supplying health microinsurance: lessons from east africa
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Supplying HealthMicroinsurance: Lessons fromEast AfricaMichael J. McCord aa MicroInsurance Centre , Chilton, Wisconsin, USAPublished online: 03 Jul 2007.
To cite this article: Michael J. McCord (2007) Supplying Health Microinsurance:Lessons from East Africa, International Journal of Public Administration, 30:8-9,737-764, DOI: 10.1080/01900690701226489
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Intl Journal of Public Administration, 30: 737–764, 2007Copyright © Taylor & Francis Group, LLCISSN 0190-0692 print / 1532-4265 onlineDOI: 10.1080/01900690701226489
LPAD0190-06921532-4265Intl Journal of Public Administration, Vol. 30, No. 8-9, May 2007: pp. 1–43Intl Journal of Public AdministrationSupplying Health Microinsurance: Lessons from East Africa
Supplying Health Microinsurance McCord Michael J. McCordMicroInsurance Centre, Chilton, Wisconsin, USA
Abstract: Health microinsurance[1] is a recent entrant in the effort to provide sustain-able health financing products to low-income populations. Literature covering this areais sparse and limited to a focus on one delivery channel. Several other channels arebeginning to show promise in this market, but these have not been carefully reviewed,compared, or contrasted. There is no significant literature that reviews these differentmodels in a practical manner to aid institutions that are considering the development ofa health microinsurance product. This study provides a better understanding of theeffectiveness of these different models. It helps insurers and others to identify goodand “bad” practices[2] within the various models so that they can:
1. decide which model is most appropriate for them, and2. benefit from the key lessons of others.
Keywords: health microinsurance, Kenya, microinsurance Tanzania, Uganda
Seven microinsurance programs were selected based on several factors,including:
1. activity within East Africa,2. providing health care financing services to the low-income market,3. including a variety of methodologies within the sample, and4. willingness to be reviewed.
The research for this paper was conducted for MicroSave (www.microsave.org)with funding from UNDP, CGAP, DFID, and Austria. Any errors or omissions are theresponsibility of the authors.
Address correspondence to Michael J. McCord, 1045 N. Lynndale Drive, Suite 2E,Appleton, WI 54914, USA; E-mail: [email protected]
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One for-profit HMO focusing on the lower middle to upper classes wasincluded in the sampling to provide a comparative perspective. Researchersinterviewed management and staff from each of the insurers, health care pro-viders, and intermediaries, as well as the insured. They assessed financial andinstitutional viability,[3,4] relationships with partners, and client attitudes.Information was gathered primarily through techniques of semi-structureddialog, except for the demand side, where people were formed into randomfocus groups for qualitative research. Each institutional visit lasted betweensix and twelve person days, depending on the complexity of their operations.
Key lessons learned in delivering health microinsurance include the needfor individual and institutional incentives, as well as extensive training ofmanagement, staff, and the market. Success, in terms of profitability and out-reach, requires management that is knowledgeable about insurance basics, andtheir ability to develop and manage institutional and product controls. Effi-cient systems are critical for all parties.
This article presents detailed and practical information that helps healthmicroinsurers provide their products in a more effective manner. Being moreinstitutionally effective will result in access to improved health care for low-income populations in developing countries. The primary findings showedthat issues of profitability involved efficiency, loss ratios, volume, pricing,and controls and risk management.
“It is very difficult these days to get assistance for treatment. If you do nothave the money, you will just be left to die. With death, people can easilyassist you, but not [with] sickness. Sickness is for you and your family.” (Pov-erty Africa client[5])
INTRODUCTION
Microinsurance in various forms has been available in East Africa for manygenerations. From the informal, yet ubiquitous munno mukabi (“friend inneed”) systems of Uganda, to the harambee (“pulling together”) culture inKenya, and the funeral societies of Tanzania, low-income people have cometogether to create mechanisms that help them to manage the financial risks intheir lives. These activities are frequently found in both urban and rural areas;among low, middle, and high-income groups; as well as among men andwomen. Through these structures, people have made great efforts to managetheir risks in terms of health, property, and funeral expenses. However, toofrequently, these strategies have proven insufficient to stop the family fromthe precipitous decline towards deeper poverty.
