Small-scale health insurance for a more secure future

High out-of-pocket healthcare costs in African countries send many low-income people into significant debt. Microinsurance has the potential to complement national health insurance schemes and offer affordable healthcare, but several obstacles continue to challenge scale-up of the insurance model.

When Bimpe Ibidun (not her real name) was diagnosed with early-stage squamous cell carcinoma—a type of skin cancer—in early 2021, her doctor recommended an urgent surgery to prevent spread of the cancer to other parts of the body that same week. But it took nearly seven months for the 50-year-old Nigerian mother of four to raise the $590 she needed to pay for the surgery.

When she returned to the hospital, new tests showed the cancer had spread and now required both surgery and radiotherapy that could cost at least five times more than the initial estimate. “I did not have the money the doctors asked me to pay so I had to beg family and friends,” she says.

The health protection paradox

Stories like this are common in Nigeria and other African countries where most healthcare is funded out-of-pocket by private citizens. In sub-Saharan Africa, 33% of health expenditure was financed out-of-pocket in 2018, compared to 18% globally. The situation is even worse in Nigeria, Africa’s most populous country, where about 77% of health expenditure came from out-of-pocket payments in 2018—up from 60.2% in 2000.

The trouble with out-of-pocket healthcare costs is they are difficult to budget for, especially in sub-Saharan Africa, where more than 40% of the population lives on just $1.90 a day. Saving for known and unknown future health needs and emergencies is unrealistic, so when health needs arise, it’s extremely difficult to foot the bill without compromises and sacrifices ranging from food rationing and indebtedness, to suspension of schooling for children, loss of jobs and housing. Sometimes these strategies aren’t enough, and a patient could stay for months in the hospital until relatives are able to raise the funds. With over 100 million people becoming impoverished annually due to very high health expenditures, particularly in Africa’s low and middle-income countries (LMICs), developing viable long-term solutions is increasingly important.

According to finance experts, micro health insurance is touted as an important potential solution. It operates in much the same way as conventional insurance except it’s targeted at low-income people with few or no financial reserves. Premiums and coverage limits are usually low and paid in irregular instalments to account for fluctuating incomes.

For people across Africa who can access urgent health services for diabetes, hypertension, cancer and other non-communicable diseases (NCDs) without the financial burden of high out-of-pocket costs, microinsurance can be life changing.

Rethinking healthcare financing

The foundations for microinsurance can be traced back to 2001, when Africa’s health ministers gathered in Abuja, Nigeria’s capital city, and committed to allocating 15% of their annual national budgets to improving their healthcare systems. The commitment, referred to as the Abuja Declaration, soon became a rallying call to mobilise more resources from government coffers for the health sector. However, it has become a commitment that most African countries could not keep.

According to the South African Institute of International Affairs (SAIIA), the 16 members of the Southern African Development Community (SADC) have found that meeting the 15% target is a continuing struggle. “Indeed, the push towards the more sustainable allocation of resources to healthcare requires that governments in the SADC region, as in the rest of Africa, increase investment in all facets of the healthcare system…[But] the latest data from the World Bank’s World Development Indicators shows that countries in the SADC region are failing to spend enough on public health,” SAIIA says.

African governments have realised that improving healthcare services in their respective countries is a costly venture. They have also come to terms with their limited fiscal space. Realising they cannot solely rely on budgetary allocations for health financing, African countries are now exploring other funding models including social insurance models that encompass both national health insurance services and microinsurance.

Not quite universal

Even though most countries in Africa now have national health insurance services, the inability to ensure every person has access to all (or most) of their healthcare needs without needing to make out-of-pocket payments has made these services unattractive.

Research examining inequality in health insurance coverage in 36 countries in sub-Saharan Africa led by Edwine Barasa, director of the Nairobi Programme of the KEMRI-Wellcome Trust Research Programme, reported that only four countries—Rwanda, Ghana, Gabon and Burundi—had coverage levels with any type of health insurance, national health insurance or microinsurance, above 20%.

They found health insurance coverage was low and largely favoured wealthier people in the populations. Access to information on health insurance, socioeconomic status and level of education were the leading contributing factors associated with access to insurance coverage in the countries studied.

The latest data from the World Bank’s World Development Indicators shows that countries in the SADC region are failing to spend enough on public health

In Ghana, the National Health Insurance Scheme (NHIS) has been credited with removing some socioeconomic barriers in accessing healthcare services in the country by providing free coverage for elderly people, children and pregnant women. It also improved health service-seeking practice among insured Ghanaians.

But the Ghanaian scheme doesn’t equate to universal healthcare, as premium payment is required before many citizens can access healthcare services and it’s comparatively more expensive in some parts of the country. Experts believe this may discourage more people from enrolling. According to a World Bank study, the proportion of the Ghanaian population covered by the scheme is about 40%.

“We have a situation where you will say you have health insurance coverage, but you will have to pay some money to get treated,” says public health expert John Appiah, who’s based in Accra, the Ghanaian capital. “We know of countries like the United Kingdom where you will not be asked to pay anything, but this is rarely the case here. Because even when they know you have insurance, there will always be one or more additional payments to be made.”

