Emerging Insight: Health and money matters
26 June 2018
Our earlier working paper has shown that the demand for health cover by low-income households is frequently higher than for any other type of financial risk management solution. This is understandable given that ill health can be financially catastrophic, eroding savings, depleting working capital, causing loan defaults and exacerbating indebtedness.
Over the last decade a few financial service providers have taken up the challenge of developing financial health solutions for low-income clients and micro and small enterprises, however there is significant scope for further innovation.
When designing possible financial solutions for health risks, it is useful to start by identifying the frequency (or likelihood) and the severity (high or low cost). There is, however, a third dimension to consider, namely whether universal health covered (UHC) reform is underway, whether a government health plan exists and which expenses and services it covers. With these variables, it is possible to consider how different financial services would be most relevant for different health risks.
Imagine the above figure as being two “rooms” – front and back room divided by the light blue screen. The balls floating in the front and back room represent expenses. The larger balls represent relatively larger expenses, with each colour representing one episode of ill-health. Each time an ill-health event occurs, a string of expenses is generated, some of which can be borne by the government health plan, while other expenses are left to the individual to cover. Anything which falls into the front room represents health expenditure typically covered by government health plans. Balls in the back room are not; it is for these expenses that health-related financial services can be designed.
To learn more about the range of financial services can help families manage the expenses in the back-room, see a new ILO publication – Financial inclusion and health: How the financial services industry is responding to health risks.
Over the last decade a few financial service providers have taken up the challenge of developing financial health solutions for low-income clients and micro and small enterprises, however there is significant scope for further innovation.
When designing possible financial solutions for health risks, it is useful to start by identifying the frequency (or likelihood) and the severity (high or low cost). There is, however, a third dimension to consider, namely whether universal health covered (UHC) reform is underway, whether a government health plan exists and which expenses and services it covers. With these variables, it is possible to consider how different financial services would be most relevant for different health risks.
Imagine the above figure as being two “rooms” – front and back room divided by the light blue screen. The balls floating in the front and back room represent expenses. The larger balls represent relatively larger expenses, with each colour representing one episode of ill-health. Each time an ill-health event occurs, a string of expenses is generated, some of which can be borne by the government health plan, while other expenses are left to the individual to cover. Anything which falls into the front room represents health expenditure typically covered by government health plans. Balls in the back room are not; it is for these expenses that health-related financial services can be designed.
To learn more about the range of financial services can help families manage the expenses in the back-room, see a new ILO publication – Financial inclusion and health: How the financial services industry is responding to health risks.