The Distributional Consequences of Micro Health Insurance: Can a Pro-Poor Program Prove to be Regressive

This paper examines whether pro-poor micro health insurance (MHI) is regressive. It does so on the basis of an imbalanced randomized control trial with a community-based MHI program in rural Maharashtra in India. The paper also adds to the sparse literature available on the distribution of benefits of MHI. It covers the following sections in detail:

• Meaning of MHI services, its features, and various factors that affect its demand;
• Summary statistics on demographics, enrolments into MHI programs, claims of households enrolled in MHI programs, and health of the sample considered in the context of India;
• Theoretical framework of the effect of insurance on the distribution of health care consumption by income. It discusses this relationship between health care consumption and income for three cases: insurance with a predetermined indemnity schedule, insurance with price reductions, and insurance that charge a single premium.

The paper suggests that the concern of MHI leading to regressive transfers from poor to relatively wealthier households is less important than actually expected. It also states that MHI increases Below the Poverty Line households’ health care expenditure by almost USD 3 per month of coverage and that MHI narrows the gap in health care consumption among the insured.