I heard a collective gasp of disapproval from my audience and looked up to see a dozen pairs of eyes staring at me with disapproval and perhaps a little hostility. I was in the middle of a corporate presentation to a group of accountants from a reputable firm, and I had just made a seemingly blasphemous statement. I had declared “The
preference of the health insurer is that there should be no claims whatsoever! However, since this is practically impossible, the fewer the claims, the better for the insurance company and the insured, provided premiums have been
My audience seemed to think that health insurance policies must be utilised by all subscribers simultaneously! I was compelled to launch into a lengthy explanation.
Insurance is definable as a system of compensation, which in return for regular payments of sums money, ensures full or partial financial reimbursement for the loss or damage caused by contingent events beyond the control of the insured party. In health insurance terms, the damage or loss refers to ill-health.
Underlying this relatively simple concept is a determination of the likelihood or “risk” of illness occurring in an individual residing in a given community within a specified period. The mathematics-based profession of actuarial science has evolved out of the need to calculate insurance risk. The intricacy of actuarial science can best be imagined by considering that the outgoing ICD 10 catalogues for about 70,000 codes for different
ailments that afflict humanity, each with a different incidence (box 1).
The regularly paid sums of money referred to above, also known as premiums, are determined by an exhaustive series of actuarial computations. In the private sector, health insurance companies (Health Maintenance (or
Management) Organisations) also known as HMOs arrange for the delivery by providers (hospitals, laboratories, pharmacies and others) of designated health benefits to premiumpaying enrollees by way of various health plans.
The benefits packages differ according to premium size and embedded options.
The basis of the business model of health insurance companies is the actuarially supported assumption that not every subscriber will fall ill simultaneously. In effect, at any given time, the risk is being shared, and the
healthy subscribers are paying for the members who are unwell. The HMO is thus able to pay the medical bills or claims for the ailing, from the pool of funds accumulated from hundreds, thousands or even millions of premiums. In
certain circumstances, excessive claims may deplete the fund pool so severely, that the uantity of claims exceeds total premiums and the health insurance company sustains an operational loss which may be severe enough
to bankrupt the company and create business for accountants (and possibly even lawyers)!
At this point in the discussion, my audience of accountants heaved a collective sigh of relief and leaned back in their chairs with smiles on their faces!
Operational losses may be due to actuarial miscalculation, inefficiency, fraudulent bills, over-billing, excessively high
ICD-10 ?– The International Statistical Classification of Diseases and Related Health Problems, Tenth Revision is a system, published by the World Health Organization (WHO) and used by physicians and other healthcare providers to classify and code all diagnoses,signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or diseases of relevance to patient care.
Box 1: International Statistical Classification of Diseases & Related Health Problems, (ICD-10)
The Patient Protection and Affordable Care Act, also known as the Affordable Care Act(ACA) is a United States federal statute enacted by the 111th United States Congress and signed into law by President Barack Obama in 2010. The Act is intended to ensure that all Americans have access to affordable health insurance and aims eventually to slow the growth of US healthcare spending, at present the highest in the world. It prevents insurance
companies from denying health coverage to people with pre-existing health conditions allows young people to remain on their parents’ insurance plans until the age of 26 and expands eligibility for the government-run Medicaid health programme for individuals on a low income.1
Box 2: Patient Protection and Affordable Care Act, 2010 (Obamacare)
tariffs, over-diagnoses, over-investigation,excessive/unnecessary use of services (overutilisation)and natural disasters or Acts of God.Apart from the final category of possible reasons for health insurance business failure,
the other causes may be mitigated by administrative adjustments, ultra-efficient ICT platforms, provider and subscriber education and in the more extreme circumstances,through prosecution if necessary.
“The journey of a thousand miles begins with a single step” Lao Tsu
Although only partially deployed under the public health insurance programme in Nigeria,in more mature health insurance environments in other parts of the world, the most effective disincentives to an excessive claims regime are the financial restraints of co-payments and deductibles.
A co-payment is a fixed contractual payment made by an enrollee to a health insurance company, of a relatively small sum or percentage of the anticipated cost of services before accessing care. Deductibles are either the payments made by members of a proportion of total claims (excess) or monetary hresholds below which enrollees must pay for the cost of care. These two strategies have the effect of dramatically reducing the evil of overutilisation
by way of frivolous visits to the hospital.
Readers who are conversant with the model of healthcare delivery in the United States will remember the controversy generated during the implementation of “Obamacare” (Patient Protection and Affordable Care Act1),
concerning illnesses not routinely included in existing health insurance plans (box 2). 2, 3
Conditions ineligible for coverage by health insurers are those which contravene “the law of insurance”. These conditions, typified by loss or damage caused by (contingent) events beyond the control of the insured party, are
known as exclusions. These exclusions may differ from plan to plan and from one insurer to another. In general, health insurance plans will usually exclude the following:
- Pre-existing medical conditions
- Injuries resulting from self-harm
- Alternative (or unconventional therapies)
- Various forms of cosmetic surgery
- Drug and alcohol abuse (including rehabilitation)
- Obesity treatment and specific weight loss-related programmes
- Specific congenital illnesses
- Dietary and mineral supplements
Types of health insurance
There are two main types of health insurance.
