Report: At 5.1%, Health Insurance Penetration Significantly Underwhelming

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Obinna Chima

The 2018 Health Maintenance Organisations (HMOs) industry report by Agusto & Co. has bemoaned the low level of health insurance coverage in the country which was estimated to be at 5.1 per cent.
The report released on Monday, pointed out that the consequence of the low level of coverage is that a larger proportion of Nigerians pay for their medical care out-of-pocket.

The World Health Organisation estimates that about 11 per cent of the world’s population spent over 10 per cent of their annual income on medical related expenses, while about 100 million people were pushed into poverty after incurring huge medical expenditure in 2017, thereby, highlighting the importance of purchasing a health insurance plan.

To this end, the rating agency noted that despite the significant benefits of health insurance, which has been proven globally as the most efficient means to finance medical expenses, the industry’s performance has remained lethargic in Nigeria.
Agusto & Co believed that, a combination of weak awareness and negative sentiments towards insurance accounted for the slow growth of the industry in Nigeria.

The report also held the view that “the cold relationship between the industry’s regulator (NHIS) and HMOs further dampened the industry’s performance, particularly with regard to the conundrum around the de-registration of 23 HMOs in April 2018.”
The firm also carried out a survey to gauge the perception of HMOs enrolee’s regarding the quality of service and the key drivers that could lead to switching HMOs.

The survey further probed into the elusive issues with on-boarding members of the informal sector to the health insurance scheme.
Also, the report assessed the competitive landscape in the health insurance industry, stating: “The competitive approach of most HMOscentres on poaching clients of competitors rather than penetrating new markets.”

“Consequently, low balling, which implies quoting significantly lower premiums than competitors on similar plans, has emerged as a key basis of competition in the Industry,” it added.
Therefore, it stated that such sub-par competitive landscape gives significant bargaining power to health plan buyers which are predominantly corporates.

Furthermore, the rating agency noted weak profitability in the industry, with average return on equity (ROE) estimated to be about 2.7 per cent, while some HMOs have remained in loss position for three years consecutively.
Also, the report highlighted factors impactingnegatively on profitability in the industry which it listed to includes its high loss ratio that stood at 86.6 per cent in 2017, substantially above the 44.5 per cent and 34per cent loss ratio reported in the Life and Non-Life Insurance business respectively.

The survey carried out by the agency alsorevealed that though employers’ influence remained a significant factor in the decision of selecting HMOs, enrolees were increasingly prioritising other factors while selecting HMOs.
“Enrolee turnover is also very high in the industry, with over 53.4 per cent of respondents indicating to have less than a two-year relationship with their current HMOs.

“While 66 per cent of respondents were either decided or considering leaving their current HMOs if given the chance by their employers, highlighting an unhealthy attrition rate.
“On the informal sector, the survey showed that the sector’s operators are quite open to subscribing to a health insurance plan given the right premiums and service coverage.

“Respondents within the informal sector expressed weak awareness on the operations of health insurance,” it added.
Overall, only 10 HMOs were identified as top of the mind by respondents.
“Agusto & Co sees positive prospect for HMO operators going forward, despite the current grim realities.
“The rating agency expects more states to adopt their own version of health insurance schemes over the medium term, which should improve the coverage ratio in the country,” it explained.

However, Agusto & Co. noted that the most potent tool to boost universal health coverage would be to establish a social health insurance plan that covers all citizens as applicable in Ghana, Canada and UK.
However, to ensure the sustainability of such a benign plan, an ideal fiscal framework must also be developed to ensure viable funding for the universal health care plan, it added.