Micro-Finance Health Insurance in Developing Countries

In developing economies, health shocks play a significant role in instigating and sustaining poverty. The impact of high catastrophic out-of-pocket health expenditure also fosters a culture in which people decide not to use services because they cannot afford either the direct costs, such as for health check-ups or consultations, medicines or laboratory diagnostic tests, or the indirect costs, such as transportation to the care provider or special food. The objective of this research is to investigate the potential role of voluntary health insurance in India, particularly through a micro-finance framework to reach the most destitute, bottom income quintiles of the population. Consumer Expenditure and Healthcare and Morbidity data from the National Sample Survey Organization of India is used to analyze mean and variance of health spending, projected risk premia, and variables that may predict levels of health spending. Insurance for institutional health spending is potentially feasible given current market demand across income quintiles, and sustainability of microinsurance offerings depends on increasing population reach as well as efficient delivery.