- Divyash Jha
In countries such as Nepal, where the public healthcare system is overly expanded and access to private health insurance is low, even a short hospital stay can lead to severe economic hardship for families. Rising healthcare costs, limited government coverage, and the dominance of khalti spending on medical care underscore the urgent need for innovative financial protection mechanisms.
Among these, hospitalized cash insurance stands out as a viable and effective solution, especially for the economically vulnerable population.
Hospitalized cash insurance
Hospital admission cash insurance is a complementary health insurance product. This is often referred to as hospital daily cash benefit insurance. It provides a fixed daily cash allowance to the insured for each day of hospitalization. Unlike traditional health insurance that reimburses specific hospital bills or expenses, the policy provides a pre-agreed cash amount regardless of actual medical costs. This payment can be used by the insured for any purpose (such as medical bills, medicines, travel, food, or compensation for lost income).
Nepal’s healthcare and insurance landscape
Nepal’s healthcare system has urban-rural inequalities, low-budget public hospitals and an increasing reliance on private health services. According to the World Bank data, more than 60 percent of the total health expenditure in Nepal is paid from the pocket of the person. It is one of the highest in South Asia. This puts a heavy burden on low- and middle-income families.
Although the Government of Nepal has introduced basic health insurance schemes such as social health protection programs, its reach is limited. A large proportion of the population (especially in rural and remote areas) lack access to quality health coverage. In this context, access to private health insurance is extremely low. It is estimated to cover less than 10 percent of the population. As a result, a single medical emergency often puts families in debt or pushes them below the poverty line.
Why hospitalization cash insurance is important for Nepal?
Affordable financial security
Hospitalization cash insurance is relatively cheaper than large health insurance plans. Insurance fees are low because coverage is based on fixed cash payments rather than actual bills. This makes it more accessible to low-income families, daily wage earners, and workers in the informal sector that dominate Nepal’s workforce.
Rahat against income deficit
In Nepal, a large number of people earn daily wages or run small businesses. Hospitalization is not just medical expenses but also a loss of income. Daily cash gains can help replace lost earnings during the hospital stay. It allows families to meet other essential expenses such as food, rent and school fees.
No network or feature restrictions
Traditional insurance policies often tie patients to specialized hospitals or require paperwork for fulfillment. However, hospital cash insurance pays the benefits (public or private) regardless of which hospital the patient uses. This flexibility is particularly useful in Nepal. Especially in rural areas, where access to a preferred or insured hospital is not always possible.
Simple and fast claim process
The claim process for hospitalization cash schemes is usually simple and fast. Since fewer documents are required, policyholders often receive their payments easily only with hospitalization and discharge summaries. This simplicity is an important advantage in a system like Nepal, where insurance literacy is low and bureaucratic barriers are high.
Supplement to government schemes
Although Nepal’s government health schemes provide partial coverage, they are not complete. Hospital cash insurance can serve as supplementary coverage. It also provides additional funds for indirect costs (such as transportation, food for attendants or special medicines) that are not reimbursed under public schemes.
Increasing insurance awareness and need
Introducing low-cost and easy-to-understand insurance products such as hospitalization cash plans can help build an insurance culture in Nepal. As more people experience benefits, confidence in insurance mechanisms can increase. There is a possibility of increasing the need for comprehensive insurance products in the future.
Effects in real life
Consider a typical rural Nepali family, where the breadwinner is a farmer or labourer with a normal daily income. If that person is hospitalized due to an accident or illness, the immediate income stops and expenses increase. Even if medical treatment itself is affordable or subsidized, indirect costs such as city travel, food, and work losses can devastate families financially. A daily hospital cash benefit of Rs 1,000 per day can significantly reduce these burdens. Thereby providing much-needed stability.
Implementation challenges
Despite its benefits, many challenges hinder the widespread use of cash insurance for hospitalizations in Nepal:
Low awareness: Many people do not know that such insurance products exist or misunderstand how they work.
Distribution barriers: makes it difficult for people with limited access to formal banking and insurance infrastructure, especially in rural areas, to enroll in these schemes.
Confidence issues: Past experiences of delayed or rejected claims have made people apprehensive about insurance.
Regulatory gap: Clear regulatory frameworks and incentives for cash insurance for hospitalizations in Nepal are still evolving.
Way Forward
Coordinated efforts between the government, insurers, NGOs and the local community are necessary to fully realize the benefits of cash insurance for hospitalization in Nepal. Key steps may include:
Awareness Campaign: community health workers and local language media should be used to educate people about how hospitalization cash insurance works.
Collaboration with mobile and microfinance services: Hospital cash insurance should be offered as a lump sum service in collaboration with mobile banking and microfinance institutions.
Grants and incentives: The government may provide premium subsidies or tax incentives to make the policy more attractive.
Public-private partnership: Private insurance companies should be encouraged to develop low-cost, customized products for potentially disadvantaged communities with government support.
Conclusion
In a country like Nepal, where private health insurance is still widely out of reach of most people, hospitalized cash insurance represents a viable and superior solution. It addresses not only the direct cost of medical care but also the indirect economic shocks to families from hospitalizations. Hospitalized cash insurance can play an important role in reducing health poverty and building resilience in Nepal’s healthcare ecosystem by providing a simple, flexible and affordable form of financial security.
As Nepal continues to strive towards global health coverage, integrating such innovative insurance models can bridge important gaps and ensure that no family is forced to choose between health and financial survival.
Jha is the Chief Strategic Officer of Sun Nepal Life Insurance. )
