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Nigerian Healthcare Market Needs Actuaries
Nigerian Health Care

Nigerian Healthcare Market Needs Actuaries

When one considers that the custodians of Nigeria’s healthcare system go abroad for medical treatment, one begins to understand why there is hopelessness and cynicism in the Nigerian healthcare arena.
There is a healthcare bill currently in parliament that is expected to address a number of issues concerning the state of the healthcare system which needs to serve a population of over 160 million people.   Whilst the debate is going on in parliament, it is important for the private sector to participate and assist with solutions to benefit the Nigerian people. This is an area where the skills of professional actuaries can add tremendous value in the private healthcare system for individuals, corporations, Health Maintenance Organizations (HMOs), brokers and the regulators.


Nigeria’s healthcare system

Nigerian Health Care

An actuary uses financial and statistical techniques to solve complex business problems, especially as it relates to risk and contingencies. These problem solving skills are used extensively in areas such as pensions, investments, life insurance, general insurance, enterprise risk management, and of course, healthcare.  A health actuary facilitates changes in health care delivery and financing of a society. The healthcare sector in Nigeria is ripe enough to accommodate the services of actuaries to fill the gap that is needed to stabilise the market and restore its credibility.

My analysis of the private healthcare market can be summarised as follows:  Customers (or  end users) who view healthcare as a necessary but expensive commodity embrace the HMO market to deliver the services to them at as low a cost as possible, while HMOs, under competitive pressures reduce their premiums to levels that jeopardise their solvency and reputation. At the point of service, providers are reluctant to attend to members of particular HMOs who have not reimbursed them in the past. The patient then blames the brokers for advising them on the HMOs. Then the cycle of shopping for another HMO begins. In the meantime, the National Health Insurance Scheme (NHIS) capitation rates remain inadequate.

Who is to blame?  Is it:
–       the end user who wants comprehensive benefits but wants it at a cheap price?
–       the HMOs that engage in price wars to attract customers but price below fundamental, sustainable values?
–       providers with highly subsidised equipment?
–       brokers who need to educate their clients?
–       The government that needs to actively regulate the market?

There is plenty of blame to go around, but it’s now time for solutions.
Actuaries can act as advisors to all stakeholders by answering some of the following questions:
END USER: Is your risk profile conducive for insurance, or a self-funding arrangement?  Under insurance, which HMO provides best value for money? Under a self-funding arrangement, how much are you willing to pay, and what is the right benefit design for you?
HMOs – For a menu of benefits you are offering the market, what is the right premium to charge so you remain solvent, remain competitive and your reputation in the industry remains intact. What is the most attractive reimbursement method for you and your providers? How do you maintain solvency? Do you know the risk profile of your portfolio? How do you manage these?
PROVIDERS – How do you manage efficiency at hospitals, how do you manage your risks, is capitation right for you, what other reimbursement method is suitable for your operations? How do you manage case mix?

BROKERS – What tools do you have in place to assist your clients to select the right HMO plan to suit their needs? How do you quantify the richness of benefit and value for money to the customer?

GOVERNMENT AND REGULATORS: In determining the capitation rate for NHIS, have you considered recent trends including distribution of claims, medical inflation etc? Have you considered solvency requirements that are linked to the risk of the HMOs? If so how do you quantify this amount?  To maintain sanity in the market, have you considered setting parameters around premium rates including verification of the premium sustainability, as done in South Africa, Kenya and most developed countries.
In Summary, actuaries can assist in risk management, including quantifying the risk to guide decision making around transfer, mitigate or avoidance of the risk.

To practice and be recognised as an actuary you must have demonstrated technical and analytical skills and be designated a “Fellow” from an accredited body (via a series of examinations and experience) such as the Faculty of Actuaries in the UK, Society of Actuaries in the USA and Actuarial Society of South Africa. The Nigerian Actuarial Society is in the process of establishing its own accreditation process. The University of Lagos has an active Actuarial Science curriculum.

The proposed Healthcare reform bill is a welcome amendment to the current NHIS Act which aims to ensure wider healthcare coverage. The expected increase in volume of members will lead to a larger cross section of risk which should reduce rising healthcare costs. The bill also considers strengthening of the capital requirements for Health Maintenance Organisations (HMOs) and other Health Insurers. This should put pressure on those vendors who seek to offer discounted pricing with no actuarial soundness by encouraging them to compete on quality and efficiency of care and not on price alone.

It is my view that the proposed amendment should provide for guidelines on pricing for HMOs and to provide for a set tariff for providers on listed services that would consider geographical and expense / resource requirements. A requirement to file rates with the regulator is much needed.  In addition, administrative requirements such as requiring service users to make payments within 30 days of contract otherwise the contract terminates. There should also be guidelines to explain benefit features to the beneficiaries and to ensure full understanding of the different benefit options provided by HMO. The proposed amendment should clearly define of an actuary as done globally; for example, a “Fellow” from an accredited body such as the Faculty or Institute of Actuaries in the UK, Society of Actuaries in the USA and Actuarial Society of South Africa.

All this will ensure that the end user understands what they are paying for, HMOs duly obtain their funds to pay the providers and the system remains sustainable.  When you have a crippled health care system, then the buck stops at the door of the Ministry of Health and indeed the Presidency to fix it. Healthcare should be a right and not a privilege. In addition, it must emphasise the need for NHIS (or the proposed NHIC) to act as regulators only. The business of providing care and insurance services should be left to the relevant parties with the requisite experience, i.e. the providers, the insurers, and administrators.

 Olabode Olajumoke,  a Fellow of the Society of Actuaries in the USA,  Fellow of the Actuarial Society of South Africa and Consulting Actuary at Aon Hewitt. 

He can be reached at +27 83 728 0410 or Olabode.olajumoke@aonhewitt.com

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