Health Insurance Crawls As a Practice

Ethiopians have depended on their religious beliefs and traditional practices to insure themselves against morbidity for long. Even though various life insurance packages have been sold by companies for years now, the idea of insuring health has not been popular among Ethiopians and as a business model for industry actors. The bumby relationship between insurers and hospitals and clinics is another obstacle for the matter. With the introduction of a community-based health insurance scheme a decade ago and a new draft in the making, poor awareness towards being insured seems to be slowly changing, writes EBR’s Bamlak Fekadu.

In recent years, the capital city’s main roads and large squares including Megenagna and Mexico have become frequented by minibuses playing loud melancholic songs on their rooftop speakers. The vehicles are surrounded by young men and women with matching t-shirts usually bearing a picture of an ill patient for whom they are collecting cash handouts from passersby. The money would be for that patient’s treatment for whatever disease facing them.

Poverty seems to be taking its toll on people’s health, making some treatments too luxurious that the masses cannot regularly afford. Being insured against these morbidities does not seem to be an option for many.

Samuel Wubishet, a 35-year-old Chauffeur of a ride-hailing service since 2020, earns ETB1,500 on a daily average basis and is among the few Ethiopians with even little interaction with insurance. “I’m a policyholder of a comprehensive insurance package covering any legal liability regarding damage to property as well as theft,” said Samuel. “I only used to possess third party insurance which cost ETB500 annually–proclaimed mandatory since 2012.” For Samuel, theft is an epidemic now that seemingly targets ride-hailing service providers. To counter, he now holds an end-to-end comprehensive policy paying close to ETB20,000 per annum.

Annual premium rates for third-party insurance coverage vary from ETB188 for motorcycles to as much as ETB2,700 for cross-country buses. The 18 insurance firms operating in the market collected ETB855 million in premiums for third-party insurance policies last year, accounting for a third of all revenue from the motor insurance line of business.

However, Samuel holds premium coverage for his 2020 Suzuki Dezire which he bought for ETB1.2 million. Yet, he does not hold health and life insurance for himself. “I have never given it any thought. Further, some religious norms won’t allow using such modern packages,” he disclosed.

In Ethiopia, the concept of insurance remains underdeveloped—62Pct of rural Ethiopians reported having not heard of the word ‘insurance’. Along with inability or unwillingness for most urbanites to pay for coverage, the government of Ethiopia has no health insurance plan for its citizens. However, the administration just approved a community-based health insurance (CBHI) for which citizens pay out of pocket until the universal health insurance or social health insurance is officially launched.

Although the administration just approved and promised to implement a national insurance plan, citizens have to pay out-of-pocket until the plan is established. Since 2018, the national expenditure on health per capita is USD24 according to World Bank data. When one considers the ubiquitous poverty in Ethiopia, the figure is not surprising or enough.

Established in 2010, as a federal agency with 24 branch offices, the Ethiopian Health Insurance Agency (EHIA) has drafted a social health insurance directive which is awaiting the green light from Parliament. It aims to allow formally employed individuals to be covered with affordable health insurance packages administered by the state. It is a policy that would enable employees of private and public enterprises to reduce out-of-pocket payments for medical expenses and attain access to healthcare services using a pool of funds contributed in the form of membership fees.

As part of the life insurance lines of business, policyholders of health insurance are very few in Ethiopia which is almost none other than life insurance with along maturity period and group personal accident (GPA) insurance.

Neighboring Kenya has around 17Pct of its population insured through 32 insurers. The state-owned Kenya National Hospital Insurance Fund (NHIF) holds 94Pct of the insured with the balance held by the remaining 31 insurers. In the earth’s most populous country, the Chinese basic health insurance system covers more than 95Pct of the population.

Even though the private health insurance sector has existed for a while in Ethiopia, it is still very weak in penetration, mainly due to the detachment between insurers and hospitals. A symbiotic relationship is required to lead a managed care system.

The government-led community-based health insurance (CBHI) commenced about a decade ago and has been relatively successful amassing ETB2.2 billion in premiums just last year. Of this amount, around half was paid out to health institutions. Access to healthcare services have been availed for over eight million households.

Oromia Health Bureau, and its 8,500 plus health facilities, is among entities who have aggressively implemented the CBHI program for which around 4.4 million signed up. According to Dinka Erena, Coordinator of CBHI in the bureau.

