Insurance Article, The Insurance Times 2020, The Insurance Times June 2020

Innovating and Implementation of Micro Health Insurance

  1. Abstract

Over the past 30  years Bangladesh has made significant progress in developing its health indicators.Moreover, Bangladesh had successfully achieved most of the targets of Millennium Development Goals and looking forward to accomplishing the Sustainable Development Goals within 2030. In this connection, quality healthcare and affordable health services are the utmost priority of the government.  However, through the various health reports and analysis’s, we can find that the people of Bangladesh especially country side and lower middle income groups are facing numerous health related challenges & facing the difficulties to bear cost of diagnosis and ensuring proper treatment for having the highest percentage of out-of-pocket (OOP) payments scenario in Bangladesh.

Therefore, Bangladesh need to come up with innovative approaches to provide the means of alternative financing to people. Innovative technology driven health insurance product can be an effective tool to bring them under the safety net of health insurance coverage.

The research has been designed embracing the methods of cluster randomized trial allowing the identification of direct and indirect effects of MHI on actual OOP incurred by the insured vis-à-vis the non-insured households who are otherwise similar in economic, educational and social dimensions. Such an analysis holds the promise of determining whether MHI type of intervention may eventually lead to large-scale implementation so that quality health care reach the target segment of the policyholders thereby contributing to the cause of universal health coverage.

  1. Introduction

Like other developing countries the poor and middle class people of Bangladesh face a wide range of risks like illness and injury, death of livestock, harvest failure, flood, cyclones, drought, and so on. In has been noticed that they usually adopt various self-insurance devices such as engaging in ex-ante income diversification, investing in lower risk assets, using up liquid savings, informal borrowing, even disposing of productive assets and the like to manage the treatment cost. However, more recently reliance on microcredit has expanded greatly, but such avenues do not offer a great deal of scope for risk mitigation to the community of Bangladesh.

In addition, some ex-ante activities (e.g., income diversification and investing in lower risk assets) may themselves increase the risks of future poverty (i.e., vulnerability), while the ex-post strategies (e.g., disposing of productive assets) may lead to persistent or deepening poverty.

In the absence of well-targeted safety net measures, poorest end up relying largely on self-insurance devices to mitigate risks with high implicit premiums. Several authors have proposed that microinsurance products (e.g., life, health & livestock) if suitably designed would go a long way in preventing the risks of further poverty (Ahsan, 2009; Dror, 2007 and Morduch, 2006).  Through various report, we have found that health is the dominant category of shocks experienced by the poor in Bangladesh and annually households spend about five per cent of total expenditure to meet out-of-pocket (OOP) health care expenses (Ahsan et al., 2012, 2013a).

We have also noticed that there is also evidence that OOP payments push over three per cent of the households into poverty annually according to the report of (Hamid and Ahsan, 2013). Thus, countries like Bangladesh need to start afresh with innovative means of raising funds for the provision of health care. Micro Health Insurance (MHI) is one such innovation, which relies on pooling the risk as well as the available resources for the provision of affordable care.

Lack of quality provision of care plagues many micro health initiatives, and to this end which can provide a large range of services, both in-and-outpatient including emergency, to the poor of the region.

Drug costs, as is well-known, remain the main challenge in designing an affordable premium in MHI schemes, and in order to contain the same, socially committed pharmaceutical companies have been integrated into the pool of partners.

Benefit package design and its pricing (i.e., the insurance premium) are the other facets of this process. Based on extensive analysis of provider’s services and fess, the pattern of morbidity of the target population, health seeking behaviour and of the sources of burdensome out-oft pocket (OOP) health expenses faced by the rural poor in Bangladesh, a benefit package has been designed. Premium calculation has also been done simultaneously and in a manner congruent with the standard actuarial practices. Therefore, Health insurance is required to address all the challenges in Bangladesh related with Health and medical treatment.

  1. Methodology:

We have applied two methods to conduct the research:

(i) Household census to identify below poverty line (BPL) households and verification of list of poor (SSNP beneficiaries) endorsed by LGIs, and

(ii) Household survey for assessing health seeking behavior, health care expenditure, willingness to pay and patient satisfaction.

