Innovative health financing for refugees

Insurance companies pool risk by having the insured pay premiums to the insurer. Should any insured entity suffer a loss, the insurance company will cover them. Insurers often buy reinsurance from a third party. Reinsurance shares risks and gains and reduces loss in the case of an extreme event for which an insurer cannot pay. A government or organization that insures humanitarian emergencies needs to determine how much risk it retains and how much it transfers, or whether it would just buy an insurance policy from a private company. There are various types of insurance schemes, from those that are publicly funded through some form of taxation (public insurance) to privately funded types (private insurance). Types of enrollment (mandatory, voluntary), contributions (income-based, community-based, risk-based), and management (public, non-profit, for-profit commercial, non-profit community) vary accordingly.

The main objective of refugee health insurance should be to integrate refugees into existing national systems, if they exist and are functioning. When such systems are “semi-functional,” external financial assistance and expertise may help some national systems improve sufficiently to provide health services for their own citizens and refugees. Numerous countries in Africa have integrated universal health coverage into their national frameworks, but progress towards implementation has been uneven [9]. In the future, as more countries in Africa provide universal health coverage, the more feasible it will be for refugees to integrate into such systems. In many areas where refugees are residing, national social welfare systems, including health insurance, are not available, and thus this would not be an option for refugees.

In protracted settings, when the health situation is relatively stable, traditional health insurance for refugees should be considered [10]. The majority of refugees currently live in protracted settings. However, relatively few refugees currently have access to public health insurance schemes. For health insurance for refugees to be feasible and sustainable, however, refugees must have access to livelihoods to pay for their premiums and co-share costs. The issue of livelihoods is complex and will not be discussed in detail here. However, the right to work for refugees is essential to reduce refugee dependency as well as the amount of donor assistance. The World Bank’s 2016 report entitled “Forcibly displaced: towards a development approach supporting refugees, the internally displaced, and their hosts” shows that refugee influxes often benefit the local economy, although who benefits within that community is more nuanced [4].

There are numerous direct and indirect benefits in allowing refugees to access national health insurance schemes. Improved access to health services and financial protection are clearly the two largest benefits. Indirect benefits include the provision of an official piece of documentation (a health insurance card) that may protect refugees from harassment by authorities and provide refugees with a sense of belonging and security, or allow them to send and receive remittances (Box 1). More data about refugees may be provided to UNHCR and its partners to more objectively decide who is most vulnerable. Other data can be collected from health insurance companies about who uses which services, where, and for what reason. The protection benefits and data may also allow for improvement in other sectors and programs. Although equity is an important component in health care, it must be one of many essential factors to be considered in providing health insurance. While a scheme may exclude a group of especially vulnerable refugees or those with specific illnesses, it may still be cost effective for some or the majority of refugees who have the possibility of paying health insurance premiums [10].

There will always be vulnerable populations in all societies who cannot afford to pay for health insurance. Decisions as to who is vulnerable and who will help to pay (fully or partially) for these vulnerable persons will need to be made. Depending upon the number of refugees contributing to the national system, the risk pool may have sufficiently grown to allow for subsidizing the insurance premiums and co-payments for these refugees as occurs with nationals. Other sources of revenue could come from UNHCR, which is currently funding millions of dollars in health care services via governments, NGOs, and faith-based organizations, often providing parallel services.

Finally, the provision of private health insurance is also a possibility, but it is nearly always significantly more expensive than national health insurance and should be avoided except in atypical circumstances when governments will not allow refugees to access national systems and it is considered financially viable. In general, refugees should be provided with a similar level of services to that of the “average” national [2]. In most countries where refugees are located, it is unlikely that the “average” national can afford private health insurance.

The terms “microinsurance” and “community-based health insurance” (CBHI) are often used interchangeably; however, microinsurance is a broader concept that includes CBHI schemes. Microinsurance refers to public, private, not-for-profit, or community-based insurance schemes whose services operate at the local level and are specified to the needs of the poor. It targets those who would generally be excluded from mainstream insurance coverage. It protects the vulnerable from risks specific to their situation (e.g., flooding, catastrophic health expenditures) based on the risk likelihood and cost. Individuals pay low premiums to a small pool, and the fund provides limited coverage with a small but still meaningful payout. Microinsurance schemes are often integrated into existing social protection systems [11].

Challenges arise when enrolling the extremely poor who generally cannot pay into the pool, which means that subsidization is required. Microinsurance schemes can also be difficult to sustain, particularly for health, as they require individuals to consistently pay into the pool, which may collapse if too many people withdraw at once.

