“Sharing a healthy moment”

1. PRACTICE OF HEALTH INSURANCE IN KENYA “Sharing a healthy moment” CHALLENGES & INNOVATIONS By Douglas Machuki

2. CONTENTS • Background • Challenges in Health Care Provision • The Future – Possible Innovations • Conclusion DISCOVERY HEALTH EAST AFRICA LIMITED

3. Introduction & Background • Healthcare constitutes an essential element of human life • Desirable benefit available to organizations, individuals and their families • Provided and financed through different mechanisms • On-site facility (Staff Clinic) • Direct contracts with private practitioners and facilities • Employers provide annual expenditure per employee • Offering vary depending on employee category DISCOVERY HEALTH EAST AFRICA LIMITED

4. Introduction & Background Cont’d • In-house / Self Administration • Reports of high fraud levels • Doctor / Patient collusion • Financing healthcare by purchasing cover • Insurance Company • Medical Insurance Provider • Number of providers have found health care unprofitable • In-patient has been main offering DISCOVERY HEALTH EAST AFRICA LIMITED

5. Introduction & Background Cont’d • Costs for private medical services often exceed individual’s ability to pay • Providers and stakeholders seeing need for concentrated and sophisticated effort • Need for more efficient structured, affordable & sustainable healthcare programs • Creating need and opportunity for intervention by experts in areas of healthcare provision esp. actuaries DISCOVERY HEALTH EAST AFRICA LIMITED

6. Challenges in Health Care Provision • Focus on practical and operational challenges rather than theoretical or hypothetical experiences • Matching products and services provided with consumer needs • Need to structure and address the following: • How is the product design done? • Does product achieve the objective of “fitness of purpose”? • Actuarial profession well placed to provide some of the answers DISCOVERY HEALTH EAST AFRICA LIMITED

7. Challenges in Health Care Provision Cont’d • Analysis of random size and frequency of risk • Risk analysis and measurement • Risk classification and cash flow projections • Solvency and profitability • Areas where actuarial expertise needed DISCOVERY HEALTH EAST AFRICA LIMITED

8. Challenges in Health Care Provision Cont’d • Ill health in unknown territory • Disability and sickness are unpredictable and bills can be of unknown size • Individuals wish to minimize risk that healthcare breakdown will disrupt them financially • Insurers study mountains of data, undertake rigorous analysis and use results to minimize risk exposure • Underwriters will require good quality data which is usually not readily available DISCOVERY HEALTH EAST AFRICA LIMITED

9. Challenges in Health Care Provision Cont’d • Need to work both public and private sector • Need to increase value of future information • Need to perform sound analysis from that which is currently available • Actuarial approach to data and analysis is quite thorough DISCOVERY HEALTH EAST AFRICA LIMITED

10. Challenges in Health Care Provision Cont’d • Need for effective membership, underwriting and claims management • Low level of interaction with medical professionals • Need for health insurance practitioners to constantly engage • Disease management and evidence based medicine will significantly benefit from such a partnership DISCOVERY HEALTH EAST AFRICA LIMITED

11. The Future – Possible Innovations • Health Insurance system in Kenya is struggling with a myriad of problems • Price of health insurance is frequently beyond reach of many potential consumers • Certain to continue upward spiral in years ahead • Future does not have a very attractive proposition: One Pays Too Much, and Gets Too Little • Solution lies with business community and advice they get DISCOVERY HEALTH EAST AFRICA LIMITED

12. The Future – Possible Innovations Cont’d • Embrace new model of health coverage • New model should place control of cost and care directly in hands of consumer • Consumer-driven healthcare based on bottom up • Enable insurers and consumers create better, cheaper ways to deliver high quality care • Traditional insurers that impose stringent controls / exclusions usually resisted by consumers and price competitive pressures have not helped much DISCOVERY HEALTH EAST AFRICA LIMITED

13. The Future – Possible Innovations Cont’d • Problem persists because “It is in the financial interest of the market’s participants to increase costs” (This includes the consumer) • Consumers want as much as they can rather than as much as they need (over-utilization, abuse) • Same thought pattern and structure is also true for health care professionals • Hospitals and doctors treat patients based on coverage rather than actual need DISCOVERY HEALTH EAST AFRICA LIMITED

14. The Future – Possible Innovations Cont’d • Doctors stand to profit from various courses of treatment (Increasing costs => income increase) • Costs will easily be shifted to third party payer • Market needs to be normalized to curtail widespread abuse • Cost inflation and abuse is inevitable as long as wasteful and inefficient behavior is in the interest of primary participants DISCOVERY HEALTH EAST AFRICA LIMITED

15. The Future – Possible Innovations Cont’d • Current health insurance model resembles way companies used to manage their employees’ retirement savings • Employees given no choice, no control, and very little information • Effects were dramatic when employees began to have a say • Locally shift to employee-controlled pension plans is succeeding despite much enormous skepticism • Similar consumer revolution can take place with health care benefits DISCOVERY HEALTH EAST AFRICA LIMITED

16. The Future – Possible Innovations Cont’d • Employers need to give employees substantially enhanced choice among health plans • Much greater control over how much they spend for various health needs • Much more information to help employees make the right choices • Consumer demand will then force underwriters to provide more innovative products DISCOVERY HEALTH EAST AFRICA LIMITED

17. The Future – Possible Innovations Cont’d • Competition will in turn control costs while improving overall quality and coverage and care • Essential problem with health care industry is that “it has been shielded from consumer control by various stakeholder” • Costs have therefore exploded and choices narrowed DISCOVERY HEALTH EAST AFRICA LIMITED

18. Conclusion INTEREST IN HEALTH INSURANCE COMES AT A TIME WHEN CHANGES ARE HAPPENING IN THE INSURANCE INDUSTRY IN KENYA NEED TO BUILD A COST-EFFECTIVE AND SUSTAINABLE VEHICLE THAT ADEQUATELY ADDRESSES THE IDENTIFIED PROBLEMS AND CHALLENGES NEED TO ENGAGE DIFFERENT STAKEHOLDERS IN ADDRESSING THESE PROBLEMS AND CHALLENGES ESPECIALLY THE ACTUARIAL PROFESSION DISCOVERY HEALTH EAST AFRICA LIMITED

19. Thank You DISCOVERY HEALTH EAST AFRICA LIMITED E-MAIL: info@discoveryhealth.co.ke www.discoveryhealth.co.ke DISCOVERY HEALTH EAST AFRICA LIMITED