Macroeconomic Determinants of Health Insurance Demand in Kenya: An Autoregressive Distributed Lag Modelling

Abstract

Universal health coverage is key to the Kenyan government's ‘big four' development agenda which is meant to be to be achieved by 2022. Over the years, health has always been given a higher priority and has been at the epicenter of political campaign manifesto. As a result, the government has continuously pumped resources into the health sector, and established public insurance scheme, as well as providing an enabling environment for private insurance companies in the spirit of achieving the objectives of better health care. However, insurance penetration is low with a 4 percent uptake of the private insurance and 16 percent uptake of public insurance. This low uptake has contributed to the huge out-of-pocket budgets and expenditures in Kenya, which sums up to approximately 26.1% of the percent of the overall healthcare expenditure in Kenya. This has contributed to an increase in the level of poverty as well as dependency ratios. This research aimed to look into the determinants of health insurance demand in Kenya using the Auto-regressive Distributed Lag (ARDL) Model. The research used secondary data spanning from 1980 to 2018. The study established that, income levels positively affects health insurance demand in the long-run, the effect is however, negative in the short-run. The study established that financial development has no effect on health insurance demand. Inflation rate negatively affects health insurance demand in the long run but a positive one in the short-run. Unemployment has a negative effect on health insurance demand both in the short-run and in the long-run. Finally, education level has a positively affects health insurance demand in the long-run but a negative relationship in the short-run.