More recently, new initiatives have been introduced to offer other riskmanagement options for low-income people.[6] Some hospitals and clinicshave developed prepayment schemes. Some non-governmental organizations(NGOs) that work with low-income clients have developed risk managing
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Supplying Health Microinsurance 739
products like emergency credit or microinsurance products. Even some com-mercial insurance companies have begun to identify opportunities in the low-income market. The quality of service varies from program to program.[7]
Regardless of the variation in program structure, one constant is that peopleare identifying a need for improved risk mitigation and taking advantage ofthe newly created opportunities.
The value of HMIs is not in question. One challenge HMIs face is theirability to develop self-sustaining programs that allow them to thrive as viablesolutions to insuring low-income markets. HMIs display a continued depen-dence on donor funding in order to survive. This study explores factors thatcontribute to their dependence and identifies possible solutions based on thefindings.
In this article, we analyze seven cases in East Africa. This region waschosen to learn from start-up processes and implementation from a variety ofHMI programs. Examining microinsurance products in this region offeredresearchers an array of delivery channels to explore. Thus, with the support ofMicroSave, the MicroInsurance Centre, and Microfinance Opportunitiesembarked on a detailed study of the supply gaps for health microinsurers inEast Africa. The expectation was that this information could assist microin-surers in effectively reaching more people. Specifically, we attempt to shedlight on the factors that impede growth and sustainability of HMIs.
To do this we analyzed a variety of data sources to identify HMI vulnera-bilities and areas impeding sustainability. We draw from this investigationinvolving formative research using a qualitative and quantitative explorationof the seven HMI cases in East Africa. The study was designed to build anunderstanding of current management strategies and identify programmaticgaps needing additional interventions. The process also resulted in the identi-fication of practical lessons about the supply of health microinsurance. Thisinformation is disseminated in order to provide valuable inputs for otherhealth microinsurance programs.
METHODS
A Qualitative Approach
This multi-case study involved the use of in-depth interviews conducted withmanagement and staff from each of the HMI insurers, health care providers,and intermediaries, as well as the insured. The financial and institutional via-bility was assessed,[4] as well as client attitudes and HMI relationships withtheir partners. Each institutional visit lasted between six and twelve persondays, depending on the complexity of their operations.
The cases selected were a representation of the various contexts withinwhich health microinsurance has been applied. The sample of cases represented
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various delivery mechanisms, organizational structures, and mix of urban andrural institutions, geographical distribution, and a for-profit institution thatserved the middle and upper market but that had an interest in moving into thelow-income market. Table 1 provides key information about the four modelsand the target institutions practicing these models.
A representative sample encompassed seven HMIs institutions selectedfrom three East African countries, Uganda, Kenya, and Tanzania. The Ugandacases included the Centre International de Développement et de Recherche(CIDR), Kitovu Patients Prepayment Scheme (KPPS), and Microcare Ltd. InKenya, the targets were the Community Health Plan (CHeaP) and MediPlus.Cases in Tanzania were the Community Health Fund (CHF), and the PovertyAfrica Health Programme (PoA). These cases were representative of the vari-ety of HMI institutions active today, and all offered a health insurance orhealth care financing product. Each of the cases also represented one of thefour different general delivery models.[8,9] Other factors contributed to theselection of these seven institutions. Each institution had an active health carefinancing product serving the low-income market except one, the for-profitMediPlus in Kenya. They offered health care financing to the lower middlethrough wealthy market, and were chosen as the only for-profit entity in thesample as a means of detecting significant differences in the non-profitapproach of the others.[10]
To gain a better understanding of the dynamics of these institutions, fac-tors that contribute to their resiliency, and the different opportunities availablefor the low-income market, researchers visited a variety of health insurers.[11]
Cases represented a range of delivery mechanisms and institutional ownershipstructures (Table 2), as well as an urban-rural mix.
