The viability of insuring outpatient care for a micro health insurance scheme

Abstract

Outpatient care is not widely insured due to demand side moral hazard. This is compounded by the fact that there is very high out-of-pocket expenditure especially for the poor. Micro Insurance firms cater for the needs of the poor but outpatient care is rarely part of the cover given to them. Even with the ones that provide the cover, it is limited. The purpose of this study is to assess the feasibility of a micro insurance company to insure outpatient care. The study focuses on outpatient utilization for three schemes. Outpatient costs are assessed as a measure of utilization and premium payments are also used as a measure of utilization. The study uses a panel data set from a Kenyan insurance company for the years 2012-2014. It incorporates the use of hypothesis tests to assess outpatient medical costs. The level of utilization of the outpatient benefits is very low. A small number of policyholders utilize more than their premiums paid and even less exceed the cover limits. This shows that these schemes are viable. More importantly it raises the question; why is the level of utilization in these schemes low given the high levels of outpatient utilization in Kenya?