HVC in Health Care Financing
Hybrid Value Chain in Health Care Financing
Ashoka has partnered with Healing Fields Foundation, a not-for-profit organization working in the area of health micro insurance. HFF and Ashoka are working together to develop an HVC that is both sustainable as a business model for all parties involved (e.g., HFF, CSO’s, insurance companies) as well as scalable to millions of low-income families across India.
Ashoka and HFF envision a partnership where together we develop cutting-edge innovations especially in the area of micro insurance to further our joint goals. HFF’s vision and core values of care, compassion and sensitivity strengthened with efficiency, effectiveness and empowerment of the community are well aligned with Ashoka’s vision of a world where everyone is a changemaker and one that responds quickly and effectively to social challenges, and where each individual has the freedom, confidence and societal support to address any social problem and drive change.
Why health financing?
India is home to the largest number of the world’s poor. Nearly three-fourths of India’s one billion population lives on an income of less than two dollars a day. These people are more vulnerable than any other group to shocks such as illness, injury, loss of livelihood and natural catastrophes. Over ninety percent of India’s population does not have access to any form of health care financing or risk pooling.
Although India spends five percent of its GDP on health, its public spending on health (less than 1 percent of GDP) is among the bottom 20 percent of countries. Near absence of a functioning public health system, no access to risk-pooling and no wealth to rely on, the poor often have to borrow at ridiculously high rates and sell whatever meager assets they own thus undermining their long-term ability to climb out of poverty.
One way to address this problem is to ensure that benefits of health financing and risk pooling reaches the poor. However, to make Health Insurance available to the rural population, there is a need to develop a viable health financing model which can be implemented keeping in mind the specific needs of the underserved clients.
Clearly, there is a need to develop appropriate products (not just push existing products which often do not address the needs of the rural clients) and also to develop an entire eco-system which makes the access, delivery and management of micro health insurance efficient and commercially sustainable. From a business perspective, this represents a sizeable underserved market opportunity.
Uniqueness of the HFF model
The HFF model is acknowledged as the first of its kind in the world by USAID, ILO and Bearing Point. HFF has designed a customized health insurance policy for its target membership. The plan is underwritten by HDFC Chubb, and is the first of its kind in the country. This health micro insurance plan incorporates the Diagnosis Related Group (DRG) methodology. The DRG methodology is a provider payment system based on the diagnosis of the patient to control health care costs. The provider is paid a fixed amount for a diagnosis irrespective of the actual expenses incurred or length of stay. Also, while most available products cover critical illnesses, the DRG covers for common illnesses rather than critical illnesses; because it is the incidence of these illnesses that was pushing the poor down the spiral of poverty. They were using Government facilities for the treatment of critical illnesses. Based on this HFF came up with a DRG model covering 43 listed illnesses. The list included illnesses like fevers, gastroenteritis, malaria, fractures etc. Even pregnancy, child birth and hysterectomy were included.
The micro-insurance hybrid model
An HVC collaboration involves a commercial partnership between a company and a CSO/group of CSOs (NGOs) to bring needed products and services to low-income markets at a large scale.
The development of this HVC will include the following key components:
a) Enabling a Network of CSO Partners
HFF has been implementing a Healthcare Financing Delivery Project for the last 3 years. This has led to evolution of a Health Insurance product specially designed for the rural sector. The project requires HFF to partner with CSOs for effective implementation and outreach of the product. A significant increase in the size of the network is needed to ensure financial sustainability of the model.A strategic component of Ashoka’s core activities centers on both building connections among social entrepreneurs and between social entrepreneurs and the private sector. ASHOKA will leverage this experience to accelerate the growth of a network of social sector partners willing and committed to offer micro insurance solutions to their clients. This will be done jointly with the Indian Ashoka Fellowship.
b) Strengthening upstream linkages with insurance companies
As the size of the CSO network and thereby end clients increases, Ashoka and HFF will jointly approach selected companies to participate in the HVC collaboration. Given Ashoka’s experience in this arena, ASHOKA will actively work to negotiate the best possible solution/deals for HFF and the end clients. The Ashoka – HFF partnership would be able to offer the private company the benefits of:
- Significant scale
- Back end processes in place by HFF
- A deeper understanding of low income client needs for micro insurance
- Inputs into design and development of innovative and transformative products and solutions for the target customers