challenges & innovations by douglas machuki “sharing a healthy moment” practice of health...

CHALLENGES & INNOVATIONSCHALLENGES & INNOVATIONS

ByBy

Douglas MachukiDouglas Machuki

““Sharing a healthy moment”Sharing a healthy moment”

PRACTICE OF HEALTH PRACTICE OF HEALTH INSURANCE IN KENYAINSURANCE IN KENYA

SLIDE SLIDE 22 DISCOVERY HEALTH EAST AFRICA DISCOVERY HEALTH EAST AFRICA LIMITED LIMITED

CONTENTSCONTENTS

BackgroundBackground

Challenges in Health Care ProvisionChallenges in Health Care Provision

The Future – Possible InnovationsThe Future – Possible Innovations

ConclusionConclusion


Healthcare constitutes an essential element of human lifeHealthcare constitutes an essential element of human life

Desirable benefit available to organizations, individuals and Desirable benefit available to organizations, individuals and

their familiestheir families

Provided and financed through different mechanismsProvided and financed through different mechanisms

o On-site facility (Staff Clinic)On-site facility (Staff Clinic)

o Direct contracts with private practitioners and facilitiesDirect contracts with private practitioners and facilities

Employers provide annual expenditure per employeeEmployers provide annual expenditure per employee

Offering vary depending on employee category Offering vary depending on employee category

Introduction & BackgroundIntroduction & Background


In-house / Self AdministrationIn-house / Self Administration

o Reports of high fraud levels Reports of high fraud levels

o Doctor / Patient collusionDoctor / Patient collusion

Financing healthcare by purchasing coverFinancing healthcare by purchasing cover

o Insurance CompanyInsurance Company

o Medical Insurance ProviderMedical Insurance Provider

Number of providers have found health care unprofitableNumber of providers have found health care unprofitable

In-patient has been main offeringIn-patient has been main offering

Introduction & Background Introduction & Background Cont’dCont’d


Costs for private medical services often exceed individual’s Costs for private medical services often exceed individual’s

ability to payability to pay

Providers and stakeholders seeing need for concentrated Providers and stakeholders seeing need for concentrated

and sophisticated effortand sophisticated effort

Need for more efficient structured, affordable & sustainable Need for more efficient structured, affordable & sustainable

healthcare programshealthcare programs

Creating need and opportunity for intervention by experts in Creating need and opportunity for intervention by experts in

areas of healthcare provision esp. areas of healthcare provision esp. actuariesactuaries

Introduction & Background Introduction & Background Cont’dCont’d


Focus on practical and operational challenges rather than Focus on practical and operational challenges rather than

theoretical or hypothetical experiencestheoretical or hypothetical experiences

Matching products and services provided with consumer Matching products and services provided with consumer

needsneeds

Need to structure and address the following:Need to structure and address the following:

o How is the product design done?How is the product design done?

o Does product achieve the objective of “fitness of purpose”?Does product achieve the objective of “fitness of purpose”?

Actuarial profession well placed to provide some of the well placed to provide some of the

answers answers

Challenges in Health Care ProvisionChallenges in Health Care Provision


Analysis of random size and frequency of riskAnalysis of random size and frequency of risk

Risk analysis and measurementRisk analysis and measurement

Risk classification and cash flow projectionsRisk classification and cash flow projections

Solvency and profitability Solvency and profitability

Areas where actuarial expertise neededAreas where actuarial expertise needed

Challenges in Health Care Provision Challenges in Health Care Provision Cont’dCont’d


Ill health in unknown territoryIll health in unknown territory

Disability and sickness are unpredictable and bills can be of Disability and sickness are unpredictable and bills can be of

unknown sizeunknown size

Individuals wish to minimize risk that healthcare breakdown Individuals wish to minimize risk that healthcare breakdown

will disrupt them financiallywill disrupt them financially

Insurers study mountains of data, undertake rigorous Insurers study mountains of data, undertake rigorous

analysis and use results to minimize risk exposureanalysis and use results to minimize risk exposure

Underwriters will require good quality data which is usually Underwriters will require good quality data which is usually

not readily availablenot readily available



Need to work both public and private sectorNeed to work both public and private sector

Need to increase value of future informationNeed to increase value of future information

Need to perform sound analysis from that which is currently Need to perform sound analysis from that which is currently

availableavailable

Actuarial approach to data and analysis is quite thoroughapproach to data and analysis is quite thorough



Need for effective membership, underwriting and claims Need for effective membership, underwriting and claims

managementmanagement

Low level of interaction with medical professionalsLow level of interaction with medical professionals

Need for health insurance practitioners to constantly engageNeed for health insurance practitioners to constantly engage

Disease management and evidence based medicine will Disease management and evidence based medicine will

significantly benefit from such a partnershipsignificantly benefit from such a partnership



Health Insurance system in Kenya is struggling with a Health Insurance system in Kenya is struggling with a

myriad of problemsmyriad of problems

Price of health insurance is frequently beyond reach of Price of health insurance is frequently beyond reach of

many potential consumersmany potential consumers

Certain to continue upward spiral in years aheadCertain to continue upward spiral in years ahead

