When Kalpana had to be admitted to a private hospital in Patna for her dengue, she took some solace from the fact that her micro finance company had sold her a hospicash policy along with her last loan. “One less thing to worry about!”, she thought as she lay on her hospital bed fighting the fatigue. Three days later, at the time of discharge, she was dismayed to learn that against a total bill of Rs. 35,000, her hospicash had an upper limit of Rs. 500/day of hospitalisation. She and her husband ended up scrambling to borrow from their relatives for the balance amount.
Kalpana would be considered in a survey as someone with access to some kind of health insurance. However, she clearly does not have financial protection in any meaningful sense. The WHO defines financial protection as “..achieved when direct payments made to obtain health services do not expose people to financial hardship and do not threaten living standards”. Hospicash is an example of miniaturisation and successful distribution (commissions are ~ 25%) expanding access to the product considerably without solving the underlying customer problem. In fact, the original purpose of hospicash was to supplement an existing health insurance cover to cover expenses such as transportation and loss of wages – it was never meant to be a standalone product which it has defacto become for millions of rural and low-income individuals. On a rainy day, It is an umbrella with large holes.
How can we provide meaningful financial protection to people like Kalpana who are currently not served by health insurance markets (public or private)? This is the issue my team at Dvara Health Finance and I have been working on for the past couple of years. A few insights and reflections from our work so far:
- Standard hospitalisation covers, even if they were made available somehow, are not very relevant to this target group because of the high proportion of out-patient expenditures (estimated to be more than half). Banerjee et al (2014)[1] found negligible demand for a hospitalisation policy bundled with a microfinance loan. On the contrary, clients were willing to forsake the loan when presented with a bundle.
- The burden of disease is high in our informal sector populations. We find from our Maharashtra data that 1 out of 2 adult subscribers have either hypertension, diabetes or obesity. There is a real challenge to pricing and under-writing this level of risk in a stable manner. Pooling is not the right approach for high-certainty expenditures (ex: out-patient expenditure associated with diabetes management), these will have to be paid out of household savings in some manner rather than an insurance mechanism[2]. There are many interesting experiments in subscription-based services that could be promising in this context. This then needs to be combined with insurance for secondary/tertiary care episodes.
- If we can engage with customers in out-patient settings, then we can significantly alter the risk of hospitalisation over a cycle. Through our current protocol-driven offering, we are striving to achieve 50% plus control rates among customers with hypertension and diabetes. This will translate into meaningful reductions in ischemic heart disease and stroke, two of the leading causes of hospitalisation and death among Indians. Some of the doorstep access elements of microfinance are very relevant in this context. We cannot wait for customers to show up at a health facility for chronic disease management or worse yet, at a hospital at the time of the claim, we need to go where they are.
- To the extent that customers pay out of current income/savings for an out-patient offering, it needs to pass the value perception test. There is a fundamental barrier of individuals under-estimating their lifetime health risks/costs. This may need creative package and service design that solves for customer needs. For example, we are finding medicine delivery to be an attractive value proposition.
All of this calls for a fundamental re-design of health financing/insurance for this market. We are borrowing elements from the doorstep model of micro finance for service delivery, the patient-centricity of community-based models like Waymark Care and the Alaskan Community Health Aide and the pricing approach of managed care models.
We believe this is key to offering meaningful financial protection to the millions of households currently left to their own devices when faced with a health crisis. We must do better than hospicash.
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The author is founder of Dvara Health Finance and Chair of Dvara Holdings. Views are personal.
[1] https://www.aeaweb.org/articles?id=10.1257/aer.104.5.291
[2] Mor & Ashraf (2023): https://doi.org/10.1016/j.socscimed.2023.115918
