Promoting sustainability for micro health insurance: a risk-adjusted subsidy approach for maternal healthcare service

Abstract

Micro health insurance is an important way to finance health expenditure for low-income people, and maternity care is a key component of relevant coverage. We propose a risk-adjusted subsidy provided by the government to microinsurers as a method to enhance micro health insurance for maternity benefits. Using a large data set from a micro health insurance programme in Pakistan, we apply various econometric models to predict maternity-related expenses and to calculate an appropriate risk-adjusted subsidy from the government to microinsurer. This allows us to further simulate the microinsurers’ financial results. We find that the risk-adjusted subsidy could significantly improve the loss ratio by almost 40%, and the Ordinary Least Squares model is preferred among the four model forms we test. We contribute to the literature by demonstrating that this method is feasible, and further, by illustrating the potential effect of such a subsidy on micro health insurer outcomes. If successful, such a payment model could improve efficiency and extend affordable maternity care to low-income women in developing regions.