Resilience and Health Shocks: The potential of health savings accounts and health loans

Researchers from the University of California, Davis, and Freedom from Hunger conducted a field experiment in 2014 to understand how households respond to shocks and build resilience. The study aimed to help financial service providers design effective products and services to cope with health shocks. The researchers used economic games to introduce health savings accounts (HSAs) and health loans to participants, mimicking real-life products by a local financial service provider. Participants made choices about the allocation of resources against expenses in hypothetical scenarios, facing three types of hypothetical shocks: livestock mortality, a health shock framed as malaria occurrence, and a social shock framed as a family member or neighbor asking to borrow cash. The game was divided into three rounds, with participants managing the shocks with income and livestock only in the first round, then having access to the HSA in the second round, and access to both the HSA and health loan in the third round. The HSA required a seasonal minimum deposit, and the money saved here was only available to use for the health shock. Participants with at least FCFA 2,000 in the HSA could take out a health loan of FCFA 2,000 to pay for treatment if hit with a malaria shock. The study identified key strategies that households used to respond to shocks, with and without access to the HSA and loan. The research found that households using these products were better off in light of the trade-offs and limitations. The study's findings can help financial service providers design effective products and services to help clients manage costly negative health shocks and build resilience.