Table 2 provides some basic information about the institutions.These institutions ranged from the start-up Community Health Plan in
Kenya with 100 clients to the Tanzanian Government’s Community Health
Table 1. A Summary of Microinsurance Models
Model Key Elements Study Example
Provider Health care provider offers health care risk pooling product to cover its own services, and retains all risk
KPPS
Community Based Owned and managed by members who absorb all risk
CIDR, CHF*
Insurer MFI as insurer, or insured HMO coming down market. MFI or other insurer retains risk
MediPlus, CHeaP, PoA
Partnership Insurer works through MFI or other group and retains risk
Microcare
*CHF works with community-based groups but is overseen by the government.
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741
Tab
le 2
.T
arge
t Ins
titut
ions
Bas
ic I
nfor
mat
ion
(Jun
e 20
02)
Mic
roca
reK
PPS
CID
RC
Hea
PM
ediP
lus
PoA
CH
F
Cou
ntry
Uga
nda
Uga
nda
Uga
nda
Ken
yaK
enya
Tan
zani
aT
anza
nia
Typ
eH
MO
Hos
pita
lN
GO
MFI
/NG
OH
MO
MFI
Gov
t.M
odel
Part
ners
hip
Prov
ider
Com
mun
ity
base
dM
FI I
nsur
erIn
sure
r (w
ith
insu
red
risk
s)M
FI I
nsur
erPr
ovid
er
Leg
al f
orm
Com
pany
lim
ited
by g
uara
ntee
Hos
pita
lN
GO
NG
OC
ompa
ny li
mite
dby
sha
res
NG
OG
ovt.
Prog
ram
Yea
r sc
hem
e st
arte
d20
0019
9820
0020
0219
9620
0119
96
Cov
ered
live
s77
61,
750
837
100+
65,0
0060
033
0,00
0O
wne
rN
on-s
hare
-hol
der
Boa
rdH
ospi
tal
Mem
bers
Cat
holic
Dio
cese
Shar
ehol
ders
*Pr
ovid
ers
as
inve
stor
sM
embe
rs
Leg
al F
orm
Com
pany
lim
itedy
by G
uara
ntee
Hos
pita
lN
GO
Rel
igio
us e
ntity
Com
pany
lim
ited
by s
hare
sN
GO
Gov
ernm
ent
proj
ect
Tax
Sta
tus
Not
for
Pro
fit
Not
for
Pro
fit
Not
for
Pro
fit
Not
for
Pro
fit
For
Prof
itN
ot f
or P
rofi
tN
ot f
or P
rofi
t
*The
ow
ners
are
thre
e lo
cal a
nd in
tern
atio
nal b
usin
ess
peop
le.
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742 McCord
Fund with its reported 330,000 members. Most of these institutions have lim-ited outreach, ranging from 500 to 2,000 insured lives. The for-profit commer-cial health management organization (HMO), MediPlus covers 65,000 lives.
Supply side researchers spent three to five days interviewing HMI man-agement, staff, providers, and intermediary partners about the health microin-surance program. A separate team conducted qualitative participatory rapidappraisal (PRA) sessions were held with a mix of current, past, and non-clients of each of these programs.[12] The demand research was conducted wasconducted in advance of the supply side research, and the demand researchersinterviewed clients of microfinance programs in the three East Africancountries. A detailed account of the demand research is reported in Cohen andSebstad, 2003[13].
SYNTHESIZING THE FINDINGS
Reviewing the components of each of the HMI organizations, several keyissues arise that could affect their potential for viability. Insurance skillimproves pricing and risk management. Extensive controls against moral haz-ard, adverse selection and fraud can contribute to an overall reduction inexpenditures leading to more appropriate premiums for the low-income mar-ket. Operational efficiencies were also important in reducing premiums and indeveloping an effective product. Where these were present the institutionsappeared to have a better potential for success.
