by Ryan Hogarth - South Asia, East Asia and Pacific, Trends/Challenges -

MICROCAPITAL STORY: BRAC provides Micro Health Insurance in Bangladesh. Lessons in Financial Viability. (Part II of IV)

This article on the Bangladesh Rural Advancement Committee’s (BRAC) Micro Health Insurance for Poor Rural Women in Bangladesh (MHIB) is the second in a series of MicroCapital case studies on Health Microinsurance (HMI) schemes in Bangladesh.  Please also refer to Part I on Grameen Kalyan; 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”.  The Grameen Kalyan article explained that public health services in Bangladesh are urban-based, elite-biased, and curative-oriented (p.vi), and that the World Health Organization (WHO) identified inadequate healthcare financing mechanisms to be one of the biggest obstacles to improving health outcomes of the poor.

BRAC was founded in 1972 as a small social relief project for victims of the 1970 cyclone and 1972 Liberation War. It has since grown to be one of the largest nongovernmental organizations (NGOs) in the world. BRAC’s largest program is its microfinance operations, which in 2008 loaned more than USD 1 billion to 6.4 million borrowers. However, it also has a variety of other development programs. In the mid-1990s, BRAC began establishing health centers around Bangladesh that provide basic health services, and as of 2005, there were 37 such centers (p15). Much of BRAC’s success has been attributed to the fact that eighty percent of its activities are self-financed. In order to insure a financially sustainable model for the health centers, BRAC introduced user fees. However, poorer segments of the population were unable to afford the costs. To address issues of equity and affordability, and to better finance its clinics, BRAC established a pilot health microinsurance (HMI) scheme in July 2001. The Micro Health Insurance for Poor Rural Women in Bangladesh (MHIB) was formally launched in November 2001 with a three-year contract (p16) to receive funding and technical support from the International Labor Organization (ILO).

Grameen Kalyan and BRAC’s MHIB differ in that Grameen Kalyan is both a health service insurer and provider, and MHIB is only an insurer. MHIB is administered by BRAC, but is a separate entity (p.vi) from BRAC’s health centers. MHIB reimburses BRAC’s health centers for the services they provide to BRAC MHIB members.

The program offers four health insurance packages:

1) The General Package (p28): Policyholders receive a health card upon payment of annual premium. Once insured, cardholders receive services with a copayment at BRAC health centers. Policyholders of the general package receive the following subsidized services (p28): doctor consultation, a free annual check-up for the head of the household, pathology testing, discounted medicine, and birth deliveries. The amount of the annual premium is determined by family size and membership in the BRAC microfinance program. For members of the BRAC microfinance program, the premium is USD 1.45 to USD 2.90. For those who are not members of the BRAC microfinance program, annual premium is USD 2.90 to USD 4.35 (p28). BRAC MHIB offers one-time limited subsidies upon referral to government and private sector hospitals for cases that BRAC health centers are not equipped to handle.

2) Equity Package (p28): BRAC refers to the extreme destitute as ‘ultra-poor’. The Equity Package was introduced in an effort to cross-subsidize the enrolment costs of ultra-poor with the premiums paid by non-members of the BRAC microfinance program. The package includes (p28) free enrollment, free consultations, free routine pathological tests, free yearly health check-ups with essential diagnostic tests, a discount of up to 80 percent on essential medicines, follow up home visits, subsidies of up to USD 14.40 upon referral to a hospital, and free transport to the hospital.

As of October 2004, the General Benefit and Equity Packages had 7816 policyholders (6776 BRAC microfinance members, 700 non-members, and 340 ultra-poor), covering an estimated 39 thousand beneficiaries (p17).

3) Prepaid Pregnancy Related Care Package (p28): From a study (p17) conducted in 2001, BRAC MHIB determined that due to lack of funds, women visited clinics on average three times during a pregnancy, and only when conditions seemed desperate. The Prepaid Pregnancy Related Care Package was introduced in 2002 in order to encourage monthly checkups. The package includes (p28) free monthly antenatal check-ups, a free monthly supply of iron and folic acids supplements, a Tetanus Toxoid immunization, a safe delivery kit, a discount for delivery at a BRAC health center, a post natal home visit for the mother and new born, and a one-time limited subsidy for any treatment of complications upon referral to a hospital. The premium for this package is USD 0.73 for BRAC microfinance members and USD 1.01 (p28) for other community members. Enrollment for the ultra-poor is free. At the end of 2004, the Prepaid Pregnancy Related Care Package had 3442 policyholders (p17).

4) School Health Package (p29): A pilot School Health Package was introduced at one school in January 2004. For an annual premium of USD 0.17 (p29), the package provides the schoolchildren with free annual check-ups, free biannual immunization against common intestinal worms, free supplementary iron tablets for girls, and a 10 percent discount on pathological tests. At the end of 2004, 1000 of the 1200 students in the school were enrolled in the school health package.

In total, BRAC MHIB had 12.3 thousand policyholders in 2004, covering an estimated 43.5 thousand (p14) individuals. Unfortunately, BRAC MHIB had major issues with members not renewing their policies once they expired, as described in the BRAC research paper, “Micro Health Insurance (MHI) Pilot of BRAC: A Demand Side Study”. Furthermore, BRAC MHIB did not base the price of premiums on a feasibility study. Instead, its field staff held informal discussions with community members to determine an affordable price. All premiums and fees charged to members of the BRAC microfinance program are at a subsidized rate.

From 2002 to 2004 BRAC had an operating loss of USD 95 thousand (p48). Unlike Grameen Kalyan, BRAC MHIB did not have any investment fund, reserves, or assets of its own. It survived with USD 114 thousand (p32) in subsidies from 2002 to 2004 – this in an organization that had a total expenditure of USD 138 thousand (p33) over the same three years.

The BRAC MHIB case study demonstrates the necessity for efficiency, innovation, scale, and alternative sources of funding in creating a financially sustainable HMI program. A study conducted in May 2005 to find possible ways of increasing the program’s sustainability. The report recommended (p48) the following:

– Reduce head office staff from two to one

– Reduce field staff to two per field location

– Increase outreach and premiums

– Introduce late renewal penalty on premiums

– Introduce no-usage renewal discount on premiums

– Experiment with more innovative concepts

BRAC MHIB management decided to implement the recommendations, but realized that it would be several years before the program would be financially sustainable. It requested continued assistance from the ILO, but the ILO made its last installment into MHIB in 2005 (p31). According to a 2005 CGAP research paper (p48), “It will not be possible for BRAC MHIB to continue its operations without financial support from a donor or its parent organization.” MHIB was still operating in 2006 with an unspecified amount of support from its parent organization, but its continued existence was questionable.

The only information on MHIBs activities since 2006 is from BRAC’s homepage, which currently states, “The Health Micro Insurance scheme is developing a sustainable community-health financing model to increase the community’s access to health treatments and safeguard household health security for the poor.” It is unclear whether BRAC continues to subsidize MHIB’s operations, or whether MHIB continues to operate in the same capacity as before.

By Ryan Hogarth, Research Assistant

Additional Resources:

Bangladesh Rural Advancement Committee (BRAC): Home

BRAC: Audit Report 2006

BRAC: Health Report 2006

“Exploring the perceptions of ultra poor for low utilization of micro-health insurance schemes, BRAC, Bangladesh: A Qualitative study” by Manjula Singh, James P. Grant School of Public Health BRAC University

“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, April 22, 2009: “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?”

“Micro Health Insurance (MHI) Pilot of BRAC: A Demand Side Study”, by Imran Matin, Nuzhat Imam and Syed Masud Ahmed, BRAC Research and Evaluation Division: December 2005

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