Kenya's Private Medical Insurance Landscape: Challenges and Opportunities
Dennis Okaka
Healthcare Strategy| Medical Affairs| Driving Innovation & Growth in Pharmaceutical Industry | Healthcare Financing
At the close of 2022, Kenya boasted 21 registered private medical insurance providers (MIPs), collectively amassing premiums totaling KES 54.8 billion (USD 375 million) to cater to roughly 3% of the country's 55 million-strong population. Typically, these premiums are facilitated through employment-based insurance covers arranged by employers for the welfare of their workforce. Employees, in turn, access healthcare services either via employer-owned facilities or through MIP contracts with established health institutions. The leading MIPs by market share in 2022 were Old Mutual, Jubilee Health Insurance (split off from its parent company, Jubilee Insurance back in 2020), AAR Insurance, and APA Insurance respectively, jointly commanding 57.6% of the market.
Despite the substantial market control by the top players, a deeper dive into profitability reveals an intriguing narrative. Only 9 out of the 21 MIPs operated at a profit. Surprisingly, larger market shares do not necessarily translate into enhanced profitability, challenging the assumption that increased revenues should yield better returns. The larger MIPs all have much lower profit ratios.
Looking into the Past
Private medical insurance, as a formally tracked industry, made its debut in 2010. The Finance Act of that year mandated businesses offering medical insurance to seek registration from the Insurance Regulatory Authority (IRA). Subsequently, the IRA has diligently monitored industry statistics and performance. The industry has grown over the period, however, certain characteristics have persisted over the years.
The incurred claims ratio, measuring payouts relative to received premiums, has remained relatively constant over the 12-year span. Even with the introduction of the comprehensive National Health Insurance Fund (NHIF) under the Supa Cover scheme, the industry has struggled to turn significant profits. Profit margins over the period have never exceeded 3%, with a 2.95% average in 2020 (likely impacted by the pandemic) and a mere 1.38% in 2013.
This begs the question: What ails our industry? Is it a revenue problem, indicating insufficient collection, or a cost-effectiveness issue due to higher utilizations?
领英推荐
From a revenue perspective, given that MIPs cover only 3% of the population, there's room for growth by expanding their risk pools. The 2018 Kenya Household Health Expenditure and Utilization Survey highlighted that 89% of the insured population relies on NHIF, leaving a modest 5.1% with private health insurance. Consequently, MIPs must devise strategies to boost the adoption of their insurance products, thereby enlarging their risk pools with a healthier clientele.
On the cost front, MIPs need to reevaluate their pricing structures, understanding and managing healthcare costs effectively to achieve savings. Additionally, a scrutiny of internal management costs is imperative to ensure efficiency in utilizing the collected premiums. Drawing inspiration from the Affordable Care Act in the US, which mandates a minimum medical loss ratio of 80%, Kenyan MIPs currently operate with a loss ratio of 75%. This poses a challenge, urging them to enhance cost efficiency and align with global best practices.
In conclusion, the private medical insurance landscape in Kenya presents both challenges and opportunities. By strategically addressing issues of revenue expansion and cost efficiency, MIPs can navigate the complexities of the industry and foster sustainable growth, ultimately contributing to the broader goal of enhancing healthcare accessibility for all Kenyans.
References
ALUSHULA, P. (2020, January 23). Jubilee lays off 52 after units split. Business Daily. https://www.businessdailyafrica.com/bd/corporate/companies/jubilee-lays-off-52-after-units-split-2277686
Jubilee to restructure business. (n.d.). Retrieved February 22, 2024, from https://cytonnreport.com/news/jubilee-to-restructure-business
KENYA HOUSEHOLD AND HEALTH EXPENDITURE AND UTILIZATION SURVEY (KHHEUS) 2018 - Kenya. (2022, September 16). KENYA HOUSEHOLD AND HEALTH EXPENDITURE AND UTILIZATION SURVEY (KHHEUS) 2018. https://statistics.knbs.or.ke/nada/index.php/catalog/95
Medical loss ratio (MLR) - Glossary. (n.d.). HealthCare.Gov. Retrieved February 22, 2024, from https://www.healthcare.gov/glossary/medical-loss-ratio-mlr/
User, S. (n.d.). Annual reports. Retrieved February 22, 2024, from https://www.ira.go.ke/index.php/publications/statistical-reports/annual-reports
(N.d.). Retrieved February 22, 2024, from https://crsreports.congress.gov/product/pdf/R/R42735?
Health Policy, Financing and Governance professional
11 个月Denis thanks for the brief analytical write up and hope it can reach a larger audience or be further broadened to a policy brief. You mention something is passing that is important for the SHIA regulations to consider; Can the new SHA be obligated to report vital and operational statistics to the IRA just like other MIPs? That would be very useful for policy making and impact assessments.
CPA(K) | MBA| Experienced Finance Professional | Pharma | Diagnostics | Access to Healthcare | Consumer Healthcare | FMCG|
1 年Very insightful Dennis Okaka
Strategy Manager - OLD MUTUAL GENERAL INSURANCE KENYA
1 年It is interesting to note that these Private Medical Insurers purchase the medical care almost exclusively from a few Tier 1 hospitals which almost always dictate the cost of care due to high demand. One of the key battles that must be won is the cost of specialized care. There is some hope with the new SHA. I hope it can create enough demand (through increased funding) so that we have more investors in the specialized care space to increase supply.
Medical Science Liaison | Oncology, Non-Communicable Diseases
1 年This is quite an insightful analysis on the status of healthcare financing in the country. What do you reckon the impact of the new social health insurance bill will be on the amount of revenue directed to healthcare, a potential expanded pool of people covered by government insurance and healthcare affordability/out of pocket payments?