Tuesday, July 21, 2015

Designing Valuable Health Insurance–It Matters How You Slice It!


One fundamental challenge in building health insurance products affordable for low-income individuals and families is the disconnect between customers’ rational financial behavior and optimal health outcomes. This conclusion is a prominent finding of our work on the Microinsurance Learning and Knowledge (MILK) project of the Microinsurance Centre. In our Client Math case studies of individuals’ financial behavior with and without insurance coverage, we found far stronger client value for the catastrophic insurance coverage relative to primary outpatient care.

While catastrophic medical emergencies can devastate cash-constrained households and are clearly worth insuring against, primary care insurance often looks similar to out-of-pocket primary care, with frequent low-cost medical visits. As such, the client value case for primary care coverage is often low. Problematically, this fact incentivizes users away from preventative care and towards forestalling treatment until covered medical emergencies. While such behavior is financially rationally for low-income households, the health outcomes will be significantly worsened.

To redress this flaw, we employ a Slices of Healthcare model to inform good product design. We developed this concept while working with Banrural to guide the development of a health insurance product affordable for low-income women in Guatemala. Rather than offering costly comprehensive care, we proposed targeting a core health needs and offering a narrow set of services within each health bundle. In Guatemala this meant offering women a set of preventative and curative gynecological services. By getting these Slices sufficiently narrow and useful, we found that microinsurance products can strike a balance between affordability and effective medical utility.