The hidden value of social health insurance: breaking the intergenerational poverty trap?

by Christoph Strupat

In the last decade, we witnessed a global campaign to extend health care coverage in the developing world. This push for Universal Health Coverage (UHC) aims to improve protection against the risk of unforeseen medical expenses when falling ill. The Covid-19 pandemic has made this protection even more important.

Countries across the globe are implementing various reforms aimed at achieving UHC. More specifically, several countries are working towards expanding health protection through the implementation of social health insurance schemes. The term social health insurance is used to refer to any publicly managed health insurance scheme. In this case, contributions are made by individuals and directly by the state to ensure coverage of those unable to contribute.

Direct and indirect impacts of social health insurance

Emerging evidence clearly indicates that the expansion of social health insurance results in concrete progress towards UHC, and in increasing access to health care and enhancing financial protection. These direct impacts are of particular importance for poor households that are especially vulnerable to health shocks that often lead to catastrophic health expenditures. However, little attention has being paid to the potential indirect impacts of social health insurance that emerge from how poor households cope with health shocks and associated medical costs.

One way of coping might be that health care costs force parents to send their children to work in order to generate additional income or take them out of school to save school fees. Such a strategy potentially creates adverse effects for children’s’ well-being later in life and can induce an intergenerational poverty trap. So can social health insurance prevent poor households falling into that trap?

What does the evidence tell us?

A growing research body examines these issues. So what does the recent evidence say?

In Pakistan, the extension of a health insurance scheme caused lower incidence of child labour (as defined according to the ILO Conventions of child labor C138 and C182), and higher rates of school attendance. While the authors find no impact on girls, child labour of boys was reduced by 8 percent, while school attendance increased by 2 percent. This might be explained by the fact that child labor activities are more common amongst male children in Pakistan. In China, the introduction of the social health insurance completely stopped school dropouts and employment of children due to a health shock. Different from the study on Pakistan, these impacts are stronger for girls than for boys.

In our study, which to our knowledge is the only one that looks at a countrywide scheme, we examine the impact of social health insurance in Ghana. The Ghanaian national health insurance scheme (NHIS) was introduced two decades ago and served as a precedent for many countries of the African continent. The introduction of the NHIS resulted in a reduction of catastrophic medical expenditures by 15 percent and of child labour by 22 percent (also defined in line with the ILO Conventions of child labour). The time that children spent attending school classes increased on average by one hour per week. Impacts are larger for girls than for boys, suggesting that labour supply among girls is more prone to changes in household resources.

Long-term impacts

A final important question is now whether these indirect impacts have long lasting consequences on education and well-being of children later in life.

This question is difficult to answer as studies generally focus on the short to mid-term impacts of social health insurance schemes. In addition, studies are often ill-equipped to account for the nuances of children’s engagement with work (as explored in another blog post).

Nevertheless, some research shows that children’s engagement with work in harmful ways and school dropout can have detrimental effects for cognitive development and can lead to lower wages and worse health status later in life. Although more research is needed on how insurance schemes can mediate children’s development in the long-run, this recent evidence, shows that social health insurance has the potential to contribute to the breakage of the intergenerational poverty trap.

In conclusion, impacts of social health insurance schemes are more far reaching than one would think. Given the fact that more countries are going to implement social health insurance schemes in the near future, it is paramount to understand their entire potential in reducing poverty. From a policy perspective, it is important to also consider the indirect impacts in the cost-benefit analysis of social health insurance schemes. Social health insurance is not merely about securing access to health care, it also has positive and important knock-on effects on families and children when they no longer have to engage in negative coping strategies.

This blog post was written by Christoph Strupat. Christoph is researcher at the German Development Institute (GDI) in Bonn, Germany. His research focuses on the impact of insurance schemes and social protection, and social and economic development more broadly.

Photo credit: Kamaji Ogino from Pexels