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

Comprehensive vs. “sliced” health microinsurance: The value of subsidy. BBL FOMIN June 2014 Barbara Magnoni Client Value Project Manager MILK Project. MILK Project. Objective is to understand:

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

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  1. Comprehensive vs. “sliced” health microinsurance:The value of subsidy BBL FOMIN June 2014 Barbara Magnoni Client Value Project Manager MILK Project

  2. 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

  3. 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 insurance US health plan USD 4,250 Microinsurance Kenya micro health USD 6.18 India micro health USD 3.21 0.07% - 0.14% of the US premium

  4. WhatisValue 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

  5. Are you happy with insurance? Measuring Financial Value • Group client satisfaction studies are not enough • Need more rigorous sampling & measurement YES! YES! YES! YES! YES! YES! YES! Star client Star client Star client Star client Star client Star client Star client Loans Help from family Savings, Etc… Food Seating Ceremony Burial Etc… How much did you spend on each component of the funeral? How did you pay? • 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

  6. Programs and Context $ $ $ $ $ $ $ $ $ $ *Costs shown for uninsured respondents Samples of approx. 30 insured and 30 uninsured in each study

  7. How are these costs financed? 2% 2% Consider different levels of access and burden 23% 23% 40% 40% 53% 53%

  8. Choices in product design Narrow vertical “slice” Hospital cash Hospitalization coverage Pharmacy Healthcare Needs Outpatient (curative) Outpatient (preventive) ……. Chronic ….. Acute …. Pediatric ….. Gynecological ..…………

  9. “Doing the math”: Cost of hypertension in Nigeria Other costs Dietary changes Lost income Transport cost Treatment & services

  10. “Doing the math”: Cost of routine care in Guatemala Annual insurance premium Lost income Transportation Medicine Labs Appointment

  11. “Doing the math”: Financing aHospitalization in Kenya USD440 Formal Loans Informal Loans Reduced Spending Savings/Asset sales Income USD107 Gifts

  12. 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

  13. 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

  14. Value of different types of coverage Lowers Difficult Financing Postitive Behavioral Incentives Lowers Direct Costs Hospitalization +++ + +++ Drugs +++ ++ +++ Healthcare Needs Curative- Outpatient ++ ++ + Preventative- Outpatient + +++ -/+

  15. 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

  16. The MicroInsurance Centre“Developing partnerships to insure the world’s poor” www.MicroInsuranceCentre.org

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