MICROCAPITAL STORY: Grameen Kalyan offers Health Microinsurance for USD 1.73 Per Year and Partners with Pfizer Inc, GE Healthcare, and Mayo Clinic. Is it Economically Viable? (Part I of IV)

This article on Grameen Kalyan is the second in a series of MicroCapital case studies on Health Microinsurance (HMI) schemes in Bangladesh. Please also refer to Part II on the HMI scheme of the Bangladesh Rural Advancement Committee (BRAC MHIB); Part III on the Society for Social Services (SSS); and Part IV, a wrap-up of the CGAP research paper “Health Microinsurance: A Comparative Study of Three Examples in Bangladesh”.

At present, free healthcare for the poor in Bangladesh exists only theoretically. Public health services are urban-based, elite-biased, and curative-oriented (p.vi). A case study on health microinsurance (HMI) by the Consultative Group to Assist the Poor (CGAP) discovered that less than 40 percent (p.10) of the population has access to basic health services. The paper states that health risks (p.1) requiring medical treatment costs are some of the most common concerns to low-income households and act as major barriers to breaking out of the poverty cycle. It cites a study conducted in 1992 with members of Bangladeshi microfinance institution (MFI) Grameen Bank, which concluded that after 10 years of borrowing 58 percent had lifted themselves out of poverty, compared to 18 percent of non-borrowers. Of the 42 percent who failed to cross the poverty line, 60 percent (p.22) had an illness drain family resources.

The World Health Organization (WHO) identified inadequate healthcare delivery systems and inadequate healthcare financing mechanisms as two of the biggest obstacles to improving health outcomes of the poor. To fill these niches, several nongovernmental organizations (NGOs) in Bangladesh have begun to play the role of health provider and/or insurer. Grameen Kalyan offers both.

Grameen Kalyan (Bengali for “Village Well-being”) was established in 1996 as a sister NGO of the Grameen Bank, when it was handed 10 functioning clinics by Grameen Trust, another sister NGO with the mission of spreading Grameen’s microfinance model through a Build-Operate-Transfer (BOT) model. Since then, Grameen Kalyan has expanded to 38 health centers that act as both insurers and providers of primary health services. Most of the health centers are attached to a Grameen Bank branch. The area covered by each center corresponds to that of the branch, and usually has a radius of about eight kilometers. Each center is run by one office manager, two doctors, one paramedic, one laboratory technician, and six health assistants.

In addition to the 10 clinics, Grameen Kalyan also received a USD 42.5 million (p.23) endowment fund from the Grameen Bank to generate income for its health microinsurance (HMI) scheme. The endowment fund was put into savings, generating income until 2002, at which point it was returned. From 2002 to 2004, the International Labour Organization (ILO) granted Grameen Kalyan USD 378 thousand, and transferred a total of USD 750 thousand (p.49) to the NGOs reserves.

Grameen Kalyan also generates funds through its HMI scheme. The HMI clients pay a yearly insurance premium (USD 1.73 a year for Grameen Bank members and USD 2.17 for non-Grameen Bank members) which covers up to six family members. Upon a visit to a health centers, cardholders pay an additional co-payment of USD 0.14. Besides generating more revenue, the co-payment is a strategy to prevent cardholders from overusing the services (p.3). Cardholders get one free routine checkup per year, and can also purchase medicines at a discounted rate. Grameen Kalyan does offer services to non-cardholders, but at a more expensive rate. For more information on product features and policies, please refer to Grameen Kalyan’s website.

According to the website, in 2007 the NGO treated an aggregate 321 thousand patients at health centers, and provided domiciliary services to 2.5 million villagers. Its operational cost recovery rate increased from 38 percent in 1997 to 93 percent in 2007. Unfortunately, Grameen Kalyan’s website does not provide any further financial information.

