Providing health insurance or health security for poor people continues to be one of the most important unresolved policy issues for the world. Most rural and informal sector workers in the world do not have any form of health insurance. And in most developing countries, the rural and informal sectors constitute the bulk of the population. In India, for example, estimates suggest that 90% of India’s families earn their livelihood from the unorganized sector, contributing 40% of the nation’s GDP (Jhabvala and Subrahmanya 2000). However, they are poor, most of them are not in employer-employee relationships, they do not have any form of insurance or security (e.g. maternity benefits, retirement, health insurance), nor do they have representative organizations that might help them fight for these benefits (Ahmad et al. 1991, Gumber & Kulkarni 2000).The poor are particularly vulnerable to the lack of health security. Studies show that the poor spend a greater percentage of their budget on health related expenditures (Sheriff et al 1999). The burden of treatment is particularly devastating for major health issues, and particularly when they seek "in-patient" care (hospitalization). Further, the high incidence of sickness (morbidity in technical terms) cuts into their budget in two different ways, i.e. they need to spend large amounts of money for treatment and are unable to earn money while under treatment. In fact, healthcare costs are one of the primary reasons for rural indebtedness and poverty (Gumber 1997). It is estimated that at least 24 per cent of all Indians hospitalized fall below the poverty line because they are hospitalized, and that out-of-pocket spending on hospital care raises by 2% the proportion of the population in poverty (Peters et al. 2001, 2002).

Moreover, there is the issue of accessibility. A majority of poor households reside in remote rural areas where no government or private medical facilities are available. Obtaining treatment at a town or district level hospital involves travel costs, which are not insignificant. Thus for many, simply accessing health care is by itself, an expensive proposition.

However, a common perception is that the poor are too poor to buy health insurance. While it might be true for the poorest of the poor who struggle for survival every day, it need not be true for those living close to the poverty line (Martin et al. 1999, Zeller and Sharma 1998). Moreover, there is substantial evidence that if provided with the opportunity, the poor would be willing to pay for health insurance. However, a large number of the existing schemes for poor people still involve part or full subsidies by the governments of various countries.

Several obstacles stand in the way of providing health insurance to the rural poor and informal sectors (Van Ginneken 1999). First, the rural and informal sector is not a homogenous category, so it is difficult to organize them. Second, they are geographically dispersed. Third, there are no employers or it is difficult to identify employers. Fourth, providing health insurance to this section of the population is a daunting task, because rural and unorganized workers often need employment, income and social security simultaneously, which is hard to provide. As a result, for example, overall health insurance coverage is low in India (Gumber 2002). Estimates suggest that less than 10% of people in India have access to health insurance, and a majority of them belong to organized sector (Gumber 1998, Ellis et al 2000). Obviously, the demand for health care for the rural and urban unorganized sector has largely been unmet.Commercial insurance companies so far have showed little interest in providing health insurance for poor farmers and workers in the informal sector because of potentially low profitability and high risk. It is non-government

organizations (NGOs) and charitable institutions (not-for-profit) that have played an important role in the delivery of affordable health services to the poor. However, the coverage of these schemes has been very limited, and the record has been mixed. A review of 83 NGO provided health insurance schemes for the informal sector suggest issues of poor design and management, affecting their sustainability (Bennett, Creese and Monasch 1998).