The study has covered randomly few selected areas of ShasthoShurakshaKarmasuchi ,( an Initiative Ministry of Health and Family welfare of Bangladesh) ,  of to carry out the pilot project using probably sampling approach. For rural areas, villages were selected as primary enumeration units at Kalihati,Ghatail ,ModhupurUpazila of Tangail District. The household census covered  10,000 households in primary enumeration areas., while household survey involved 3000 randomly selected households.

The study made use of six different types of data collection instruments like poor household identification format, household interview schedule, exit patient interview schedule, key informant interview check.

  1. Progress of Bangladesh Health Scenario

Over the past 47 years since independence Bangladesh has made lot of strides in the Health sector which is clearly visible. The major developments have taken place in establishment of medical colleges, medical university, private medical colleges, private clinics, private hospitals, district hospital, rural health centers and community clinics in various parts of the country to provide easy access to health treatment.

Also, it is a clear sign that much progress has been made in the pharmaceutical sector providing adorable medicine, anti-cancer drugs etc. National and private level campaigns are ongoing to promote mental and child health, vaccination programmes, mass deworming programmes, use of safe water and latrines, hand washing etc.

4.1 Major Successes in the Healthcare Sector

Maternal Mortality in 1000 live birth


2010- 242



Child Mortality Under 5 per 1000




Infant Mortality





Stunt Birth Rate


2010- 26.1%



Immunization Coverage




Access to clean water





Sanitation Coverage


1990- 34%





Life Expectancy 72 Years

Male life Expectancy


Male 70.6 years

Female 73.5 Years

4.2 Factors behind the Success

Guiding Principles of National Healthcare Approach of Bangladesh

Constitutional Obligation

  • Basic Medical Requirement to all people
  • Improve Public Health
  • Improve Nutrition

4.3 National Health Policy Obligation

  • Recognize Health as human right
  • Ensure primary and emergency healthcare
  • Increase and Expand citizen centric quality health care ensuring equity
  • Enable people seek healthcare and undertake healthy life style

4.4 Stronger Healthcare Infrastructure

  1. Established 16,438 communityclinic and union health centers toprovide healthcare services tothe doorstep of rural people
  2. Established a number of newgeneral and specializedhospitals
  3. Established a bone marrowtransplant center in the capital
  4. Expanded intensive care units, and angiograms and angioplasty services to all medical college hospitals Expanded kidney dialysis services to many medical college district hospitals;
  5. Established trauma centersalong busy highways
  6. Expanded burn units in districthospitals
  7. Establishing one largemultidisciplinary hospitalin each city zone

4.5 Strengthening Medical Service

  1. 30 types of free medicinesprovided free of cost
  2. Tele-medicine service has beenlaunched in 43 hospitals aroundthe country for providingmedical service at home roundthe clock
  3. 30,000 satellite clinics for childand maternal healthcare
  4. Health Call Centre: 24/7 healthcall center 16263 for freemedical consultation, ambulancereservation and providing healthinformation services
  5. 103 service centers for disabledpersons servicing 500,000children with autism free of cost
  6. Nationwide community-basedskilled birth attendant (CSBA)training program organized
  7. Expanded Cardiac surgeriesin several hospitals
  8. Strengthened care foremergency parents in publichospitals and privatehospitals
  9. Promoted private hospitalsand encouragedpublic-private partnershipsin healthcare
  10. Added several hundred newambulances including boatambulances
  11. Free medical servicesensured for freedom fighters and their families.

4.6 Other Success

  • Target to achieveuniversal healthcoverage by 2023that will pay 70%of the medicalexpenses
  • 97% medicine demands are met by local pharmaceutical industries
  • Primary HealthCare is free ofcost and inclusiveof health screening
  • Bangladesh has theworld’s largestdeployment of DistrictHealth Information System(DHIS2) software.


4.7 Extensive Healthcare Network

  • About 70,000Community HealthWorkers engaged indomiciliary service
  • About 19,000 daycare health facilitiesincluding communityclinics and unionhealth & familywelfare centers.
  • Coursesintroduced formidwifery and3,000 midwivespost created9 & 2

A satisfactory level of progress has also been made in family planning. In this connection, it would be worthwhile to mention that Bangladesh has made remarkable performances in achieving the Millennium Development Goals way ahead of neighbouring countries, has also expressed its willingness to do the same with regard to achieving the SDGs as well. Many NGOs also engaged and contributing toward health care delivery system in Bangladesh.

