Protecting the Poor through Community-Based Health Insurance

This paper examines the outreach of a model of community-based health insurance (CBHI) to the community’s poorest members. The analysis reveals that CBHI schemes are successful in reaching poorer households because of their ability to reduce operational costs and control ex post moral hazard through community level supervision.

Study results indicate that individuals with the lowest income continue to remain outside the membership of CBHI groups unless they reduce administrative costs to zero. Further, some low-income households choose to remain outside the purview of CBHI schemes due to the natural limits of human patience. Conclusions include:

• CBHI schemes are unable to attract the membership of the poorest of the poor, although they are able to reach out to poor households that may be excluded by the market;
• Poor people choose to remain out of insurance schemes not because of their inability to understand the importance of insurance, but because of cost-inflated premiums;
• CBHI success proves that the poor are willing to seek risk coverage if insurance becomes a more beneficial proposition, either through controlling costs or curbing moral hazard.