Health insurance benefit packages prioritized by low-income clients in India: Three criteria to estimate effectiveness of choice

Abstract

We applied a decision tool for rationing choices, with a predetermined budget of about US$11 per household per year, to identify priorities of poor people regarding health insurance benefits in India in late 2005. A total of 302 individuals, organized in 24 groups, participated from a number of villages and neighborhoods of towns in Karnataka and Maharashtra. Many individuals were illiterate, innumerate and without insurance experience. Involving clients in insurance package design is based on an implied assumption that people can make judicious rationing decisions. Judiciousness was assessed by examining the association between the frequency of choosing a package and its perceived effectiveness. Perceived effectiveness was evaluated by comparing respondents’ choices to the costs registered in 2049 illness episodes among a comparable cohort, using three criteria: ‘reimbursement’ (reimbursement regardless of the absolute level of expenditure), ‘fairness’ (higher reimbursement rate for higher expenses) and ‘catastrophic coverage’ (insurance for catastrophic exposure). The most frequently chosen packages scored highly on all three criteria; thus, rationing choices were confirmed as judicious. Fully 88.4% of the respondents selected at least three of the following benefits: outpatient, inpatient, drugs and tests, with a clear preference to cover high aggregate costs regardless of their probability. The results show that involving prospective clients in benefit package design can be done without compromising the judiciousness of rationing choices, even with people who have low education, low-income and no previous experience in similar exercises.

Introduction

The purpose of this article is to draw policy insights from the analysis of choices made by prospective clients among the poor in India on benefit-package composition for health insurance.

Many authors agree that if the poor are to accept insurance, it must respond to their needs (Ahuja & Jütting, 2004; Gumber, 2002; Leftley, 2005; Radwan, 2005). However, these authors advocate that the industry design different insurance products for the poor, but do not refer to perceived priorities of the clients themselves. The literature on consumer-driven healthcare has so far dealt mainly with the situation in rich countries. Coast (2001) investigated whether citizens want to make rationing decisions in healthcare in the context of universal coverage in the UK. Her findings suggest inter alia that the potential distress that denying care may cause increases citizens’ desire to be directly involved in such decisions. Following this logic, poor population segments in low-income countries, who can at best buy only severely rationed health insurance packages, would presumably be exposed to high potential distress due to limited access to healthcare, and would therefore wish to be involved in rationing decisions. In developing countries, there is a general shortage of information and data about the preferences of households (Asfaw, 2003). Specifically, there is very little literature on the preferences of prospective clients of health insurance who personify simultaneously low-income, low-education, low-numeracy and low- or no experience with insurance. The few studies we were able to identify concluded that ‘groups of low-income uninsured individuals [in the USA] are able to identify acceptable benefit packages that are comparable in cost but differ in benefit design from managed care contracts offered to many US employees’ (Danis, Biddle, & Goold, 2002); that clients’ satisfaction with benefit-package design in a community-based health insurance scheme in West Africa contributed to a higher willingness to enroll (De Allegri, Sanon, Bridges, & Sauerborn, 2006); and that in the same area, there were strong preferences for inclusion of high-cost health services such as operation, essential drugs and consultation fees in the benefit package (Dong, Mugisha, Gbangou, Kouyate, & Sauerborn, 2004). Finally, one study, carried out in India on a somewhat related topic, suggested that most households would prefer a comprehensive benefit package over partial coverage (Mathiyazhagan, 1998). However, this falls short of evidence-based reporting of the preferences of such population segments in India. Thus, our article offers new information on the expressed priorities of households that were asked to compose the health insurance package of their choice.

In India today, out-of-pocket spending by households for healthcare represents about 73% of total health expenditure (WHO, 2006); another estimate puts that rate at more than 80% (Devadasan, Ranson, Van Damme, Acharya, & Criel, 2005). This high rate exposes many households to unexpected and unaffordable healthcare costs for which insurance can be an attractive and cheaper alternative (Ray, Pandav, Anand, Kapoor, & Dwivedi, 2002). However, at present only about 3% of India's population, mostly in the formal sector, benefit from some form of health insurance and the role of grassroots community-based schemes is prominent in the informal economy relative to the alternatives offered by the public sector or by commercial insurers (Devadasan et al., 2005; Tabor, 2005).

Furthermore, community-based health insurance schemes in India cover a partial benefit package that reflects the assumption that premiums are the main source of financing. If the poor are to pay for insurance, the package must be attractive in two regards: it must meet clients’ perceived needs and be affordable to them (Radwan, 2005; Wiesmann & Jütting, 2000). Since affiliation to grassroots schemes is voluntary, and considering that willingness to join such schemes may increase when prospective clients are satisfied with the benefit package and identify with it (De Allegri et al., 2006; Fleck, 1994; Schone & Cooper, 2001), it is important to develop a tool to assess prospective clients’ priorities.

The novelty of the experiment described in this article is that it divulges information on the rationing choices of low-income, low-education population segments in India who were given the opportunity to compose an affordable benefit package.