Micro health insurance and the circle of poverty


This page in:

Back home in the KBK districts of Orissa, the head of the household that for decades has worked with my family, fell ill recently. He is in his early 50s. His legs have stopped functioning normally. There have been similar cases before, and some got partially cured when they were taken to a doctor in Raipur, a city some 150 miles away. The family wants to take the patient to the same doctor. But that would cost a lot. They need cash. Urgently. They are considering approaching a local money lender in exchange for a mortgage on their meager ancestral land.

It is likely that my friend's sickness would be cured. But it is unlikely that the man of the family would be able to work as before. The likely scenario is that the family would have another man -- "old man!" --  to care for, while its only asset remains mortgaged to an informal money lender. It is also very likely that the family would default on the loan and lose the land. And the circle of poverty would perpetuate, yet again, for another family.

Such family sicknesses can be considered a rare event within a window of, say, 5 years. One may be tempted to treat this as a low probability high-impact event.  But when considered over a 15-20 year time span, such an event is a high-probability and high-impact event. A group health insurance scheme could be highly effective in addressing this problem. Considering the large number of households/people and their dispersion over a vast geographical area and age groups should make it easy to design a financially sustainable health insurance program in that part of India (Orissa and Chhattisgarh, or more broadly the BIMARU states).

Upon inquiry, I am told India has many health insurance programs for the poor. And yet almost no one in Sindhekela, my village, is aware of, let alone enrolled in, any health insurance programs. Even educated people (say teachers or doctors or pharmacists) are skeptical about the usefulness of insurance programs: does the insurer actually pay if one does fall sick some day? In that part of the world, even retirees from government services have to pay bribes to collect pension benefits. What percentage does one have to surrender to corrupt officials to collect medical insurance claims?

Micro health insurance can truly break this circle of poverty. But governance of such schemes needs to be improved to earn people’s trust.

For poor families that receive remittances, I can imagine a scheme whereby remittance receipts are linked to paying the premia for health insurance. If such a scheme existed, I would buy one. For my friend who has fallen sick.



Dilip Ratha

Manager, Migration and Remittances Unit and Head, KNOMAD, Global Indicators Group, World Bank

Join the Conversation

Abdul Bari
April 13, 2011

Good idea, I beleive remittnace companies consider this service with the halth insurance companies, however proper service the beneficiary remains questionable in corrupt socities.

Adam Wagstaff
April 13, 2011


By coincidence your blog and mine (http://bit.ly/eqPZWG) are two blogs apart today on the Bank's external site. They're much further apart in terms of content!

Micro health insurance has not been a success (some understatement here) for all the reasons an intermediate microeconomics text would suggest. Fortunately the idea seems to have been largely abandoned by the health reform crowd and by policymakers. Let's let it rest in peace!

By contrast, India's Rashtriya Swasthya Bima Yojna (RSBY) scheme claims to be having some success. According to the RSBY website, this the second year RSBY has been operating in Orissa's Kalahandi district, and 50% of BPL families there are enrolled. See http://bit.ly/hUJ5Ul. Admittedly it covers only BPL families (sounds like your friend could be eligible), and covers only 725 hospital procedures right now (your friend's condition might not be covered). (It also covers up to 1000 rupees in transport costs.) Andhra Pradesh’s Rajiv Aarogyarsi scheme is somewhat similar though predates RSBY. It covers almost the entire population, and the list of procedures covered is growing fast.



Anil Swarup
July 10, 2011

The Health Insurance scene in India is undergoing a sea change and RSBY is one of the principal contributors. It has already provided cover to around 90 million persons by way of issue of more than 23.5 million smart cards. More than 2 million have already availed hospitalizaion facilities. The scheme has been extended to those above poverty line as well. Thus, the government has already announced extension of the scheme to building and other construction wotkers, MNREGA beneficiaries, street vendors, beedi workers and domestic workers, irrespective of their economic status. There are indeed some challenges but the scheme seems to be making considerable headway as it has already acquired a pan-India status