According to the World Health Organisation (WHO), Bangladesh is ahead of most of its neighbouring nations when it comes to its national life expectancy at birth. For example, the life expectancy at birth in the country is 72 years on average which is more than by a couple of years compared to that of India and Pakistan having life expectancy at birth figures of 68.5 and 67 years respectively.  Bangladesh has been able to produce huge number of private physicians who are contributing to solve the day to day medical problem that people are facing.

The country has also taken effective initiatives in ensuring praiseworthy infant and neonatal health protection as reflected by sharp declines in the associated death rates. Infant mortality rate in the country has gone down by almost 75% over the last three decades or so. At present, infant mortality rate in Bangladesh hovers around 31 deaths per 1000 live births as compared to India.

In short, it would be worthwhile to mention that Bangladesh needs to do many things for achieving the success in improving health sector. Health insurance will be a great tool.


To prepare this report, it requires to study the evolution of micro health insurance (MHI). The concept of micro health insurance policy has closed link with that of micro finance which is alternative financial tool to improve the economic condition of the poor and disadvantaged people and community of the developing countries like Bangladesh.

Many researchers have found that reduction in out-of-pocket expenses for healthcare and improved financial protection for health coincided with both health reform such as health financing schemes and with economic recovery and poverty alleviation schemes like micro-finance.

In this chapter, will mainly focus on issues related to micro health insurance finance that can be tailored to serve the purpose of establishing micro health insurance in a developing country like Bangladesh.


In 2012, the government implemented the health financing strategy 2012-2032 and the mission of this strategy is to achieve universal health coverage by means of establishing social protection for health.

The major goals of the financing strategy is:

  • To halve the out-of-pocket expenses for healthcare at point of service from the current level of 64% to 32% by the year 2032.
  • The strategy further aims to ensure efficiency in resource allocation within the MoHFW in order to attain maximum value for money and an equitable and sustainable financing mechanism.
  • Indeed, the success of any health financing strategy depends not only how the resources are accumulated but also on how the collected revenues are spent and allocated.
  • Risk pooling through an insurance mechanism has proved to be an efficient health financing mechanism, which possesses the ability to ensure higher value for money for healthcare.
  • The government of Bangladesh is also inclined towards testing social health insurance schemes in this regard. The current strategy plans to combine funds from tax-based budgets with the social health protection scheme, existing community-based and other prepayment schemes, and donor funding to ensure financial protection against health expenditures for all segments of the population.
  • The importance and interest in testing social health protection schemes was also highlighted in the country’s health sector Strategic Investment Plan (SIP) of 2003-2010.
  • The current health financing strategy of Bangladesh further elaborates on the path towards universal health coverage where it includes small scale health insurance schemes like micro health insurance or community health insurance as an intermediary step towards establishing a social health insurance mechanism to cover the risks of ill-health nationwide.

There are some organizations have launched micro health insurance in the country. In order to make it more successful and effective operational system should be designed and developed.

In this regard, prepayment for health, diversifying source of funding, monitoring of dynamics of health insurance market and ensuring easy access to health service for the poor demand deeper understanding should be ensured.  For this the country needs to accumulate findings from the existing trials and or programs to build a system that would allow efficient risk pooling and fund allocation under a well-managed national insurance scheme.


Collecting revenue in health insurance can vary from being financed by the client as well as the employer like Thailand started co-payment on health service and later resulted fully subsidizing the premium by virtue of which currently has achieved universal coverage for health.

India has a wonderful revenue collection strategy varying from full subsidization from government to combined contribution from employer, employee and government. Revenue of Ghana comes from VAT on goods and services (70%) followed by compulsory contribution from formal sector workers in the form of social security tax (23%) where premium from the members is only 5% of the total revenue. If Bangladesh could follow the revenue collection strategy of these countries, it would be more helpful for the nation. Bangladesh has a number of people that creating revenue collection difficult because of informal sector. Bangladesh government currently following Indian to fully subsidize the premium for the population below the poverty line (BPL) to ensure universal coverage for all though it’s required further investigating. The example of Ghana could also prove to be useful in Bangladesh to include people from all spare. Bangladesh however can mix several methods that could be also useful. In the developing and under developed countries financing reforms followed a path where health insurance schemes are solely introduced for the formal workforce. In this system better quality health and resources can be focused to already an advantaged and organized group, which in another form exacerbates inequities in societies and leads to a two-tier system of healthcare provision.