Future does not have a very attractive proposition: One Future does not have a very attractive proposition: One

Pays Too Much, and Gets Too LittlePays Too Much, and Gets Too Little

Solution lies with business community and advice they getSolution lies with business community and advice they get

The Future – Possible InnovationsThe Future – Possible Innovations


Embrace new model of health coverageEmbrace new model of health coverage

New model should place control of cost and care directly in New model should place control of cost and care directly in

hands of consumer hands of consumer

Consumer-driven healthcare based on bottom upConsumer-driven healthcare based on bottom up

Enable insurers and consumers create better, cheaper ways Enable insurers and consumers create better, cheaper ways

to deliver high quality careto deliver high quality care

Traditional insurers that impose stringent controls / Traditional insurers that impose stringent controls /

exclusions usually resisted by consumers and price exclusions usually resisted by consumers and price

competitive pressures have not helped muchcompetitive pressures have not helped much

The Future – Possible Innovations The Future – Possible Innovations Cont’dCont’d


Problem persists because Problem persists because “It is in the financial interest of the “It is in the financial interest of the

market’s participants to increase costs” market’s participants to increase costs” (This includes the (This includes the

consumer)consumer)

Consumers want as much as they can rather than as much Consumers want as much as they can rather than as much

as they need (over-utilization, abuse)as they need (over-utilization, abuse)

Same thought pattern and structure is also true for health Same thought pattern and structure is also true for health

care professionalscare professionals

Hospitals and doctors treat patients based on coverage Hospitals and doctors treat patients based on coverage

rather than actual needrather than actual need



Doctors stand to profit from various courses of treatment Doctors stand to profit from various courses of treatment

(Increasing costs => income increase)(Increasing costs => income increase)

Costs will easily be shifted to third party payerCosts will easily be shifted to third party payer

Market needs to be normalized to curtail widespread abuse Market needs to be normalized to curtail widespread abuse

Cost inflation and abuse is inevitable as long as wasteful Cost inflation and abuse is inevitable as long as wasteful

and inefficient behavior is in the interest of primary and inefficient behavior is in the interest of primary

participantsparticipants



Current health insurance model resembles way companies Current health insurance model resembles way companies

used to manage their employees’ retirement savingsused to manage their employees’ retirement savings

Employees given no choice, no control, and very little Employees given no choice, no control, and very little

informationinformation

Effects were dramatic when employees began to have a say Effects were dramatic when employees began to have a say

Locally shift to employee-controlled pension plans is Locally shift to employee-controlled pension plans is

succeeding despite much enormous skepticismsucceeding despite much enormous skepticism

Similar consumer revolution can take place with health care Similar consumer revolution can take place with health care

benefitsbenefits



Employers need to give employees substantially enhanced Employers need to give employees substantially enhanced

choice among health planschoice among health plans

Much greater control over how much they spend for various Much greater control over how much they spend for various

health needshealth needs

Much more information to help employees make the right Much more information to help employees make the right

choiceschoices

Consumer demand will then force underwriters to provide Consumer demand will then force underwriters to provide

more innovative productsmore innovative products



Competition will in turn control costs while Competition will in turn control costs while

improving overall quality and coverage and careimproving overall quality and coverage and care

Essential problem with health care industry is that Essential problem with health care industry is that

“it has been shielded from consumer control by “it has been shielded from consumer control by

various stakeholder”various stakeholder”

Costs have therefore exploded and choices Costs have therefore exploded and choices

narrowednarrowed



ConclusionConclusion

NEED TO BUILD A COST-EFFECTIVE AND SUSTAINABLE NEED TO BUILD A COST-EFFECTIVE AND SUSTAINABLE VEHICLE THAT ADEQUATELY ADDRESSES THE IDENTIFIED VEHICLE THAT ADEQUATELY ADDRESSES THE IDENTIFIED

PROBLEMS AND CHALLENGESPROBLEMS AND CHALLENGES

NEED TO ENGAGE DIFFERENT STAKEHOLDERS IN NEED TO ENGAGE DIFFERENT STAKEHOLDERS IN ADDRESSING THESE PROBLEMS AND CHALLENGES ADDRESSING THESE PROBLEMS AND CHALLENGES

ESPECIALLY THE ESPECIALLY THE ACTUARIALACTUARIAL PROFESSION PROFESSION

INTEREST IN HEALTH INSURANCE COMES AT A TIME INTEREST IN HEALTH INSURANCE COMES AT A TIME WHEN CHANGES ARE HAPPENING IN THE INSURANCE WHEN CHANGES ARE HAPPENING IN THE INSURANCE

INDUSTRY IN KENYAINDUSTRY IN KENYA


Thank YouThank You

DISCOVERY HEALTH EAST AFRICA DISCOVERY HEALTH EAST AFRICA LIMITEDLIMITED

E-MAIL: E-MAIL: [email protected]

www.discoveryhealth.co.kewww.discoveryhealth.co.ke

challenges & innovations by douglas machuki “sharing a healthy moment” practice of health...

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