The most the most up-to-date financial information for Grameen Kalyan is from the 2005 CGAP case study on HMI in Bangladesh. In October 2004, Grameen Kalyan had 58 thousand cardholders (51 thousand members of the Grameen Bank and 7 thousand nonmembers), covering an estimated 290 thousand beneficiaries (p.23). Grameen Kalyan’s operating loss from 2002 to 2004 was USD 388 thousand. However, it generated USD 945 thousand from investments of the profit generated from the endowment fund as well as other funds, resulting in a net gain of USD 557 thousand (p.49). The case study states (p.49), “Grameen Kalyan has been able to meet its operating expenses fully from the revenue from cardholders and investments for the past three years. Grameen Kalyan’s experience shows that with an injection of a large endowment fund for a limited period, and with sound investment management, it is possible to reach financial viability.” In order to assess the Grameen Kalyan’s current financial viability, or how near the HMI scheme is to being self-financed, more information is required.

Matthew Jowett, senior health financing specialist at the WHO, says, “This in itself is a major achievement – generating a profit, however, would be far more problematic.” He attributes the success of Grameen Kalyan in creating a nearly self-financing HMI scheme to “covering only small risks, that is, low-cost care in primary clinics, having low operating costs, for example labor, and achieving scale in terms of membership.”

It is true that Grameen Kalyan covers only small risks. For example, it will finance only up to USD 29 for a caesarian birth, and if the health center refers a client to the hospital, then Grameen Kalyan will pay the family USD 7.25 to USD 29 per year. The focus of the insurance scheme is rather on preventative measures. The health centers provide primary treatment and advice on maternal health and family planning methods. Technicians conduct routine pathological tests on patients referred by the doctor. And, health assistants provide door to door basic healthcare services and dissemination of health education.

In September 2008, Grameen Kalyan collaborated with Pfizer Inc., General Electric (GE) Healthcare, and Mayo Clinic in pursuit of scalable models of healthcare and micro health insurance delivery in Bangladesh. Each of the partner organizations was chosen due to its respective field: Pfizer is a global research-based pharmaceutical company, GE Healthcare is a global manufacturer of medical devices such as ultrasounds, and Mayo Clinic is a large non-profit that operates medical schools, and medical treatment and research centers in the United States. The partners will evaluate ways to improve Grameen Kalyan’s existing system, and in September 2009, will propose business models that aim to scale and replicate the model in other developing nations.

Grameen Kalyan’s new alliance will reportedly focus on the following five areas:

(1) Implementing primary health promotion and disease prevention programs, including maternal and child health promotion and nutrition programs.

(2) Expanding Grameen Kalyan’s current healthcare delivery and HMI programs.

(3) Establishing permanent training programs for nurses, technicians and physicians.

(4) Reviewing operating efficiencies and the types of services offered by Grameen Kalyan’s clinics.

(5) Introducing genomic, epidemiological, and outcomes research capability to increase prevention and treatment of diseases particular to Bangladesh

The goal of Grameen Kalyan’s partnerships will be to develop social business models of healthcare delivery that are entirely financially self-supporting, with all profits re-invested into the mission of reaching more poor clients. According to Grameen Bank founder Muhammad Yunus, “Only an economically viable solution can create the infrastructure needed to enable people to sustain themselves, alleviating the poverty cycle.”

By Ryan Hogarth, Research Assistant

Additional Resources:

Business Wire: Grameen Health to Establish Independent Collaborations with Pfizer, GE Healthcare, and Mayo Clinic to Create Sustainable Healthcare Delivery Models for the Developing World

Grameen Kalyan: Home

“Health Microinsurance: A Comparative Study of Three Examples in Bangladesh”, by Mosieh Ahmed, Syed Khairul Islam, Md. Abul Quashem and Nabil Ahmed, CGAP Working Group on Microinsurance, Case Study No.13: September 2005

MicroCapital article, March 25, 2009: Scalable and Sustainable Micro Health Insurance Just Around the Corner?

OneWorld South Asia: Grameen Health partners leading medical care providers