Health Insurance Claims - High Cost of Health Insurance Claims & Possible Solutions
Health Insurance is one of the mechanisms for providing financial protection from the costs of using healthcare services which mostly translates to health claims that cover primary care, emergency services, among others.
This is a key pillar of universal healthcare. The protection it affords is extremely important as research from the World Bank and WHO showed that 100 million people are pushed into extreme poverty on an annual basis due to healthcare expenses.
To put the high cost of health insurance claims in Africa in a relatable perspective, let’s look into how healthcare costs have been skyrocketing in most parts of the world since the COVID-19 pandemic.
With costs in 2021 estimated to be $12,318 per person, the U.S. has the most expensive healthcare in the world according to the World Economic Forum. Following the U.S. is Germany in a distant second at $7,383 – 40% lower. Costs for France, Canada, the United Kingdom, Australia, and Japan average about $5,000 per person.
These figures put side by side with Africa, health claims in relatively cheaper here but it is still out of reach of pay scale of most Africans who are low and middle income earner.
Healthcare and Claims Cost in Africa Today
BMJ Global Health reviewed 19 studies on health insurance across Africa, they found that government-run health insurance was the dominant model in Africa and that it produced better results than community-based health insurance (CBHI). They also showed that private health insurance was marginal.
In Africa with a large informal sector and a substantial number of people with low contributory capacity, the review also confirmed the limitations of contribution-based financing and the need to strengthen tax-based financing. It also showed that high fragmentation and voluntary enrolment, which are considered irreconcilable with universal insurance, characterize most UHI systems in Africa.
This makes social security type of health insurance difficult to develop because, by definition, professional statuses and the individual tax base are difficult to identify. Another reason is to be found in the level of poverty of the populations.
Common Causes of High Health Insurance Claims
Some of the reasons that health claims continue to rise across Africa include:
Population Explosion: Africa has the youngest population in the world and its population increases at an alarming YoY rate. As a result of unpredictable population growth, premium healthcare becomes more expensive as the available healthcare facilities are strained.
Rising prescription drug costs, hospital labor costs, and overall inflation contribute to high cost of healthcare. As the cost of healthcare increases, health insurance claims that cover them follow a similar trajectory.
Lack of Transparency in Data and Pricing: Finding consistent and transparent pricing information from hospitals or health insurance providers is challenging for most consumers. It is common industry knowledge that insurers raise rates without explaining their reasons to regulators or the public.
This lack of transparency often leads to exorbitant cost of health claims as hospitals and other players get to inflate prices of their prices almost at will or based on trends.
Absence of Mandatory Health insurance Policy: While over 190 million Nigerians have no active health insurance cover, 77% of total health spending in Nigeria is out-of-pocket compared with 37% in many African countries, and 18% world average.
Recent investigations revealed that in some public hospitals, such as Lagos University Teaching Hospital (LUTH), initial deposit for treatment varies from N15,000 to N50,000 in the children’s ward, while in the Intensive Care Unit (ICU), the deposit can be as much as hundreds of thousands of Naira.
After this deposit, patients take a series of tests and prescriptions which leave them the unbearable hospital bills that sometimes their HMO or insurer find difficult to cater for based on the patient's existing policy. And as such, health insurance providers often wrongly take the blame for eventualities that the insured succumb to in Nigeria.
Possible Solutions to High Healthcare and Claims Cost
As observed in many countries with sustainable healthcare programs, several strategies are implemented to circumvent the challenges earlier mentioned and achieve universal coverage through insurance.
A series of studies, conducted between 2015 and 2017 by researchers mostly affiliated with the WHO, showed how, on different continents, countries were trying to expand health insurance beyond the formal sector.
These studies show that there are four main models that have helped some countries improve healthcare and keep healthcare insurance within bearable costs:
- Community-based Health Insurance (CBHI)
- Social Security-type Health Insurance
- Public Health Insurance
- Private Health Insurance
Nigeria is the one of the most populated African countries that has outsourced the management of its health insurance scheme to private operators. But the results of this approach fall short of expectations, and as such exorbitant hospital bills continue to make health claims unbearable for insurers and the insured across the country.
The Lancet Nigeria Commission, in its recent report, recommends that the Federal Government funds health insurance coverage to all Nigerians by paying the estimated N15,000 per capita yearly premium for 83 million least wealthy individuals (approximately 40% of the population) with revenue raised through the Basic Healthcare Provision Fund, taxation, and levies, and each state to fund residents through their state health insurance scheme supported by a national mechanism to assure quality.
According to the report, it would cost N1.2 trillion or 9% of the current annual national budgets to cover individuals who cannot afford to pay current premiums in National and State Health Insurance Schemes.
While this cost may be overbearing for the government to wholly shoulder, more commitment will yield political will to entrench more strict regulations that will ensure transparency in the Nigerian health sector. With improved transparency, the health sector will attract more local and international investors that will help fund and build better infrastructure.
Curacel health insurance claims management infrastructure helps businesses in Africa and emerging markets streamline their claims process, reducing the time and effort needed to process, approve and settle claims and cut down claims fraud by as much as 98%. Get started now
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