The Challenges of Universal Health Insurance in Developing Countries: Evidence from a Large-scale Randomized Experiment in Indonesia

Abstract

How can developing countries increase health insurance? We experimentally assessed three approaches that simple theory suggests could increase coverage and potentially reduce adverse selection: temporary price subsidies, registration assistance, and information. Temporary subsidies attracted lower-cost enrollees, in part by reducing strategic coverage timing. While subsidies were active, coverage increased more than eightfold, at no higher unit cost to the government; after subsidies ended, coverage remained twice as high, again at no higher cost. However, subsidies are not sufficient to achieve universal coverage: the most intensive intervention -a full one-year subsidy combined with registration assistance -resulted in only 30 percent enrollment. * We thank our partners at BPJS Kesehatan, Bappenas, TNP2K, and KSP for their support and assistance. In particular, we wish to thank from

Persistent Effects of Temporary Incentives: Evidence from a Nationwide Health Insurance Experiment

“…10 The immediate effect of the application assistance is less than a fifth of the effect of the full subsidy and just more than a third of the effect of the partial (50 percent) subsidy. Lower effectiveness of assisted application in Banerjee et al (2019) is almost entirely due to failed attempts to enroll caused by deficiencies in the database.…”

“…This pattern is consistent with the subsidy having persuaded those who placed a higher ex ante value on insurance to enroll and to keep enrolling, while application assistance (on top of the 50 percent subsidy) achieved a larger immediate effect by inducing those with less interest in insurance, who were less likely to re-enroll when faced with the full premium and indirect costs. 2 The use of incentives to ameliorate adverse selection by bringing lower risks into the pool -a strategy advocated by Banerjee et al (2019) on the basis of findings from a health insurance experiment in Indonesia -can run into a trade-off. A temporary incentive designed to reach further down into the distribution of risks may have a less sustained impact on the average insured risk.…”

“…Few studies test this hypothesis. Most confine attention to the immediate effect, and those that examine incentives for health insurance deliver mixed evidence (Thornton et al 2010, Das and Leino 2011, Dercon et al 2015, Chemin 2018, Asuming et al 2019, Fischer et al 2018, Banerjee et al 2019.…”

“…The randomized experiment conducted by Banerjee et al (2019) in two cities in Indonesia finds a more than three-fold increase in social health insurance enrollment during the year a full premium subsidy was operating. But less than a fifth of this effect persisted eight months after the subsidy had been withdrawn.…”

Health Insurance Ownership among Mollucans in Indonesia

“…Apart from Indonesia, the challenges of health insurance membership towards Universal Health Coverage are also experienced by many countries (Fossati, 2016;Banerjee et al, 2019;Msn et al, 2019;Huang, Yuan and Liang, 2020). The characteristics of the community contribute to the expansion of the National Health Insurance membership, especially in terms of the willingness and ability to pay the community, awareness of the benefits of health insurance, and education level (Laksono, 2016;Ng et al, 2019).…”