Many developing countries don’t provide universal health insurance coverage for their citizens. As a result, any health scare and subsequent doctor’s visit or hospitalization could lead to crippling medical debt and further poverty. When the government doesn’t provide health insurance, NGOs often step in to offer coverage. However, these programs face challenges in implementation and long-term viability. Economists such as Torben Fischer, a PhD student at the University of Mannheim, try to develop solutions so that these programs can offer insurance to as many people as possible. He is part of a research group that is exploring different ways to offer health and disability insurance to people in developing countries, working specifically rural Pakistan.
To actually improve the status quo in these countries and offer health insurance to more people, the premiums need to be low and the policy needs to be easy to understand. Because they’re so simple, these kind of insurance programs are more economically risky. They don’t distinguish between high-risk insurees, who are more likely to get sick and need expensive medical care, and low-risk (i.e. healthy) insurees. If more high-risk insurees sign up than low-risk insurees (which is possible since people know more about their own health than the insurance provider) the insurance program will not be sustainable, and the citizens will be right back where they started.
Torben’s research group is testing different insurance contracts that might be able to overcome this problem while still allowing providing coverage to a large percentage of the population. One of the solutions they are testing is requiring people to sign up for insurance in households, rather than as individuals. By requiring people to enroll in household groups, the risk to the insurance program is reduced (since there is a greater diversity of high and low-risk insurees) while still ensuring that the people more likely to become ill are covered (saving them from expensive medical bills).
The academic goal of their research is to improve health and disability insurance and offer solutions that can effectively reduce household risk while maintaining the financial stability of the NGO insurance program. They wanted to test if conventional insurance plans face information asymmetries (high-risk people know that they are high-risk while the insurance provider doesn’t) that will eventually cause the plan to no longer be financially viable. There is also a humanitarian goal to offer health coverage to people who were previously uninsured, though Torben does note that some people who were insured before are no longer covered under the new plan.
Their study involved 40,000 people from 500 villages in the Punjab province of Pakistan. Torben spent nine months in the country on the project working with a local development organisation. He collected two rounds of data through computer-assisted personal interviews with sample households in some of the rural villages that were part of their study. The first survey he did established a baseline before the program began, and the second was a follow up survey done after one year of the program. The project will finish in 2017 but the researchers hope to be able to convince the local NGO to keep the health insurance program running, or even to expand it.
Travelling to Pakistan helped Torben see economics principles described in his theory class applied to real life situations, which is the part of economics that has always fascinated him. There’s debate in the field about how much general economic theory can be applied to situation in developing countries which makes his work experience in Pakistan especially interesting. While working in Pakistan he could question and consider how to make real changes in poverty and medical security without restrictions or needing to consider alternative circumstances. “My goal is to be able to deeply research the mechanisms that are in play and present social system ideas for governments that can affect important political decisions and eventually improve lives.”