MICROFINANCE PAPER WRAP-UP: “Is Health Microinsurance Sustainable? An Analysis of Five South Asian Schemes,” by Michael E. Weilant, published by the International Labour Organization

“Is Health Microinsurance Sustainable? An analysis of Five South Asian Schemes,” by Michael Weilant, published by the International Labor Organization, May 2015, 45 pages, available at: http://www.impactinsurance.org/sites/default/files/mp41_final.pdf

This paper analyzes five health microinsurance (HMI) schemes operating in India, Bangladesh and Pakistan in order to evaluate the sustainability of HMI. All five schemes were in operation for more than 3 years and serve more than 25,000 active customers. The author defines HMI, for the purposes of the study, as “a spectrum of products that range from limited coverage hospital cash to comprehensive (inpatient and outpatient) health-care products.” As none of the schemes in this study meet the standard of “unsubsidized financial profitability,” the study measures sustainability based on four “drivers”: (1) achieving scale; (2) controlling claim costs; (3) managing expenses; and (4) the use of subsidies.

The schemes vary by factors such as for-profit vs. nonprofit, government intermediary vs. NGO, mandatory vs. voluntary enrollment, comprehensive vs. limited health benefits and level of subsidization.

Argya Raksha Yojana (ARY)

ARY was launched in India in 2006 by the HDFC-Ergo General Insurance Company Limited, which is a 74/26 joint venture between the Housing Development Finance Corporation (HDFC), an Indian housing finance institution, and Ergo International AG, an insurance entity owned by Germany’s Munich Re Group. The scheme is voluntary, with annual premiums of INR 156 (USD 3.22) Since 2009, HDFC-Ergo has partnered with India’s Biocon Foundation, which has run educational health “camps” in villages and marketed the ARY scheme in rural areas at no cost to HDFC-Ergo.

Tata AIG – Rashtriya Swasthya Bima Yojana (RSBY)

Tata AIG General Insurance Company Limited is a 74/26 joint venture between the Tata Group, an Indian conglomerate, and American International Group (AIG), a US-based insurance company was chosen by the Indian Government to underwrite the Rashtriya Swasthya Bima Yojana (RSBY) scheme in 2009. Premiums vary depending on location from INR 300 to INR 740 (USD 6.18 to USD 15.24) to cover a family of five. The majority of this cost is subsidized by the national and state governments. Despite outdated government “below-poverty-line” lists obstructing enrollment, the study concludes that this scheme has “the best chance at long-term sustainability.”

Shashtayabima – Gonoshasthaya Kendra (GK)

GK is a nonprofit health organization that is based in Bangladesh and operates a voluntary HMI scheme. GK charges premiums at varying rates according to health status and geographic risk. GK also offers subsidies based on socio-economic status and offers lower prices via member cost-sharing, whereby patients pay for a portion of costs not covered by insurance. The scheme serves 500,000 people.

Nirapotta – Sajida Foundation

Sajida Foundation is an NGO microfinance institution (MFI) that is based in Bangladesh and operates a HMI scheme that is compulsory for clients wishing to borrow from Sajida. Total premiums for up to five family members vary between BDT 150 (USD 2.07) for loans with terms of 3 to 9 months and BTD 450 (USD 6.21) for loans with terms of 18 to 24 months. The author argues that this scheme has limited potential to attain larger scale because of its direct tie to Sajida’s ability to increase its loan base.

Naya Jeevan

Naya Jeevan (NJ) is a for-profit enterprise that began operations in Pakistan in 2008. NJ differs from other service providers in the study in that it is an insurance intermediary, rather than bearing insurance risk directly. It aggregates groups of low-income individuals into risk pools and negotiates premiums with insurers for those groups. In addition, most or all of the premiums are paid by employers. NJ also offers members additional benefits that cost a total of USD 2 per person per year, such as access to a “tele-health” line and preventive health education sessions, among others. Achieving scale is cited as NJ’s key objective.

Conclusions

In terms of sustainability, the author labels Niaprotta, GK, and Naya Jeevan “unprofitable with losses subsidized;” Tata AIG – RSBY is deemed “profitable with explicit subsidy;” and ARY is labeled as “profitable with implicit subsidy,” in the form Biocon subsidizing enrollment costs.

By Mathew Cerf, Research Associate

Sources and Additional Resources

“Is Health Microinsurance Sustainable? An Analysis of Five South Asian Schemes,” by Michael E. Weilant, published by the International Labour Organization, May 2015, http://www.impactinsurance.org/sites/default/files/mp41_final.pdf

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