Insuring Health or Insuring Wealth? An experimental evaluation of health insurance in rural Cambodia

High health care expenditures following a health shock can lead to long-term economic consequences. Health insurance has the potential to avert economic difficulties following health shocks. If uninsured individuals forgo valuable health care due to lack of funds, health insurance can also increase health care utilization and improve health. These potential benefits of insurance have led many developing nations to consider insurance as a policy tool. Yet, even in developed nations, there have been few studies to measure its effectiveness. We evaluate the health and economic effects of the SKY Micro-health insurance program on households in rural Cambodia using a randomized controlled trial. By randomizing the insurance premium we induce random variation into the likelihood of insurance take-up that allows us to estimate the causal effects of health insurance on economic outcomes, health utilization, and health outcomes. We find that SKY insurance has the greatest impact on economic outcomes, as expected from an insurance program. For example, SKY decreased total health care costs of serious health shocks by over 40%, and households with SKY had over one-third less debt and over 75% less health-related debt. SKY also changed health-seeking behavior, increasing use of (covered) public facilities and decreasing use of (uncovered) unregulated care. At the same time, SKY had no detectable impact on preventative care. As expected, due to low statistical power, we did not find statistically significant impacts on health.