Content area
Full Text
If insurers can segment potential markets by income, even lowincome households might buy health insurance.
ABSTRACT:
Could voluntary insurance markets exist in developing countries? We used data from the World Health Survey for eleven countries to estimate, at different income levels, variation in total medical spending and spending for hospitals, physicians, and outpatient drugs. The goal was to generate estimates of risk premiums that consumers might pay for insurance coverage and to calculate likely insurance administrative costs. We conclude that insurance covering either hospital spending or total spending is feasible for much of the population, but not insurance for physician services or medicines. Spending varies by income, so insurance markets should be segmented by income.
[Health Aff (Millwood). 2009;28(6):1778-87]
IN MOST DEVELOPING countries, a sizable proportion of total national health care spending is paid out of pocket. There are potential benefits from making insurance available in such countries to risk-averse sumers who might otherwise make large outof-pocket payments.1 However, governments face limits on their ability to finance such insurance. This is primarily because of the difficulty of collecting high taxes in informal labor and product markets.
Might unsubsidized private voluntary insurance markets be a feasible (if not preferred) alternative to limited or nonexistent public schemes? The private gain to citizens from protecting themselves from a rare but very high medical expense might motivate voluntary insurance purchase if that insurance could be offered at attractive premiums. There would also be widespread societal gain if peopie with poor health outcomes or facing catastrophic ruin from high medical bills could obtain coverage.
In this study we looked at the potential for unsubsidized voluntary health insurance in a sample of truly "developing" countries - ones with low but growing per capita incomes. We examined the potential demand for comprehensive insurance, for insurance that covers only hospital care, and for insurance that covers only outpatient prescription drugs. Our estimates suggest that potential demand for comprehensive and hospitalization insurance is high enough to cover the premiums that would prevail in competitive private markets, We also found that the potential demand for such voluntary health insurance is not concentrated in the highest level of die income distribution but extends to lower levels as well.
* Demand for Insurance. Voluntary demand for...