We sat with Yolanda and Antonio on plastic chairs under a thatched roof hanging over the front of their house. They had lived on the same 5.5 acre land in Peru for decades and raised two boys by selling milk from their three cows, crops like tomatoes, paprika and corn, and groceries at the family-run hut by the road. Farm life had aged Yolanda (age 54) but I noticed a slight smile upon her weathered face.
She shifted her weight from one side to the other as she told us about her recent trip to the hospital for hip surgery. The couple lives in La Joya, a two-hour drive outside of Arequipa. The doctor in the local public health outpost had her schedule an appointment with a surgeon in the city who would accept her health insurance, purchased through a government-sponsored program specifically for farmers. Even with the major costs covered by insurance, the family dug into their pockets several times throughout the three-day stay in the city and hospital. Finding the money was especially difficult because leaving the farm unattended meant they didn’t have any income.
How much did this surgery cost Yolanda and her family?
- A bus to and from Arequipa: 22 soles.
- Taxis within Arequipa: 10 soles.
- Food for Antonio and other visitors: 15 soles.
- Loss of income per day: 40 soles.
All in all, it cost Antonio and Yolanda 161 soles, or approximately four day’s income (almost US$60).
Despite the cost, Yolanda and Antonio actually felt lucky that their expenses were not so high. After all, they could have had to pay the hospital and doctor fee, cost of surgery, and medications, as millions of uninsured Peruvians do. Yolanda and Antonio are amongst the few clients of Caja Arequipa that are covered by one of the two national health insurance plans, ESSALUD or SIS. ESSALUD serves government or payroll employees and the few farmers who pay out-of-pocket for the policy. SIS is designed for very poor Peruvians who have little- to no- income.
At Caja Arequipa, an estimated 68% of credit clients are completely uninsured. They are excluded from SIS for their income-generating activities and possession of credit. However, they are not employed in the formal or public sector and so cannot access ESSALUD unless, like Yolanda and Antonio, they qualify and opt to pay for the ESSALUD plan for farmers. When faced with hospitalization cases like Yolanda’s—or worse—these farmers and microentrepreneurs must dig into whatever savings they have, borrow from friends or relatives, and sell a business asset or personal item. They may even need to take out an additional loan to cover medical bills and other costs.
So what can a microfinance institution like Caja Arequipa do to help? Caja Arequipa, with support from Women’s World Banking, is preparing to launch a type of health insurance – a cash payout for hospitalization. Market research revealed that clients want this product and the amount proposed will provide a true value to clients. At 6.18 soles (US$2.16) per month, the client will receive 150 soles (US$52.42) per night spent in the hospital. Unlike many available policies, there would also be no exclusions for preexisting or chronic conditions or maternity. For Yolanda and Antonio, this 300 soles payment (for two nights) would have covered their travel and daily expenses and would have provided an additional cushion to help with their loss of income. The impact is even more profound for Caja Arequipa clients who are uninsured potentially avoiding a decapitalized business or crippling debt.
Caregiver, Women’s World Banking’s hospital-cash product, has had great success in Jordan with network member, Microfund for Women (MFW). Now with 190,000 clients and family members insured, MFW and the partner insurance company have paid more than 8,500 claims, about half of which were made for pregnancy-related hospitalization. The institution has seen an increase in their client retention and interest from new clients who come to MFW after hearing good stories from current policyholders. We expect similar success with Caja Arequipa in Peru with the product termed Familia Segura (or Safe Family). Beginning March 1, 2014, Caja Arequipa will pilot the product by offering individual policies to existing credit clients and later extend coverage to clients’ spouses and children at similarly-affordable rates.
Yolanda and Antonio in Peru are just like the couples we met doing customer research for the product in Mexico and, we expect, to meet in Uganda and Morocco. Preparing for the unexpected medical emergency is difficult but hospitalization does not have to undermine a family’s financial security. Through Familia Segura, they will have a safety net instead.
Stories and experiences from Women’s World Banking’s health microinsurance product development in Mexico, Uganda, Morocco and Egypt coming soon. The project in Peru is funded by Credit Suisse.