Jenny Nasr

Paving the Way Out of Poverty: Health microinsurance can keep a medical emergency from becoming a financial tragedy

During the opening speech of the 68th World Health Assembly in Geneva last month, Angela Merkel, chancellor of Germany, addressed delegates by calling for a new plan to deal with catastrophes. Furthermore, she emphasized the need for all countries to have strong and resilient health systems and put forward the key role of health in sustainable development. On a similar note, World Health Organisation (WHO) Director-General Dr. Margaret Chan urged delegates to be prepared for the post-2015 development agenda and the Climate Conference at the end of the year by financing plans that are “ambitious but credible.”

“Ensure healthy lives and promote well-being for all at all ages” is one of the 17 Sustainable Development Goals (SDGs) that will be adopted during the United Nations Summit in September 2015 in New York. While the single health goal captures the key aspects of achieving good health, health is closely linked to many of the other 16 proposed SDGs.

Health insurance as a tool for inclusive finance for development

According to the UN Secretary General’s Special Advocate (UNSGSA) for Inclusive Finance for Development, every year, 100 million people around the world fall into poverty due to medical costs. Insurance is playing an increasing role in helping poor households avoid this tragic outcome.

Government-led programs can have dramatic impacts by providing scale and widespread coverage. In Mexico, nearly 7 percent of families were dragged below the poverty line each year by medical emergencies until the late 1990s. In 2004, a government insurance program, Seguro Popular, was introduced, and by 2010 this number had fallen to less than 3 percent. Health insurance is now nearing universal coverage, and those who do seek medication and procedures no longer risk being bankrupted by illness.

Furthermore, a savings account is the simplest form of insurance, and even the most basic of savings products can be effective in managing health care costs. Women in Kenya provided with a dedicated savings box and key had an increase in preventative health care investments of 68 percent over a control group, and those using savings earmarked for a specific health product had investments 129 percent higher.

Concerning the HIV epidemic, more than 35 million people are living with HIV/AIDS in the world, including 24.7 million in Sub-Saharan Africa alone. To help manage treatment costs, some countries are starting to provide free anti-retroviral therapy (ART) but have neglected support for medication related to opportunistic infections. Since public programmes are often limited to ART treatment, the additional substantial costs require out-of-pocket payments. Many families sell vital assets to cope with the financial implications of diagnosis and treatment. In Uganda, two-thirds of HIV-affected households have had to sell land, capital or property to pay for treatment, and 67 percent required financial support from family during treatment.

It is particularly in this gap that microinsurance provides some helpful solutions to HIV care. One pilot programme by the DHAN Foundation in Tamil Nadu State in India has targeted people living with HIV and their dependents for health and life coverage. The programme also offers wage loss compensation when a customer is hospitalized for up to 15 days. Effective partnerships with health care providers, government support and donor funding play an important role in strengthening the infrastructure required for microinsurance growth.

Effective partnerships

Policy and partnerships can also lead to developing microinsurance products that low-income individuals can purchase. The insurance regulator in Zambia, for instance, is authorizing new distribution channels. In 2012, two new microinsurance products were introduced, and for the first time, clients could buy life insurance using mobile phones, for as little as U.S. 30 cents per month. In Jordan, Women’s World Banking (WWB) partnered with an insurance company to launch The Caregiver Policy, microinsurance for emergency medical care.

The pilot project was highly successful: By 2012, more than 91,000 women had enrolled in the program, covering 98 percent of WWB clients in Jordan. In Morocco, WWB partnered with AlAmana Microfinance which introduced a microinsurance scheme called l’Assistance to support clients in their time of need. It provides cash payouts for childbirth, hospitalisation, diagnosis of a ciritical illness, road accidents and death.

As financial institutions move toward offering a more diverse mix of services to the poor, savings and insurance products will be important to absorbing risks and improving resiliency.

Microinsurance in social protection schemes

According to WHO, a growing number of countries in all regions have made more explicit political commitments to universal health coverage in their national policies. In many countries, intensive efforts have been made to raise more money for health and reduce direct out-of-pocket payments.

There is a growing synergy and complementarity between microinsurance and other social protection mechanisms in terms of insurable risks such as sickness, old age, death, accident and disabilities, and extreme weather conditions. In Vietnam, the government developed a comprehensive social protection strategy for the period 2011-2020.

Based on country experience, WHO has found that the scope is limited for generating substantial, stable resources through voluntary health insurance. Public spending, derived from various forms of taxation – including social health insurance contributions where relevant – must lead the way. This is a challenge for countries with a significant proportion of the workforce outside regular, salaried employment – a factor that constrains revenue collection. Numerous countries have nevertheless met this challenge. In the Western Pacific region, for example, 14 countries increased the priority given to the health sector in their allocation of budget resources in the past few years. Others have introduced new forms of taxation or improved collection mechanisms to allow for increased government spending in the health sector.

Abt Associates, which started as a research tank, currently works on developing and implementing lasting solutions to improve health systems globally. It supports countries in mobilizing domestic resources for health and develops financial risk protection mechanisms. It also implements numerous bilateral projects focused on strengthening country health systems. Abt Associates is currently leading USAID’s Health Systems Strengthening II Bridge project in Jordan.

In World Health Resolution WHA64.9 (May 2011), member states were urged to ensure that health financing systems evolve so as to avoid significant direct payments at the point of delivery, and include a method for prepayment of financial contributions for health services, as well as a mechanism to pool risks among the population. The idea is to avoid catastrophic expenditures that may impoverish individuals as a result of seeking the services needed.

Gabon and the Philippines are examples of countries that have created or raised specific taxes from which funds have been channelled into health insurance premiums for the poor. As a result, there has been a steady reduction in the extent to which countries throughout much of the world have relied on out-of-pocket payments to fund their health systems.

On a global note, Measurement and Accountability for Results in Health (MA4Health) looks at areas to improve and sustain country measurement and accountability systems for health results in the years to come. One of the main objectives of its upcoming summit later this month is to identify innovative approaches and strategic investments that can strengthen health data availability, quality and use.

Jenny Nasr is development coordinator for the Microinsurance Network based in Luxembourg.

Health Care