Can Insurance Mitigate Household Businesses’ Vulnerability to Health Shocks?
Household Businesses (HB) are vulnerable to health shocks affecting all members of the household to which they belong. The monetary costs of these shocks affect HB revenue and investment. Health insurance, by offering financial protection against catastrophic health expenditures and increasing health care utilisation, should mitigate this specific vulnerability. A 2005 reform giving free health insurance to children under 6 in Vietnam introduced a discontinuity in the coverage of children, and lets evaluating the influence of insurance in this regard. The change allows comparing otherwise similar household businesses that differ only by the proportion of insured children in the household. The results show that health insurance did not decrease health expenditures, and neither increased the number of days during which the HB operated. The potential of health insurance to mitigate the effect of health shocks on informal microenterprises is conditional on the actual level of financial protection offered –which was low in this context. I nevertheless evidence a potential peace of mind effect: health insurance can stimulate investment, at least temporarily, even while no actual mitigating effect exists.
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