The health plight of low-income households is illustrated by Isaac and Monicah, participants in the Kenya Financial Diaries study. Shortly after delivering her third baby, Monicah fell ill. It was not long before the couple had exhausted their funds on medicine and inconclusive diagnostics. Eventually Monicah was diagnosed with a throat tumor that required surgery. Isaac and Monicah were unable to raise the 23,000 KES (US$227) needed to pay for the surgery; Monicah soon died. Ironically, funds from friends and family worth more than that – 33,000 KES (US$326) – then flooded in to help pay for funeral expenses. Things for Isaac deteriorated; he too developed health problems, and he became homeless.
There are many Isaacs and Monicahs in the world, where inadequate access to quality care drives families into poverty. The UN’s Sustainable Development Goal (SDG) 3 strives to ensure happier endings with the ultimate goal being universal health coverage. To achieve this goal, financial inclusion can and should play a critical role in boosting a nation’s health and well-being.
Financial inclusion and the path to UHC
If Isaac and Monicah had health insurance and/or other financial services, would Monicah have possibly survived? Would Isaac have avoided becoming homeless? Evidence suggests that they would have possibly had better health outcomes and averted poverty. Research by the ILO’s Impact Insurance Facility shows that health insurance has impact: it helps improve access to healthcare, lowers out-of-pocket expenses, helps families avoid relying on burdensome coping strategies and provides peace of mind.
Funding for healthcare is complex, coming from a patchwork of sources in most countries. While studies show that comprehensive, market-based health microinsurance is not viable on its own, simple health microinsurance products can be particularly beneficial in tandem with social health insurance schemes, to supplement the basic package available.
One of the great challenges in achieving universal health coverage is the extension of benefits to workers in the informal economy. This extension is what one would call “product distribution” in the financial inclusion world and “expanding enrollment” in public insurance. Different language, same thing. For example, in the Philippines, the government’s health insurance program, PhilHealth, is distributed by a range of organizations, including CARD, the largest microfinance institution in the country. In countries with limited resources, public schemes should investigate partnerships with financial institutions to leverage resources and infrastructure.
Savings and credit, and insurance
Other services under the financial inclusion banner can also enable low-income households to cope with health shocks. For example, Reseau des Caisses Populaires du Burkina Faso (RCPB), a credit union network, offers a voluntary health savings product. Clients deposit a minimum of US$1 per month into an account that can be used only for health expenses. When the account has a balance of $20, clients are eligible for a health loan. With this savings and credit combo, RCPB clients have access to the funds needed to address basic health expenses before they become serious.
But with savings and credit alone, it is difficult to cope with catastrophic losses, which really should be covered by insurance, ideally through a universal health coverage scheme as stipulated by the SDGs. Together savings, credit, and insurance can be a powerful poverty fighting triad. A health savings account could be set up alongside a loan to pay for co-payments, transport to hospitals, medicine or other out-of-pocket expenses not covered by the insurance mechanism. Unfortunately, there are few examples (if any) where the three elements are combined effectively. This is an area that warrants significant innovation and experimentation.
Value-added services and well-being
SDG 3 talks not only of good health, but also well-being. The poor lead stressful lives plagued with risk and uncertainty; when things go wrong, the consequences are severe. At critical times, advice to make wise health decisions may not be available. One approach is to include value-added services, such as the call-a-doctor service provided though Sema Doc, to insurance-savings-loans combinations. Such services are particular beneficial for those in rural areas for whom travel to clinics might be more expensive than the cost of care. Access to a wider network of medical expertise through mHealth solutions can start to fill in the current pixilated picture of healthcare provision, improving access and quality.
Indeed, combining insurance with value-added services, such as pharmaceutical discounts, SMS tips and toll-free numbers is important not only to enhance impact, but also to bolster the attractiveness of the insurance product. In this way, policyholders who do not make a claim can still avail of the additional services and therefore are more likely to appreciate the value of the product.
Financial inclusion and the social protection floor
Financial inclusion can go a long way toward helping families such as Isaac and Monicah’s avoid the catastrophic consequences of health shocks, but it will not be effective unless there is a basic level of publicly funded healthcare. Comprehensive healthcare funding is expensive, thus to reach the aspiration of universal health coverage, it is imperative that countries invest in their social health insurance schemes. The ILO’s work on social protection floors lobbies for such minimum health coverage. The base level of care will not, however, by definition, be fully comprehensive. While social health insurance can cover a substantial tranche of expected healthcare costs, the copays and/or balance can be supplemented through innovative financial products that relieve financial risk during times of hardship.
To achieve universal health coverage, the poor need access to both financial and health services. Given today’s digital advances, there are more opportunities than ever for financial inclusion and health agendas to intersect, and to find smarter ways of combining public and private sector resources. Microfinance institutions, mobile network operators, and other financial sector players can be engaged to extend social protection floors by distributing coverage to workers in the informal economy, and supplementing the benefits with simple insurance products and value-added services. Public investment in national health has tremendous positive economic side effects; with a boost from financial inclusion, good health and wellness become more achievable.
I agree with you completely on "Given today’s digital advances, there are more opportunities than ever for financial inclusion and health agendas to intersect". I have always wondered how digital finance can help reach the unbanked with the numerous charges applicable when you use available platforms, the administrative bottlenecks and the cheap options available from non regulated informal thrift collectors. But you have opened me up to the possibilities available if stakeholders collaborate and digital finance becomes the vehicle for the collaboration
Excellent piece and and we need more work on this and more empirical evidence to encourage both providers and policymakers to address the issues highlighted..
But one more issue that we need to focus on is: mobile phone ownership issue. Data show that this is still substantially low among the poor and a large proportion of women do not have access. And, how many poor people live in areas without a good signal or no signal. In all these, smart subsidies and smart policies can play a role. Together with this, financial consumer protection also has a major role.
In most countries rural people are subject to agressive marketing and sold inappropriate insurance products. The literature is biased mostly with positive examples. Because of the , B-POSITIVE- approach, we etnd to shun negative experiences and thereby pose opportunities to get important insights from such experience to refine policies, producst and improve effective demand nad usage.
Nimal A. Fernando
This is a thought provoking article especially given its comprehensiveness from a policy perspective. In a country like India where government is falling short on its promise and duty of keeping people healthy at the same time responding to the challenges like OOP expenditure, community-based micro health insurance products such as health mutual can play a vital role combined with other financial inclusion products such as savings and credit. As writers say "Together savings, credit, and insurance can be a powerful poverty fighting triad. Unfortunately, there are few examples (if any) where the three elements are combined effectively." In a country like India another opportunity lies in the numbers and economy of scale by serving bottom of the pyramid can sustain any effort and help achieve viability and scale. I am motivated enough to try something in this direction.