East African ExperienceDr. Nelson Gitonga

Insight Health Advisors – May 2010.

WHY MICRO HEALTH INSURANCE?

There is a viscous cycle between health status and poverty

Lack of resources is one of the biggest barrier to accessing health services for the poor and low income earners In Kenya 38% of the ill who who did not seek care cited lack of

money as key barrier (Kenya Household Health Expenditure Survey 2007)

Out-of-pocket spending on health only worsens poverty WHO estimates 125 million households globally spend over 50%

of annual income on health Catastrophic healthcare expenses drives about 25 million

households into poverty each year Poor households identify Illness/Injury, Death of family

member as the most common causes of decline in wellbeing (Narayan et al 1999)Insight Health Advisors

WHAT IS MICRO HEALTH INSURANCE?

Definition

Low cost voluntary private insurance products and services targeted at the poor and low income earners as a means of protecting them from vulnerability arising from risk events

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WHAT DO WE KNOW ABOUT MICRO HEALTH INSURANCE?

Some basic facts

Health insurance is one of the many products offered by micro-insurance

The low income earners participating in micro-insurance usually come from largest economic sectors in East Africa – informal and agriculture

Most common model for micro-insurance is a Partnership Model

The risk carrier (insurer) partners with a distribution & financing channel (MFI’s and other community & agricultural organisations) and a network of low cost health providers (often public, FBO and small private providers)

Donors subsidize premiums/contributions in some cases to facilitate affordability and fast uptake of the products

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HOW CAN MICRO HEALTH INSURANCE HELP?

Micro-insurance can play a key part in poverty alleviation, income protection, and health status:Reaching low income earners –frequently left out by conventional private health insurance and public pay-roll based health insurance schemesActing as the primer for future expansion of public/social health insurance and offer useful lessons for planning universal coverageOffering more sustainable health insurance than community insurance since its risk is managed professionally and can be bundled with other insurance and financial servicesWhen combined with other micro-insurance products and microfinance services, its an essential part of providing broad vulnerability protection to the poor and low income earners.

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HOW TO DESIGN A MICRO HEALTH INSURANCE PLAN

KEY STEPS

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WHAT ARE KEY PROCESSES TO IMPLEMENT MICRO HEALTH INSURANCE?

Marketing & Distribution of products and services by agent organisation (MFI, farmers organisation, community group etc)

Recruitment of members and payment of contributions (If MFI is involved they may finance the contributions). Contributions maybe annual or monthly.

Accessing services from selected panel of healthcare providers (access control through lists, ID, referrals, photo or biometric cards)

Interface between provider and insurer through managed care principles.

Processing of claims and payment (Fee for service, fixed reimbursements and capitation).

Client relations and insurance cover renewal process.Financial and business management of scheme

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CHALLENGES WITH MICRO-INSURANCEWithout subsidies will not be affordable for the very low

income earners and absolute poor.Presents high financial risk for insurer (e.g. high

transaction and admin costs, low retention, fraud, financial and social volatility and of target groups)

Problems associated with adverse selection and moral hazard since it is voluntary insurance

Difficult to build sufficiently large risk pool for sustainability

Lack of technical ICT and management skills to manage the schemes

Shortage of health workers and poor health infrastructureWeak or restrictive regulatory frameworkLack of understanding of insurance concept (risk pooling)

among targeted groups

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EXAMPLES FROM EAST AFRICA

Existing micro-insurance schemesKenya:

CIC Insurance with various MFI’s (some initial donor support).British American Insurance with KTDA (Kenya tea development

authority) (some initial donor support).UAP Insurance with Equity bank.Various MFI initiated schemes -Faulu Kenya

Uganda:Microcare Insurance (Closed down?) (some initial donor support)

NB: In all the above cases thorough and systematic reviews and case studies are needed to distil the valuable lessons learned

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EXAMPLES OF MICRO HEALTH INSURANCE CIC/MFI’s Microcare/

CBO’sUAP/MFI

Inception date Model

2001Partnership of Insurer btwn MFI’s (Faulu, KADET, KWFT, K-REP) and co-op societies.

2000Insurer/HMO working directly with CBO’s and MFI’s.

Mid 2008Partnership of insurer with Equity Bank (Commercial bank and MFI)

Target Group Geographical Coverage

Clients and members of participating organisations in rural and urban areas

Formal and informal sector /community organisations in urban and rural areas. MFI members.

Bank Clients across the country. Initial pilot selected urban areas.

Benefits Outpatient (OP)Inpatient (IP)

IP cover including HIV/AIDS and chronic conditions. Also sold public IP insurance cover –NHIF.

Comprehensive IP and OP cover, each unique to the group insured. Includes HIV/AIDS & health promotion.

OP and IP cover including HIV/AIDS, chronic conditions & maternity. Fixed reimbursements and capitation used.

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EXAMPLES OF MICRO HEALTH INSURANCE CIC/MFI’s Microcare/

CBO’sUAP/MFI

Membership & Characteristics

13,000 members (2008 - all micro-insurance products - 260,000)

85,000 members (2007)

2,000 (2009)

Average Premium /Contribution

$80 p.a. (for a family of 5, shared IP cover limit $ 7,000 p.a. (2007-2008). NHIF option $ 26 p.a. per family.

$ 30 to $ 300 p.a. For IP and OP cover.

From $ 90 to $ 280 per person p.a. for IP and OP cover ranging from $ 1,000 to $ 13,000 p.a. (2008)

Comments Claims and admin costs higher than anticipated, hence financial loss. Challenge of MFI’s marketing insurance.

Microcare collapsed in 2008. Possible causes: Low premiums compared to risks, financial & risk mngt, adverse selection, member & provider fraud, rapid growth.

Unique bancassurance model. Bank finances premiums. Uptake good but slower than expected. Profitable in 2nd Year.

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