For many people across the continent, private health insurance provided by employers fills in the gaps, or perhaps serves as a substitute for national health insurance services. Nigerian quality assurance officer Philip Towo says he’s never paid any money for health coverage, with the private insurance company contracted by his employer covering all his immediate family’s healthcare needs.

“My wife delivered our baby and I got treated following a motor accident without paying anything. I also enjoy routine medical check-ups for me and my family. I know this is not the experience everyone has, but if it’s possible for some of us, they should be able to find a way to extend it to other citizens,” says Towo.

A cautiously burgeoning marketplace

Some African countries are adopting a new approach, rolling out multiple health insurance offerings to provide coverage to as many people as possible. The largest are the national health insurance schemes, and there are also packages managed by state and local authorities. Plus, there’s now a plethora of offerings from the private sector, ranging from all-inclusive health coverage deals signed by major companies with health management organisations, to tiered premium offerings that individuals and families can sign up for.

But a major shortcoming of these approaches is their consistent exclusion of people who aren’t earning enough to be able to afford coverage through traditional insurance companies. Microinsurance can help to fill the gap by delivering low-cost, affordable health insurance—and several approaches have already been deployed on the continent.

In 2014, the International Finance Corporation unveiled an agreement to expand micro health insurance to low-income and informally employed people in Senegal. The pilot aimed to provide low-cost health microinsurance products to 108,000 people.

In Tanzania, Jamii Africa targets the low-income population through their mobile phones. The startup, launched in 2015, performs all the administration activities of an insurer and allows users to access cheap insurance starting at $1 per month. Jamii Africa says it now has more than 20,000 active users, about 400 registered hospitals and has raised over $1 million.

In Kenya, microinsurance is often bundled with other services. One example is MicroEnsure’s Fearless Health product that offers on-demand loans for primary healthcare at outpatient clinics, medical advice by phone and insurance for inpatient care. By bundling financial products in this way, the company says customers can enjoy the benefits of insurance without making costly separate insurance premium payments.

But a major cog in the wheel of these and other microinsurance products in several African countries is the end-users’ desire for more coverage and the low-cost solutions’ inability to generate large enough revenues to justify and finance the inclusion of more services. This is one of the reasons why microinsurance remains a small player in the continent’s health insurance sector.

Some microinsurance schemes only cover vaginal delivery, so how do you convince the woman that she has to pay if the baby was delivered via caesarean section?

Nigerian physician Dr Victoria Feyikemi says healthcare professionals often struggle to help patients with microinsurance coverage understand they have access to a limited range of services. Patients sometimes believe they’re being cheated by the healthcare workers or the coverage provider, or both.

“[For example], some [microinsurance schemes] only cover vaginal delivery, so how do you convince the woman that she has to pay if the baby was delivered via caesarean section?” she says. “Or when there are complications, [patients] may start a serious argument when asked to pay more.”

MASSIVE AFRICAN MARKET ON HOLD In Nigeria, microinsurance providers still struggle to find the right business model

A matter of trust

It is therefore not surprising that startups that set out to provide access to health insurance coverage in several African countries have stopped operations, leaving health management organisations as the only major players in the private sector. In Nigeria, even though the country has a large population and a potentially large market for health insurance, the top health startups making a difference in the country are not health insurance startups. Instead, they cover areas like telemedicine and health data collection.

Dr Ifeanyi Nsofor, CEO at EpiAFRIC, an African health consultancy, argues the way to better position microinsurance and health insurance services more generally on the African continent is to find a way to convince people to channel high out-of-pocket expenditure into health insurance.

He says the dominance of out-of-pocket payment for health services in most African countries, where being able to quickly make payments could decide who lives or dies, shows there is still an unmet need for health insurance services. But only a proportion of the population has enough money to set aside for future unforeseen health emergencies.

Nsofor says the way out is to go back to basics and improve the level of trust among Africans for health insurance, by explaining to the general public how insurance—traditional insurance as well as microinsurance—works.

“We need to improve knowledge by drawing parallels between other operating expenses and health insurance. For instance, what people spend monthly treating themselves can get them a health insurance cover for a year. Health management organisations and community health workers must step up in this regard,” he says.

With new microinsurance services and packages regularly emerging and re-emerging in the various markets, the ecosystem will favour players who are willing to be in the market for the long term—long enough to gain trust and do the hard work of educating users about the different health insurance plans and what they cover.

Nsofor says helping consumers understand that microinsurance isn’t a complete and perfect substitute for traditional health insurance is at the core of ensuring its success in Africa. “It helps to manage expectations when those with health insurance go to hospitals to access care,” he says. He also advocates for measures to ensure transparency and enable consumers to safeguard trust through easily identifying fraudulent, scrupulous and controversial service providers.

As the microinsurance space continues to attract more startups, new market entrants, international organisations and partnerships between existing health insurers and telecommunications firms, more innovative solutions will increasingly become available to Africa’s low-income groups. Indeed, Bimpe Ibidun in Nigeria was able to secure a microinsurance-type loan to help cover the cost of some of her treatment. Eventually, microinsurance providers will be able to balance profitability with attractive product pricing. This is an equilibrium that is yet to be found, but a firm foundation is being laid.