Subsidies at the BOP? How about changing the business model?

Iddo — Wed, 25 Jul 2007 02:35:28 -0500

The premise that community-based health insurance (CBHI) schemes cannot be sustainable without subsidies usually entails looking at communities merely as agents of commercial insurance companies. As such, transcation costs (both for distribution and claims monitoring) are indeed high, and the commisions paid to agents along with the cost of devising schemes at HQ can make schemes unviable without subsidies. So, why not look at alternative business models for micro health insurance? If communities are empowered to own the insurace process, and participate in all its phases including benefit package design, claims monitoring etc. costs can be drastically reduced and with the ownership in the villages, a major part of the moral hazard will be addresses as well. Time for a change?

Subsidies at the BOP?

Julia Tran — Thu, 26 Apr 2007 11:01:11 -0500

Cheikh Mbengue, an expert from Abt Associates on community-based health insurance (CBHI) schemes in Africa, said something that perked my ears last Wednesday at a USAID After Hours Seminar on microinsurance. He said that he thinks CBHIs can't function effectively without subsidies. No one has really talked about subsidies in the BOP space. The message is always, "get prices down low enough, quality up high enough, distribution wide enough, and you've got a market at the BOP."

In some instances, especially in fields with higher R&D, manufacturing, management, and labor costs like healthcare, extending the necessary suite of services to lower-income BOP may require government involvement, possibly with donor backing, in addition to entrepreneurialism, innovation, and investment.

Mbengue began the discussion by giving a brief history of CBHIs in Africa. In the 1990s, governments built up their health infrastructure, but facilities stood empty because people were too poor to pay for services. So individual communities resorted to creating their own insurance schemes, taking care of collection, management and disbursement on the community level. In 11 West and Central Africa countries, there were 76 schemes in 1999. By 2003, the total jumped to 366 schemes. Rwanda has been most successful in scaling insurance to the national level, and had 228 CHBIs by 2004 covering approximately 20% of the population.

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Subsidies at the BOP? How about changing the business model?

Subsidies at the BOP?