Achieving universal health coverage (UHC) has become a priority for many countries.[1] According to the DHS 2017-18 data, only 1% of women and men aged 15-49 are covered by health insurance.[2] Through its current Insurance program for strengthening human capital (ARCH), the Government intends to collaborate with a private insurance company[3] to provide health insurance to a certain group of the population in the long run.
However, a recent mapping of purchasing functions and capacities in Benin reveals low knowledge of the concept of strategic health purchasing (SHP) among health care purchasers[4]. Strategic health purchasing differs from passive purchasing in that it aims to efficiently allocate healthcare resources and promote equity.
Given the importance of private insurance schemes in Benin’s UHC strategy, it is important to understand how private insurers currently purchase healthcare, identify positive aspects and areas for improvement, and lessons for implementing the ARCH pilot and national health insurance scheme. That is the main objective of this blog. Specifically, the blog takes the reader through the purchasing capacities and governance functions in private insurance schemes, including governance and accountability, contracting, targeting beneficiaries, the benefits package, the payment system and the budget deficit challenge, and then discusses lessons that could be useful to AM-ARCH.
Note that while, in Benin, the notion of the private insurance sector includes both private insurance companies and the community-based health insurance initiatives, our analysis emphasizes more on the private insurance companies.
What is strategic health purchasing (SHP)?
According to the World Health Organization (WHO), the core principle of strategically purchasing healthcare is “linking the transfer of funds to providers, at least in part, to information on aspects of their performance or the health needs of the population they serve.” [5] It is an active process that aims to efficiently utilize resources and improve equitable access to healthcare. SHP is viewed as an important tool in health financing to accelerate progress towards UHC. Health purchasing functions include financial management, benefits specification, contracting, provider payment, and monitoring. These purchasing functions are linked to a set of purchasing capacities that we have chosen to explore from the private insurers’ perspective.
- Governance and accountability
Private insurance companies have financial and decision-making autonomy. They are free to decide which provider to contract and how to structure their purchasing arrangements. Their relationship with providers is arbitered by a federation of private insurance companies. In the event of disputes with an insurance company, beneficiaries or providers can write to the National Insurance Directorate, a public entity of the General Directorate of Economic Affairs that coordinates and monitors the application of national insurance regulations as well as regulating disputes between parties in the insurance market.[6] Having a third neutral party is important to arbiter the provider-purchaser, and purchaser-beneficiary relationships to prevent power abuses and injustice.
2. Contracting
a. Providers
The decision to contract with a provider can come either from the purchaser or the provider, although a growing number of providers approach insurers by themselves for contracting. Private insurers select the care providers with whom to contract based on several criteria that assess the technical platform of the health facility (equipment, staff, hospital capacity, and geographic accessibility for beneficiaries). A list of health facilities is available and accessible to private insurers from the Association of Private Insurance Companies of Benin.
b. Beneficiaries
Insurance companies primarily target private sector institutions for contracting health insurance. Private insurers rarely contract with individuals or public institutions because public sector staff generally benefit from other public health insurance coverage. Also, private insurers believe that contracting with individuals increases the risk of abusive service utilization by beneficiaries and, therefore, may not be cost-effective.
Despite this being profitable for the purchaser, it does not promote equitable access to care. Private insurance companies apply different contract terms with their clients depending on the ability to negotiate with each client.
A common concern among people who purchase health insurance from private insurers is whether they would get their money back in case they do not fall sick for a whole year. When contracting with the private health insurer, the beneficiary institution must pay a lump sum which includes both the annual costs to cover health care for its staff and an amount as the operating costs of the insurer. Therefore, with private insurers, the health costs are regularizable depending on whether the subscription paid exceeds or is less than the expenses incurred by the insurer for the beneficiary. The beneficiaries may receive a return on their subscription fees if the health expenses are less than the subscription and would reimburse additional expenses if the insurer spends more. This contrasts with the standard practice that aims to build reserves for years that there may be more claims than the premiums collected.
3. Targeting of beneficiaries
Unlike national insurance schemes that are commonly designed to target individuals, private insurers primarily target institutions. According to some private insurers, it is easier to pool funds from individuals who share similar disease risks for cost efficiency. They consider staff of institutions as groups of people who share the same risk for health issues. Private insurers also screen their clients to ensure that they do not have chronic diseases that could be costlier. Again, such a practice may be discriminatory and inequitable.
4. Benefit package
The benefit package of private insurers includes mainly the most common health issues. Private insurance schemes generally cover most primary health care and several secondary and tertiary health care. The health care coverage may vary, sometimes with co-payment contingencies. Due to misinformation, sometimes, beneficiaries are forced to bear the costs of being treated for this disease in a private health facility when the government has no contract with private providers. Most private insurers do not cover epidemics-related costs.
5. Payment system
The most common payment system used by private insurers is the fee for service with a ceiling. For instance, beneficiaries are required to get approval from the insurer if they have to be hospitalized; otherwise, the insurer may not reimburse the hospitalization expenses and any care received during hospitalization. A similar ceiling is set for medicines costs, which oblige beneficiaries to request authorization from the insurer if they receive prescriptions exceeding a certain amount. Such a gatekeeping strategy helps the insurer prevent uncontrolled spending on healthcare and further promotes primary healthcare. The private providers often contract with medical advisers which, play an essential role in the payment process by checking claim documents. A medical adviser must validate all care offered by providers before reimbursements are made.