1. Private Health Insurance (PHI)
2. Social Health Insurance (Government-operated / subsidised health insurance)
Private health insurance
Two varieties are practiced in Nigeria:
Managed care plans
In this model, HMOs enter into contracts with a network of providers, to deliver services at agreed tariffs expected to be much lower than amounts charged to walk-in patients. In return,HMOs guarantee providers a high volume of enrollees. Healthcare delivery is categorised into primary, secondary or tertiary care depending on the severity of the ailment, a necessity for hospital admission, the likelihood of surgery or the need for complex
investigations. For treatment of primary care conditions without recourse to the HMO,providers are paid a fixed sum per enrollee,known as a capitation fee. In this way, the HMO transfers the risk of primary ill health to the
providers. Providers, however, charge HMOs for secondary and tertiary healthcare on a case by case or fee-for-service basis.
Indemnity or fee-for-service (FFS) plans
These plans may also sign contracts with providers but may allow enrollees to roam or use any hospital within the network. Capitation fees are not paid, and care is given by providers solely on a fee-for-service basis. All bills undergo thorough vetting before payment.
Social Health Insurance (SHI)
Social Health Insurance shares many similarities with its private insurance counterpart, namely the pooling and sharing of funds and risk, actuarial computation of economic premiums and healthcare tariffs and remuneration of providers. However, there are noteworthy differences, the most significant of which is that SHI systems are not-for-profit! Also, even though premiums are paid according to ability and personal circumstance, SHI plans are uniform, with no disparity in benefit packages.
In effect, the more affluent subscribers to this type of health insurance programme effectively subsidise healthcare on behalf of the
less privileged, a system known as crosssubsidisation.Furthermore, many conditions,ordinarily excluded under the terms of a private health insurance scheme, such as pre-existing conditions, drug and alcohol abuse and congenital diseases are accommodated by SHI schemes.
In countries such as the United Kingdom,where successful SHI programmes have been sustained for an appreciable length of time, the government has invested considerable effort in mobilising population-wide contribution from
millions of citizens in order to ensure economies of scale. Where governments have been unwilling or unable to charge special “health taxes”, laws have been passed to make SHI contributions compulsory for as many categories of employed residents as possible.
Workers in the informal sector might be charged a flat rate to access healthcare through the SHI system. Premiums are usually paid into a single “fund”. Government subsidies in SHI schemes stabilise the system and assist
vulnerable groups such as the indigent,prisoners and long-term disabled individuals who would otherwise be unable to afford care.
Even in the ultra-capitalist USA, Medicaid and Medicare provide a level of subsidised health care for individuals on low income and also for the elderly.
Planning the 33-Fold Leap from 3% to UHC
Currently, in Nigeria, about 2 million public servants and dependants are enrolled in the Formal Sector Social Health Insurance Programme (FSSHIP) of the National Health Insurance Scheme (NHIS). In addition to (approximately), one million enrollees on PHI and perhaps 2 million on various other plans such as the Tertiary Institution Social Health Insurance Scheme (TSHIP), a total of about 5 million people are enrolled nationwide.
The World Bank estimates the Nigerian working population in 2017 to be in the region of 60 million individuals, most of whom are subsistence farmers and artisans earning less than US$ 1 per day.
However, with 10 million confirmed taxpayers/breadwinners, and an assumed average family size of 6, the Nigerian UHC project can take-off with sixty (60) million beneficiaries. 4, 5
We envisage that PHI and SHI will continue to run concurrently in Nigeria.
The following are essential steps towards achieving Universal Health Coverage through health insurance in Nigeria.
1. Enacting appropriate legislation – Eligible persons must be obliged by law to make contributions into the SHI pool of funds.
2. Building consensus – In a 2010 World Health Organization (WHO) publication,Doetinchem et al. state that “considerable effort needs to be put into building consensus and support of all stakeholders as well as the general public if SHI is to be established successfully.6”
3. What would be the SHI benefit package?– Many countries that have launched successful UHC programmes have
implemented an “essential (basic) package” of benefits. Given Nigeria’s current economic situation, experts have
proposed a basic package of primary care to include maternity and under-5 care.
4. Which health care providers? – A mix of public and private healthcare providers is recommended for the basic package of social health insurance. Secondary and tertiary care can be provided by eponymous centres for PHI and SHI.
5. What payment mechanisms? – Fee-for service plans are challenging to administer and are associated with rapidly escalating healthcare costs. The capitation model is recommended for primary care.
6. Government subsidies – to take the form of statutory votes for primary care and budgeted sums at all tiers of Nigerian Government.
“The journey of a thousand miles begins with a single step,” said Lao Tzu the ancient Chinese sage. It took Germany over 100 years from Otto von Bismarck’s 1883 Health Insurance Bill, to achieve universal health coverage. It may yet take decades for Nigeria to reach this ideal. Nonetheless, it is imperative that the journey should begin.read more
Disclosure forms provided by the author are available at NEJM.org.
Dr Leke Oshunniyi is CEO/MD, AIICO Multishield Healthcare Ltd. and Director, royal Cross Medical Centre, Ikoyi, Lagos
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