Overcoming Financial Barriers to Community-Based Health Insurance: Evidence from a Randomized Controlled Trial in Urban Ethiopia

Low enrollment in community-based health insurance (CBHI) remains a major obstacle to achieving universal health coverage (UHC) in low-income countries. This paper evaluates whether affordability constraints or information barriers are the primary impediments to CBHI uptake among poor urban households. We conducted a randomized controlled trial involving poor and vulnerable households in Addis Ababa, Ethiopia, randomly assigning participants to one of three interventions: a 50% premium subsidy, information provision, or combination of both, alongside a control group.,While information sessions achieved high participation (95%), information alone had no statistically significant effect on enrollment. In contrast, premium subsidies substantially increased enrollment. Under the intention-to-treat framework, the subsidy increased enrollment by 9 percentage points, while the combined intervention increased enrollment by 21 percentage points. Local average treatment effect estimates were considerably larger, at 61 and 98 percentage points, respectively. Besides, households receiving premium subsidies experienced significant improvements in employment outcomes and modest increases in labor supply. However, the interventions did not significantly affect healthcare utilization within one year. Cost-effectiveness analysis using real-cost data indicated that premium subsidies are substantially more cost-effective than information campaigns in expanding insurance coverage.,The findings provide causal evidence that affordability, rather than lack of awareness, is the principal constraint to CBHI enrollment among the urban poor. They indicate partial premium subsidies remain insufficient for the ultra-poor, many of whom were unable to finance their required contribution, suggesting flat-rate subsidies exclude the ultra-poor. Achieving UHC therefore requires effective targeting mechanisms combined with fully subsidized premiums for the ultra-poor.