Although private insurers usually have electronic databases of their beneficiaries, it is barely used in their purchasing arrangements since the electronic system is not common among providers. Therefore, provider claims, as well as the reimbursement processes are mainly paper-based.
Meanwhile, private insurers allow beneficiaries to request services from any health facilities other than contracted providers in case of an emergency. In that case, the beneficiary would have to pay upfront for the services and later request a refund from the purchaser. Private insurers do not consider the self-reference of providers as an issue and would normally cover all services through the fee for service as long as the referral is justified. Also, a private purchaser may use different rates for the same care with public, faith-based and private providers based on official guidelines.
6. Budget deficit challenge
Although private insurers are for-profit, the health insurance component is not always profitable. They often face budget deficits due to the overuse of health care services by beneficiaries. To prevent such deficits, insurers regularly calculate a claimant’s loss rate for each beneficiary, which is the ratio of the health costs over the subscription fees of the beneficiary. Beneficiaries are informed quarterly on their health expenses and potentially are asked to provide additional payments. Insurers also try to increase the amount that beneficiaries pay as operating fees but the competition in the insurance market does not allow them. Moreover, to respond to budget deficits, private insurer companies are forced to offset their expenses with income from other insurance components.
7. Lessons that could be useful to the AM-ARCH
7.1. Good lessons from private insurers’ purchasing strategy
The analysis of private health insurance systems in Benin has helped identify several good lessons that could be taken into account in the implementation of the AM-ARCH, including the good governance, the fair accountability system, the good contracting system, and private purchasers’ efforts to use gatekeeping systems.
By using gatekeeping systems, private insurers promote the use of cost-effective care among beneficiaries. With the ceiling, the fee-for-service payment system helps ensure that quality care is provided to beneficiaries and limits an overprovision of care. In addition to that, a strategic purchaser must also be: (1) sufficiently independent, financially and in decision-making; (2) be selective in contracting; (3) and have a well-designed accountability system.
These characteristics can somehow be seen in the current implementation of the AM-ARCH. The government has given a mandate to the National Social Protection Agency (ANPS) to be the executing agency for the generalized phase of the ARCH program. The agency is expected to have full autonomy in managing the national health insurance scheme. For now, the UGP-ARCH is playing that role of the purchaser, and its actions seem to be a bit politically driven since the unit is directly accountable to the president.
7.2. What should the AM-ARCH avoid?
A distinguishing feature between private insurance and the AM-ARCH is the target beneficiary groups. Private health insurance companies seem more driven by profit-making than promoting equity in access to healthcare. Not only do they target mainly private institutions, but they do not accept individuals to purchase health insurance from them unless the person demonstrates a sufficient capacity to pay, which purchasers would consider in very rare cases. Therefore, we encourage the current ambition of the AM-ARCH, which is to ensure equity in healthcare, targeting primarily the most vulnerable groups such as the “extremely poor people” and “non-extreme poor people”. Further, we encourage the ANPS to fix options for AM-ARCH. It could be among the following: AM-ARCH for the poor and private insurance for others or AM-ARCH mandatory for everyone and complementary package for private insurance or Everyone has the choice. The ANPS should prioritize the option that allows it to achieve the goal of universal health coverage more effectively. ANPS has to associate the Community based health Insurance for more impact in communities. These Community based health Insurances are well organized (Federation, CONSAMUS) and more settled in remote areas, they are close to communities, promote preventive medicine, are very affordable, but there is no law to regulate. They are initiated in many regions of the country. They have a role to play, and ANPS has to be aware of it.
Unlike private health insurance companies, the AM-ARCH should also avoid cream-skimming, that is, select healthier clients and exclude those chronic ailments, and avoid risk-rating the premium to charge clients with chronic ailments and elderly more premium. Although using the fee-for-service payment system may help ensure that quality care is provided to beneficiaries, open-ended fee-for-service may lead to budget challenges and supplier induced demand.
Furthermore, most private health insurance companies do not have proper strategies to promote preventive health and providers’ prescription of generic drugs. This results in an overuse of healthcare services by beneficiaries which subsequently leads to their budget deficits.
Conclusion
To sum up, private health insurers play an important role moving towards universal health coverage in Benin. Despite following some principles of strategic purchasing of healthcare, they are more driven by profit-making than by the intents of SHP, which are better resource utilization, efficiency in care provision, and equity in access to care. The AM-ARCH has a lot to learn from the experience of private insurance schemes considering good lessons that could be useful and practices to avoid.
This blog was written by Dr Christelle Boyi, M. Crédo Ahissou, M. Cossi Xavier Agbeto and Dr Jean-Paul Dossou
[1] United Nations. 2019. Universal Health Coverage – General Assembly Of The United Nations. [online] Available at: <https://www.un.org/pga/73/event/universal-health-coverage/> [Accessed 20 September 2020].
[2] Institut National de la Statistique et de l’Analyse Economique (INSAE) et ICF. 2019. Enquête Démographique et de Santé au Bénin, 2017-2018. Cotonou, Bénin et Rockville, Maryland, USA : INSAE et ICF.
[4] Strategic Health Purchasing Progress Mapping Technical Partnership, Benin report, CERRHUD May 2020
[6] DGAE Finances. 2020. Direction Des Assurances (DA) – Direction Générale Des Affaires Economiques. [online] Available at: <https://www.dgae.finances.bj/direction-des-assurances-da> [Accessed 20 September 2020].