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Can innovative finance help low-income households better cope with health shocks?

November 10th, 2021

Is innovative health finance the solution to enhanced resilience for Kenyans?

Health shocks have a debilitating impact, especially on low-income households. Such households often lack access to appropriate finance solutions such as insurance to cushion themselves against the related non-routine income expenditures.

According to the FinAccess national survey, only 30% of adult Kenyans had access to health insurance in 2019, with National Hospital Insurance Fund (NHIF) contributing 26% to this. The majority (70%) of these NHIF users were employed and in the two highest wealth quintiles. Only 3% of adult Kenyans had access to private health insurance and these tended to be those who already had NHIF.

While the national and county governments’ efforts in the provision of universal healthcare have borne some fruit, public healthcare remains insufficient. It normally has to be supplemented by the private sector services. Most low-income households thus pay for their healthcare “out of pocket” and often defer or forego care because they cannot afford it. The situation has been exacerbated by the COVID-19 pandemic which has diminished household incomes.

Recent outreach through NHIF has made a difference, but there remains a significant gap in access. Low-income households which derive their incomes from the informal sector are particularly disadvantaged. Access to NHIF is out of reach, given the lumpsum and scheduled nature of the premium payment. This does not align well with their daily income and expenditure pattern. The 50% penalties levied on late premium

payments, even if late by just a day, are hefty and an extra deterrence to use of NHIF. The real barrier to the use of NHIF is not general unaffordability but a timing issue. Many households do not necessarily have the KShs 500 at hand to pay the monthly premium instalment when it falls due.

Furthermore, low-income households have a myriad of competing priorities to manage each day despite their dismal income. Health events are typically unpredictable, unlike other needs such as food or sending children to school; thus, healthcare tends to be relegated to the bottom of the priority list.

To such households, the available healthcare finance products are unaffordable.
FSD Kenya has partnered with Insurance for All, Access Afya and PharmAccess to innovatively create healthcare finance solutions to address this need.

A key insight from the research and other work that we have undertaken is that a pure health finance solution would have little attraction to this population segment. In addition, value adding health finance solutions need to be useful, affordable and trustworthy. They need to cater to other household needs, such as cushioning them against potential income loss as they deal with the health events.

Using the findings and insights obtained from the research, our partners have developed a suite of health finance solutions that are currently under pilot. These include credit at the point of care, bundled micro-insurance targeted at informal micro and small entrepreneurs and gig workers, NHIF insurance premium financing, and a health membership plan payment solution.

FSD Kenya appreciates the critical role that access to healthcare plays in the resilience of households. We are keenly monitoring these pilots to understand the barriers of uptake to these solutions and what could be done to enhance their value proposition.

We will be sharing the lessons and insights from these pilots with other actors in this space to inform innovation of value-adding health finance solutions and scale-up.

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