Why Micro Health Insurance Units Cannot Forego Reinsurance

This study seeks to estimate the capital that micro health insurance units (MIU) require to secure their viability as stand-alone risk carriers. It also examines the potential of reinsurance as a cheaper and safer alternative solution to maintaining contingency reserves.

MIUs reduce negative financial consequences of healthcare costs for people who cannot access formal and affordable health insurance. Study findings indicate that:

• Amount of capital required b MIUs is linked to membership size and their confidence level for sustainability;
• Amount of capital is considerable, and risk of insolvency if such capital is not amassed is high;
• MIUs that have had to go it alone have failed;
• Cheapest and simplest method of capital relief is reinsurance;
• Reinsurance, in addition to underwriting, also provides access to technical assistance for MIUs.

MIUs represent an opportunity for governments to extend health insurance among excluded populations. They need capital relief from the moment of launch of operations, and reinsurance becomes imperative when they are unable to accumulate and hold large reserves or seek external deficit financing.