Extending Health Insurance to the Informal Sector Through Microfinance in NicaraguaPDF version
Throughout the developing world, micro-entrepreneurs have shown an interest in having access to savings and insurance products that reduce the vulnerability of their household cash flow. Policy makers, in turn, have been struggling to offer inexpensive access to quality healthcare, including maternal health and other services, to a wider range of workers. Many workers lack access to these products, likely because they are not employed in the formal sector, but these informal sector workers stand to benefit the most from receiving healthcare for themselves and their families because health insurance reduces the vulnerability of their cash flow. For this reason, extending health insurance to informal sector workers could offer an effective means of buffering households against income shocks.
In Nicaragua, available public health facilities are under-resourced and lack the infrastructure, staff and medications needed to respond to the population's health needs. In particular, poor individuals living in rural areas, the indigenous population, and individuals living in households engaged in agriculture suffer from below-average access to healthcare information and services. Lack of risk mitigation mechanisms such as insurance and social security (only 6.3 percent of the population contributes to social security1) is one reason why Nicaraguans to spend a significant share of their income on healthcare, especially to buy medications and other non-consultation items such as medical tests. Ultimately, many poor individuals are forced to seek informal care, or receive no care at all.
There is little documentation on the effectiveness of health insurance schemes targeting the informal sector, and so little is known about cost covering and the increase in utilization of quality health services. Moreover, very little is actually known about the impact which health insurance will have on informal sector workers in terms of economic shocks and health outcomes.
This program evaluates a demonstration project that extends the Nicaraguan Social Security Institute's (INSS) health insurance program to informal sector workers through microfinance institutions (MFIs), thereby expanding access to quality family planning, maternal health and other health services to a lower income population.
J-PAL, in collaboration with its partners, is performing a randomized evaluation to assess the impact of informal sector health insurance on improved access to affordable healthcare for the poor. A total of 4,000 respondents were randomly assigned to sign up at either an MFI or at the INSS. Respondents were provided an informational brochure about insurance. Additionally a random sample was offered subsidized insurance.
Project ongoing.
First Stage Take Up: Simply providing an informational brochure on the benefits of insurance has no impact on uptake of health insurance. Subsidies, on the other hand, have strong impacts on the take up of health insurance—offering a 6 month subsidy increases uptake by approximately 30 percentage points.
1 International Insulin Foundation (IIF), “Nicaragua’s Health System”, http://www.access2insulin.org/html/nicaragua_s_health_system.html.
