This chapter discusses role of health insurance. The term Health Insurance is generally used to describe a form of insurance that pays for medical expenses. It may be purchased on a group basis or purchased by individual consumers. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from high or unexpected healthcare expenses. In a health insurance system, a group of individuals agree to pay certain sums for guarantee that they will be compensated, for costs related to the use of special kinds of healthcare. Public health expenditure in India has declined from 1. 3% of GDP in 1990 to 0. 9% of GDP in 1999. Serving employees and existing pensioners shall have the option to opt out of the Central Government Health Scheme (CGHS) and subscribe only to the Insurance Scheme, thus making their own arrangements for OPD needs.