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Health insurance may cost more, but it protects the poor against high cost of care – concludes seminar at LIDC

The 3ie-LIDC seminar ‘What works in international development’ is back this month after the summer holiday break.

At the first event this academic year, Dr. Arnab Acharya, Senior Lecturer and Unit Research Degree Coordinator, Department of Global Health and Development, London School of Hygiene and Tropical Medicine (LSHTM), presented his recent paper ‘Impact of National-level or Social Health Insurance for the Poor and the Informal Sector: A Systematic Review for LMICs’.

The speaker argued that health crises are very difficult for populations to recover from financially, compared to other types of crises. A health crisis tends to cause a drop in household consumption, whereas insurance helps smooth out consumption.

Few low and middle income countries have developed-country type large-scale social health insurance (SHI) schemes mandated to the working population. In developing countries, where formal employment makes up a small portion of the population, those SHI schemes mandated to the formal sector cannot afford to cross-subsidise the poor or the informal sector. Therefore, in many countries SHI, where it exists, has been extended to the informal sector mostly on a voluntary basis through a schedule of insurance premiums at different levels of income including free enrolment for the poorest group. In some countries these are stand-alone insurance schemes just for the poor and those in the informal sector; but in nearly all countries the premium is heavily subsidised through tax financing. Some use the third party payment system that is nationally managed and some are community managed schemes. In a few instances community-managed insurance may be funded only through beneficiaries, offering very limited risk pooling and low-level coverage that does not insure the poor against most type of health crises.

The review looked at enrolment into these health insurance schemes, utilisation, and the consequences that follow, such as out-of-pocket expenditure and health outcomes.

So does health insurance work for the poor?

The systematic review undertaken revealed no clear patterns in terms of enrolment, beyond the fact that educated people had a higher tendency to enrol in insurance schemes. In terms of utilisation, most studies considered in the review reported higher overall use of healthcare services among the insured than among the non-insured. In some cases inpatient usage was no higher among the insured in comparison to the uninsured, while outpatient usage was. As far as financial protection is concerned, studies showed mixed results, with health insurance being related to higher out-of-pocket expenditure on healthcare in comparison to those uninsured.

However, health insurance, even though implying a higher cost overall, protected against high cost of healthcare in case of expensive treatments, which is an encouraging result. A discouraging result may be that poorer people tended to get less benefit in terms of out-of-pocket expenditure from the insurance than those relatively well off. Health insurance was shown to lead to improved health outcomes in a few cases, but no effect was noted in some other contexts. 

Why would people decide against enrolling in insurance schemes or not use the insurance that they have? One explanation could be poor understanding of what insurance is or poor quality of health services that discourage people from using them.

Evaluating the impact of health insurance poses various methodological issues: there are few studies available; studies use different measures and look at various types of insurance, etc. Another potentially distorting factor is that people self select themselves into health insurance. Some may only decide to enrol when they anticipate the need for treatment.

Dr. Kara Hanson, Head of the Department of Global Health and Development; and Reader in Health System Economics, London School of Hygiene and Tropical Medicine (LSHTM), offered discussant’s comments on the presentation. She started with some reflections on the definition of insurance adopted in the review, and questioned whether a system in which the premium is fully subsidised by the government should be called insurance; some of the schemes in the review might be better described as purchasing arrangements. In commenting on the implications of the mixed results on the impact of insurance, she said it may be tempting to conclude that health insurance does not work, but it is in fact not so simple. As well as the effect of insurance in removing demand side constraints to health service utilisation, it is important to look at the supply side and the extent to which the eligible providers are offering care that patients want to use. Introducing health insurance without measures to improve quality of care may not lead to increased enrolment (in voluntary schemes) or uptake of benefits. Schemes also need to consider their purchasing arrangements and the incentives these embody: it has been observed in some settings that providers may discriminate against insured patients (in favour of those paying user fees) if the provider payment system does not reimburse their full costs. In order to provide effective financial protection against the costs of illness, insurance arrangements in low income settings need to take an integrated view of demand and supply side issues.  

Download the full paper
Download the powerpoint presentation

The next seminar in the series will take place on 17 November 2011 and will look at ‘small n’. More information