10.4 The Choice between Formal vs. Informal Care

We have found that the majority (about 60%) of those interviewed whohave sought some form of health care followed by private providers (about 26%) and government providers (about 11%). More than two-thirds (about 68%) of those who went to informal providers, visited quacks (followed by drugstore salesman (about 22%).

This report has revealed that the main reason for selecting the type of provider by about 42 per cent of those who sought ‘informal’ care followed by the ‘low cost of treatment’ (about 31%).

For those choosing formal providers, while the propensity to seek private care remained about the same (26.1 vs. 25.4, respectively) for programme and control groups, there appears to be some important differences when it came to choose between government and NGO providers. In fact, lacking access to NGO care, which was utilised by about 5.1 per cent of the programme patients, control subjects chose government care instead (12.5 vs. 9.8 in the programme areas).

  1. Micro health insurance in Bangladesh: innovation in design, delivery and distribution channel

In Bangladesh the poor and middle class families face wider ranges of risks like illness and injury which often causes death. To address those health risks, the community usually adopt various self-insurance devices like using up liquid savings, informal borrowing, even disposing of productive assets and the like.

We have also found that poor and middle class families often heavily dependent on microcredit for quick risk mitigation. In addition, some ex-ante activities (e.g., income diversification and investing in lower risk assets) may themselves increase the risks of future poverty (i.e., vulnerability), while the ex-post strategies (e.g., disposing of productive assets) may lead to persistent or deepening poverty.

In the absence of well-targeted safety net measures, poorest end up relying largely on self-insurance devices to mitigate risks with high implicit premiums. Evidence reveals that health is the dominant category of shocks experienced by the poor in Bangladesh and annually households spend about five per cent of total expenditure to meet out-of-pocket (OOP) health care expenses.

There is also evidence that OOP payments is increasing in each year. Therefore, countries like Bangladesh need to start afresh with innovative means of raising funds for the provision of health care. Micro Health Insurance (MHI) is one such innovation, which relies on pooling the risk as well as the available resources for the provision of affordable care.

In order to design innovative health insurance scheme a holistic approach is required for identification and congregation of all relevant stakeholders (e.g., government, healthcare provider, insurance company, drug companies and the hospital).

  1. A Holistic Design

Design of an innovative health insurance scheme involves complex activities like product design and pricing, product sales and distribution including marketing and monitoring clients’ satisfaction, technical management (membership, premium and claims), financial management, management of agreements with the network of health care providers, drug companies, and risk bearing.

This scheme is a unique holistic model of health insurance which has assembled all relevant parties to ensure universal health coverage for all the households. This model can be viewed as a variant of partner agent model where a third party leveraging its expertise mediates with the partners and carry out the functional activities.

Under this model, a chain of mutual interactions among various partners has been arranged. As already stated, the third-party organisation plays the pivotal role in the functioning of the model through proper coordination of the entire process involving many partners. Accordingly, a unit office (consisting of a pilot project manager, a pilot project officer, an MIS officer and some field staff) has been set up in the hospital premises to serve the clients and policyholders.

Structure of and partner of the Scheme:

  1. Benefit Package, Co-payment and Inclusion Criteria

Benefit Package: The benefits of health insurance scheme has been designed analyzing the local needs of the community. In addition to household behavioral information, we have reviewed various kinds of secondary information through consulting with  local hospitals to re-evaluate the need and disease probabilities.

Inpatient care with surgery (including Caesarean section, if relevant) as well as management of chronic care and OPD services all of which commonly lead to catastrophic OOP payments for poorer households, have been included in the benefit scheme under discussion.

Over the 12-month period, a maximum of five outpatient visits has been set for a household of four and five members, three visits for a household of two or three members, six visits for a household of six or seven members, seven for a household of eight or nine members and eight visits for a household of more than nine members.

Each eligible household will be entitled to receive one complete maternal care including  ANCs delivery (normal or C-Section). However, a household will be considered eligible for the maternity component of the package if the pregnancy develops after enrolment in the MHI scheme by a mother who is at least 18 years old and does not have more than two children.

The benefit norms mentioned that the above package benefits will be much higher than the actuarially predicted incidence of illnesses.  This implies that the sum assured (SA) per insured member is many times greater than the expected cost of care.