CBHI is a microinsurance scheme focused on mitigating health risks. It is managed at the community level by a community organization rather than a public, private, or not-for-profit group. The community organization collects premiums and pools funds to protect enrolled community members from risks. Enrollment is voluntary, and usually these schemes emerge when the social protection system or private sector cannot reach affected individuals. CBHI generally has low transaction costs and high trust but, like microinsurance, struggles with maintaining enrollment and creating a large enough pool to adequately cover multiple claims at once [10, 11].

To our knowledge, CBHI has not yet been implemented to scale for refugees in LICs or MICs. We recommend that, together with traditional health insurance for refugees in protracted settings, CBHI for refugees in similar settings should be explored. It can substitute, complement, link with, supplement, or provide an alternative for other refugee health care mechanisms.

Insurance can operate at several levels in emergency-prone contexts, offering disbursements to states, organizations, communities, or individuals. Regional risk-transfer and insurance mechanisms for natural disasters have existed for more than a decade and are increasingly being explored for other crises, such as pandemics. Mutualizing risk shares costs associated with loss and risk among many parties, so no single party is solely responsible. Governments, businesses, communities, or multi-lateral agencies can pool funds to protect populations against disasters, linking payment to natural disasters and now epidemics [5, 6].

Bonds are a common capital market tool where a creditor loans money to a public, corporate, or other entity, which issues them a bond. The bond lasts until a preset date (maturity date), and once mature, the loaned funds (bond principal) are returned. Interest is usually paid out periodically until maturity. Bonds have either a set or variable interest rate (coupon). Catastrophe bonds are issued by a public entity, insurance company, or other organization to an investor. They have a high coupon rate, usually to reinsure another party. If a catastrophe occurs (currently, most of these bonds are for natural disasters), the investor defers or forfeits payment of the interest and/or principal. Instead the money is used to address the catastrophe. If there is no catastrophe, the bonds typically mature within 3 years, and investors are paid back the principal with interest [5].

Three different examples are presented (Box 2) that could be adapted and explored for different refugee contexts: (1) the African Risk Capacity (ARC) group [12], (2) the Caribbean Catastrophe Risk Insurance Facility (CCRIF) [13], and (3) the Pandemic Emergency Financing Facility (PEF) [14]. Could such a combination of modified risk-transfer instruments be used for refugee emergencies pre-crisis? The answer is unknown.

We present here a model modified from the PEF called the Refugee Health Financing Model (FinRef), which requires further exploration by a multi-disciplinary team including experts in finance, insurance, health, development, and humanitarian emergencies (Fig. 1).

The objective of FinRef is to provide funding from diverse sources, using a variety of financing mechanisms, to provide health services to refugees during the acute phase of an emergency using pre-emergency planning. A cash window for immediate funding uses existing pool funding mechanisms that sets aside donations to be immediately available for emergency responses to humanitarian crises. Funding is channeled through UN-managed humanitarian pooled funds, such as the global Central Emergency Response Fund (CERF) and Country-Based Pooled Funds (CBPFs). These pool funding modalities have almost doubled over the past decade and reached $1.2 billion in 2016 [6]. Despite this significant increase, the CERF and CBPFs are limited, available for all sectors, and cannot sufficiently address the health needs of refugees.

The indexed insurance window could consist of insurance financed by the private sector, multi-lateral and bi-lateral organizations, and UN agencies with clear parametric indices. For example, the UNHCR expends millions of dollars each year on health services for refugees. Some of these funds could be “set aside” for health insurance pre-emergency for host countries. The parametric indices need to be developed and verified, but some examples could include: (1) the Fragile States Index, which is a critical tool that identifies key factors that push a state towards the brink of failure [15], and (2) a specified number of refugees crossing a border. However, considerable analysis needs to occur to decide which, if any, indicators are measurable and predictable. When possible, funds should go to government-level offices that manage health systems and are responsible for integrating refugees. Existing health systems, whether functional or semi-functional, will likely need increased capacity and support from the UN and NGOs. If national health systems at the district level are not functional or cannot sufficiently address the emergency needs of refugees, then other entities should receive the funds. These entities include the UN, international and national NGOs, faith-based organizations, and in some rare circumstances the private sector (e.g., mostly privatized health systems, such as the one in Lebanon). As with all financial instruments, there are potential benefits as well as risks that must be examined according to context. For FinRef specifically, issues such as market speculation must be considered, particularly in a humanitarian context where refugees are so reliant upon external support. Since the objective is to have refugees integrated into national health systems with funds used to improve the system for both nationals and refugees, incentives and agreements should be put into place with these entities to ensure that once the situation is more stable, refugees and the funding will move from these “parallel” systems to national systems. Doing so will require building capacity of the latter.