Since last fiscal year’s conclusion, the bureau has collected over ETB1 billion, mostly from farmers. Yearly premiums were ETB250 and 360 in rural and urban settings, respectively.
“Premiums have now been adjusted by 64Pct to ETB410 and 510 following drastic increases of health care expenses” Dinka told EBR.

Further, the Addis Ababa City Cabinet increased CBHI rates by 30Pct to ETB500 in December 2021. The capital city’s program was launched eleven years ago for an annual fee of ETB170.
Out-of-pocket spending on health is high in Ethiopia, accounting for 37Pct of the total expenditure in the health sector, according to a 2018 World Bank report. Ethiopia’s experience can offer worthy lessons on how African governments can pursue universal health coverage through a series of complementary measures including strengthening health governance at the facility level and implementing national health financing reform. In all, over 11 million people have benefited from CBHI, making it one of the largest of its kind in Africa.

Through social and community-based health insurance schemes as well as not-for-profit mechanisms of health financing grounded in principles of solidarity and risk-sharing, citizens will be protected from financial burden arising from medical costs, according to Halima Abate (PhD), Director of EHIA’s Claim Management Directorate.

However, the social health insurance directive is yet to receive the full green light from the government. Yet, it has moved its muscle by approving the proclamation of community-based health insurance (CBHI) in December 2021, as per Halima.

“Social Health Insurance (SHI) is an affordable health insurance offering, primarily for urban workers in formal economic sectors. It is also mandatory,“ she added. If this scheme gets appropriate governmental attention and if private insurance companies get involved, it would create the means for a sustainable health service that is potent, perhaps leading life expectancies to jump over 70.” She hopes SHI will launch soon and will set up solid ground for the future of the Ethiopian healthcare industry.

Adem Ibrahim, Insurance Expert with over a decade of work experience in the industry, says most private insurance companies have diminished appetites to provide individual health or medical insurance due to the dynamism of medical technologies, treatment, and expenditure alongside lacking awareness and purchasing power of communities.

“Ethiopia doesn’t have medical health insurance rules that make coverage mandatory like third-party motor vehicle policies, “said Adem. However, the topic is still multifaceted. Insurers will fall into a number of challenges along the way, with trust being one. The relationship between hospitals and insurance companies has not been up to par over the past few years. Insurance companies complain about exaggerated fees from hospitals and go as far as accusations of unnecessary medicine prescriptions for customers. Hospitals, on the other hand, deny most of the allegations and blame insurance companies for late payments. They also accuse them of filling their claims departments with professionals not versed in medical matters and incapable of understanding the demands of hospitals and patients.

A new directive is on the horizon to make workers’ health insurance coverage mandatory even for companies hiring seasonal workers. Drafted by experts of the former Ministry of Labor & Social Affairs, the directive will compel employers to pay for the insurance coverage.

The directive is expected to significantly impact industries that rely heavily on daily workers, such as the agriculture sector and construction industry. Moreover, the draft will provide temporary workforces and their families with more comprehensive protection against work-related injury, disability, or death. The insurance industry, which contributes less than one percent of the country’s GDP, is also set to gain if the directive goes through.

Adem understands the viewpoint of the ministry’s draft and also sees it as a golden opportunity for the insurance industry. “Every insurance company goes by the law of large numbers; thus, insurers will grow their profit from the larger number,” even if payouts will also increase.

In the current Ethiopian insurance industry context, workers’ compensation policies provide employees coverage for medical expenses or compensation to next-of-kin in the event of death. In the latter case, the standard amount of compensation paid by Ethiopian insurance firms ranges from ETB10,000 to 150,000.

Premiums and payouts are determined by the number of beneficiaries and the nature of the work. These insurance policies account for less than 4Pct of the gross written premiums, totaling ETB11 billion during the last fiscal year.

According to the former Federal Transport Authority, the cost associated with road accidents is estimated at an average of USD80 million a year. Compensation for death or injury is capped at ETB40,000, yet claimants can receive up to ETB100,000 for property damage under third-party insurance. Road accidents have been a major cause of loss of life, bodily injury, and destruction of property.

Eyesuswork Zafu is Founder of United Insurance and has over sixty years of experience in the insurance sector. He believes that every citizen should get affordable health care.
“So as to attain quality health service and save people who can’t get treatment due to lack of money, the government shall incorporate them with insurers,“ he told EBR.

It is possible to cover a community’s health expenditure if the binding policy is designed to build public-private partnerships and have a set premium. It will be a win-win situation. Furthermore, it could save billions of government money that is spent in the form of subsidies, according to Eyesuswork.

EBR 10th Year • Feb 2022 • No. 104