Turning to inpatient care, we note that of the 3000 households cited above, only five (5) utilised three or more inpatient stays at a hospital/clinic, where it so happens that majority, i.e., 3 out of those 5 households were from Tangail district, the latter sample size being 743. The overall incidence of inpatient visit (both surgical and non-surgical, but excluding heart disease) was 494 cases reported by 439 households, i.e., one episode per 7 households. These figures are well within the projected benefit range as outlined in Table.

13.1 Inclusion Criteria: Unlike formal health insurance, household has been selected as the unit of enrolment. The implementation design calls for the inclusion of a significant number of households from each area.

13.2 Premium Setting Procedures:


Health insurance is often defined as compensation/reimbursement policy and not the benefit policy and for this reason the insurer tends to set a high premium (Mittal, 2009).

As the scheme is directed to the poorer people in society, it is imperative to set an affordable premium for them. Progressive premium rate is sometimes espoused in view of the cross subsidy. But here we are applying the community rated premium for all beneficiaries, most of whom are either poor or near-poor as per our measure of poverty based on the cost of basic needs (CBN) methodology. It is also advised not to float any subsidy as this causes adverse selection on one hand (Zhang, 2012) and hampers the goal of long-term financial sustainability on the other. Besides, rate differentiation creates confusion among the population who already display apathy towards insurance over and above adding on to managerial and accounting chores. Rather subsidy in the form of not counting the high operational cost is implicit.

The morbidity rates prevalent in the relevant area obtained from household surveys were employed for setting the premium as that in the CHAT model in India (Danis et al. 2007). In Rwanda, premium calculation allowed for a small increase in the health care utilisation rate (Schneider et al., 2000). After reviewing the formula proffered by different authors (STEP-ILO 2005, Zweifel et al. 2007), we set the premium excluding the operational cost but keeping the loadings. This premium is strictly tailored to reflect the discounted FFS price schedule offered by the provider hospital and pharmaceutical companies. However, the procedure is general enough so that a different price regime maybe utilised to figure out the appropriate premium in a different context (e.g., over time and space).

  1. Recommendation

Health insurance helps to protect people from high medical care costs that arises suddenly. Insurance awareness should be increased through various initiatives

  • Awareness and insurance education: Massive awareness should be created for overcoming prior misconception and lack of trust in the insurance mechanism
  • Changing the mind-set: People mindset should be changed to make health insurance affordable to the policy-holders.
  • Comprehending risk-pooling: A Comprehensive risk pooling strategy should be made to pay premium for the health insurance.
  • Trust in the provider: From the insurance provide side, easy and hassle free service should be ensured.
  • Community leaders and members should be trained and engaged to popularize the insurance scheme and to create a mindset and willingness to pay
  • In a nutshell, Micro health insurance has the potentiality to be financially sustainable in the country for ensuring universal health coverage for the people of Bangladesh.
  • Micro health insurance should be aligned with health care and wellbeing of national SDG
  • Importance of health insurance should be part of medical education
  • Partnership Projects involving multiple stakeholder District wise like : telcos, NGO,Insurance companies, health service providers
  • Upgrading small clinics into modern healthcare
  • Private initiatives for building hospitals
  • Knowledge sharing with hospitals abroad
  • Digitalization of health care
  • Health Insurance should be mandatory for Government employee and private sector
  • More trainings of medical stuff
  • Incentives for medical for staying in remote areas
  • Govt subsidy for micro insurance premium
  • ONE TEAM ONE GOAL- Micro Health Insurance for Everyone ( Regulator ,Ministry ,Health service provider )
  1. Conclusion

Health insurance policy usually consider as market failure due to measure and monitor of the services. This makes health financing all the time complex. When a program is not cautiously managed and implemented properly succeed may not come from the product. The ideas presented in this report highlights the fact that countries willing to initiate health insurance as one of the means of ensuring universal coverage need to be flexible in terms of testing and adopting strategies and policies to implement health insurance in their own country context.

Revisiting and restructuring policies at several stages of health insurance scheme help to the improvement & played a vital role for countries to achieve targets. The same mechanism can have a different impact in different settings depending on the stage of development of a particular country and its social, political and economic. It might reflect to be effective for a country to have different types of health insurance co-existing to serve different groups of the population or have various types follow each other in succession. In Bangladesh this scheme will be successful in the mentioned areas.

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