How Microinsurance Plans Extend Healthcare in Africa

By | April 12, 2010

Kenyan student Shadrack Silipo had a heart operation five years ago, the sort of surgery that often bankrupts families in Africa.

Silipo’s parents normally would have paid by selling off land, the same green acres that form the inheritance for their eight children. But Silipo’s father, a retired principal, had enrolled the family three years earlier in a micro-insurance plan that covered the $5,000 operation in full.

Even as the United States debates how best to insure its people against sickness, a type of health care financing is growing more popular in Africa: Micro-insurance. Activists say it can help pay for health care for some of the billions of people in the developing world who cannot afford it.

“Poor people need health insurance, they deserve it and it can be done,” economist Muhammad Yunus, a Nobel Peace Prize laureate, told The Associated Press this week. His Grameen bank provides health insurance to around half a million poor Bangladeshis, and Yunus wants to expand further by using the Internet to connect doctors to patients in remote areas.

Micro-insurance is defined as a product accessible to those earning less than $2 a day, who pay tiny weekly premiums of sometimes less than one cent. The policies usually cover all conditions, including pre-existing illnesses like HIV/AIDS and maternity costs, and are written in language that is easy to understand.

Some 14 million Africans use micro-insurance, and the number of African policy holders has increased by 80 percent in the last five years, according to a recent study by the International Labor Organization. The numbers still are a fraction of the potential market but are growing rapidly as more organizations offer insurance products to the poor.

Melanne Verveer, the head of women’s issues in the U.S. State Department, said the U.S. government has increased its global commitment to micro-enterprise development, which includes micro-finance, from $193 million in the 2007 fiscal year to $265 million in 2010.

“We’re looking at ways to build on the existing U.S. commitment to micro-finance, expanding it to include things like savings and insurance,” she said. “It’s a highly effective tool to alleviate poverty.”

About half of Kenya’s 40 million people survive on less than $2 a day. When children get sick from the raw sewage that trickles through fetid slums, families must choose between medicine or food. A hospital stay usually is out of the question. Hospitals sometimes detain patients, including new mothers, when they cannot pay their bills.

Dr. Andrew Otieno, who runs a clinic in Nairobi’s biggest slum, said many poor families put off seeking help until it is too late.

“Sometimes we see them conducting deliveries in the house, and there are complications. Both the mother and the fetus can lose their life,” he said. Other patients, he said, “only go to hospitals when they are gasping or in a coma.”

Those are the tragedies that the continent’s insurance schemes are trying to avoid. Ghana’s government-run health insurance, introduced in 2003, now covers about half the population. About 90 percent of Rwandans also have access to basic health care thanks to a government-run plan.

In Kenya, the government offers a plan that covers an adult and all their children for just under $20 a year. It covers up to 180 days of hospital care a year, although there is no provision for outpatient care. But patients may still be required to pay fees for some surgeries, such as a heart operation.

Medical insurance in Africa is generally much cheaper than in the United States because doctors earn far less money, medical malpractice lawsuits are almost nonexistent, and hospitals often receive some government support.

Still, insurance can be a hard sell. It is difficult to persuade those struggling to survive to part with precious cash to pay for care that they may never need. For that reason, said World Health Organization expert Varatharajan Durairaj, micro-insurance could help the middle classes and some of the poor, but not the most desperate.

The WHO, which has studied the micro-insurance model as a way of expanding health coverage, warns that challenges remain. Durairaj said schemes had to be big enough to pool risk effectively. Those that covered only a high-risk clientele could fail, he said.

Silipo got his money from a Nairobi-based nonprofit micro-lending organization, Jamii Bora.

The group began offering insurance after realizing that many of the poor that took its tiny loans defaulted because they or a family member fell sick and needed money for treatment.

After they introduced an insurance scheme in 2001, defaults fell by 93 percent. The health insurance is just over $15 a year and mandatory for members with loans. The insurance covers an adult and up to four children for all inpatient care. Around 80,000 members are insured.

Jamii Bora lowers its costs by partnering with mission hospitals, not disputing claims and offering only a single insurance product. The organization began by asking members the premiums they could afford and then limiting its coverage to inpatient care.

“People should join the scheme because they cannot know the future for them and their children. Only God can know the future,” said Joseph Kepiro, smiling at his 25-year-old son.

Hospitals benefit too: The infusion of small but regular payments has kept open some health care facilities that might have otherwise closed, said Ingrid Munro of Jamii Bora, which has about 60 partner hospitals in Kenya. The scheme is completely self-sufficient and covers all pre-existing conditions, including HIV/AIDS, and maternity care.

“We didn’t want external funding because maybe then we could offer help one year and not the next,” said Munro. “This way we have no expensive consultants, and it’s been running fine for nine years.”

Richard Kerich, the head of Kenya’s government-run National Hospital Insurance Fund, said in some cases the insurance also helped drive down costs for patients. After three hospitals in western Kenya offered services at government-approved rates under the program, five other area hospitals followed suit and dropped prices to remain competitive, he said.

It worked so well for Silipo that his relatives also bought insurance. And it paid off: it covered the costs of care when one of his cousins was speared in the stomach while snake hunting.

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