Effects of the National Health Insurance Scheme on the Welfare of Rural Micro-Borrowers in Ghana

Health insurance plays a vital role in protecting low-income households from the financial consequences of health risks. The true potential of microcredit, a tool for economic empowerment, may be enhanced if combined with health insurance. This study assesses the effect of health insurance on rural micro-borrowers’ welfare in Ghana. By using an endogenous treatment effect model and an endogenous switching regression to address insurance selection biases, we examine the effect of public health insurance on micro-borrowers’ non-medical expenditures. Our findings highlight that health insurance substantially increases micro-borrowers’ non-food consumption expenditures and does not affect food expenditures. Without health insurance, the non-food expenditure would absorb shocks to maintain stable levels of food consumption. The heterogeneity analysis shows that enrollment in health insurance has a significant effect on non-food expenditures only among non-poor micro-borrowers. Being closer to the subsistence level of consumption, uninsured poor households tend to smooth their consumption by resorting to costly coping mechanisms. The welfare gains for poor micro-borrowers associated with health insurance cannot be fully captured by measures of food and non-food expenditures alone.