Microinsurance Learning and Knowledge

Comprehensive vs. “sliced” health microinsurance:The value of subsidy

BBL FOMINJune 2014

Barbara MagnoniClient Value Project ManagerMILK Project

MILK Project

Objective is to understand:

1. Does microinsurance offer value to low-income policyholders and their families, and if so, under what conditions?

2. Is there a business case for microinsurance among insurers and delivery channels, and if so, under what conditions?

Studied microinsurance programs, insurers, and delivery channels around the world, including work in 6 countries on health microinsurance

3-year project of the MicroInsurance Centre supported by the Bill & Melinda Gates Foundation

What is Health Microinsurance?

Microinsurance is the protection of low-income people against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved

Does not necessarily imply small policies or low coverage, but low capacity to pay typically limits premium size

“Traditional” health insuranceUS health plan USD 4,250

MicroinsuranceKenya micro health USD 6.18India micro health USD 3.210.07% - 0.14% of the US premium

What is Value in Microinsurance?

3. Financial (cost savings, cash flow, financial burden)

Value can be:

1. Expected (incentives, peace of mind)

2. Service (access to services)

Insurance

Insurance

Measuring Financial Value

LoansHelp from

familySavings,

Etc…

Group client satisfaction studies are not enough

Need more rigorous sampling & measurement

Client Math: What is the added value of

insurance vis-à-vis other common coping strateges?

Measures the full cost of a shock & financial responses

Compare insured vs. uninsured

YES! YES! YES! YES! YES!YES!

YES!

Are you happy with

insurance?

How much did you spend on

each component of the funeral? How did you

pay?

FoodSeating

CeremonyBurialEtc…

Programs and ContextLocation Shock Cost in Months of Income

Kenya (Afya Yetu)

High-cost hospitalization

Kenya(Majani)

High-cost hospitalization

India(MicroEnsure)

Medium-cost hospitalization

India(Grameen Koota)

Medium-cost hospitalization

Nigeria(PharmAccess)

Management of hypertension for a 3-month period

Tanzania(MicroEnsure)

Acute illness

Guatemala(Banrural)

Routine women’s health care*Costs shown for uninsured respondents

Samples of approx. 30 insured and 30 uninsured in each study

$ $ $ $

$ $ $

$

$

$

How are these costs

financed?

Consider different levels of access and burden

53%

2%

23%

40%

53%

40%

2%

Indirect costs

Inpatient

Medicines

Outpatient - curative

Outpatient - preventive

Choices in product designH

ealth

care

Nee

ds

Hospitalization coverage

……. Chronic ….. Acute …. Pediatric ….. Gynecological ..…………

Hospital cash

Outpatient (preventive)

Pharmacy

Outpatient (curative)

“Doing the math”: Cost of hypertension in Nigeria

Transport cost

Dietary changes

Treatment & services

Other costs

Lost income

“Doing the math”: Cost of routine care in Guatemala

Labs

Transportation

Appointment

Lost income

Medicine

Annual insurance premium

“Doing the math”: Financing aHospitalization in Kenya

Income

Reduced Spending

Gifts

Informal Loans

Savings/Asset sales

Formal Loans

USD440

USD107

Financial Value of Health Microinsurance

• Complementary to other tools

• Reduces need for difficult financing mechanisms

• Can reduce cash flow pressure

• Some behavioral incentives = lower costs

Behavioral incentives from insurance

• Can increase access to quality healthcare

• But people use mostly what is covered • Can also create a “use it or lose it”

incentive – seek care sooner, more often, and more regularly

• Regular care in turn leads to other positive behavior change = financial value

Hospitalization Hospitalization

DrugsDrugs

Curative- OutpatientCurative- Outpatient

Preventative- OutpatientPreventative- Outpatient

Hea

lthca

re N

eeds

LowersDirect Costs

LowersDirect Costs

++++++

++++++

++

-/+-/+

LowersDifficult

Financing

LowersDifficult

Financing

++++++

++++++

++++

++

Postitive Behavioral Incentives

Postitive Behavioral Incentives

++

++++

++++

++++++

Value of different types of coverage

Can Subsidy Help Improve this Balance?

• Clients are thinking about financial value- not behavior!

• Subsidy can help include coverage that encourages behavioral outcomes

• Subsidy can help “sell” a product in the short-term

• In the long term, subsidy can be reduced with

– Greater familiarity from clients

– Improved quality improves

– Broader risk pool

• Can subsidy be sustainable? – Cross subsidy

– Government engagement

The MicroInsurance Centre“Developing partnerships to insure the world’s poor”

www.MicroInsuranceCentre.org

Microinsurance Learning and Knowledge