HMI Commonalities
During the visits, the research team sought to gain a detailed understanding ofthe operations of the institutions and the HMI products they offered.Researchers found that each organization provided services through either asingle hospital or a network of health care facilities. None of them have partic-ularly strong governance, and most had very little knowledge of the intricaciesof the insurance business. HMI infrastructure observed included two special-ized computer systems at Microcare and MediPlus. Benefits to these HMIswere made clear through their increased ability to manage controls, and toprovide useful management data. However, in neither of the institutions withgood computerized systems was the data used to its full potential. Manual sys-tems were sufficient for very small community-based institutions where noreal data analysis is expected or attempted.
All of these institutions worked with groups of either those employerswho had low-income employees, microfinance institutions (MFIs), villagegroups, or others who had some financial transactions with the low incomemarket.[13] This facilitated the marketing and the servicing, including
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Supplying Health Microinsurance 743
premium collection, of their product. HMIs working with employers found thepartnership superior to working with MFIs. These employer groups were easierto deal with for several reasons, prime among them was the simplicity of dealingone individual, the human resources manager or the CEO, instead of having toconvince each individual within an MFI or other group to obtain a sale.
Insurer’s Risk
In studying the health microinsurers, key element for consideration regardingthe different models was where the insurance risk lies. The different modelsplace the insurance risk with different entities. The community-based modelleaves the local villagers with all the risk, while the insurer model and thepartnership model place the risk with a professional insurer, while the pro-vider based model leaves the risk with the medical facility. This is a criticalaspect in considering the different models as it relates to the ability of the riskbearer to manage an insurance business, and to absorb that risk without desta-bilizing the insurance activities or other aspects of a multi-faceted business(such as the capital of an affiliated microfinance business).[14]
One of the key differences between the share-based HMO and the NGOs isthe strength of the finance area and their focus on profitability. AlthoughMediPlus is barely profitable, there is a trend towards profitability with aggres-sive yet careful pricing, as well as strong and enforced controls. Interestingly,where the other institutions have problems is precisely in these areas: pricing andenforcement of controls. MediPlus is also the only institution in the group withaccess to regulated reinsurance. Their policy with Africa-Re is a stop-loss policythat is activated when the HMO’s premiums are depleted to an agreed level.
Among the NGO based HMIs, two ownership models were observed(besides the rather ambiguous ownership that derives from donor funding).CIDR groups were owned and managed by their members. CIDR’s objectivewas to work with these groups over a period of time so that they wouldbecome truly independent.[15] They would be managing their funds, member-ship, and controls, as well as negotiating with health care providers, and anyother relevant entities.
However, most of the CIDR groups found it difficult to manage the insur-ance product, and their insurance funds were depleted well before the end ofthe policy period. This is a factor of pricing problems as well as member man-agement issues. Because of these difficulties, in the program’s third year, allgroups except for one had migrated from the insurance product option to anew three-month emergency loan option. Even the exception group did notrely completely on the insurance option and were trying a hybrid method.Looking at the trajectory of growth, capacity, and ownership motivation,CIDR determined that it would take more than ten years of expatriate techni-cal assistance to get these groups truly independent.
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Only two of the target institutions had made any serious attempt at properpricing. MediPlus contracted actuarial pricing that was further reviewed bytheir insurer. Microcare has also contracted a formal actuarial review to assessits risk and premium calculations, and still needs to make the required pre-mium adjustments.[16] The health microinsurance products offered by theseinstitutions are varied in terms, coverage, and premiums. Details of theseproducts are provided below in Table 3.
Success, defined as generation of profits or surplus for the microinsurers,has been varied across the different target institutions. Part of the reason forthis is reflected in the institutional objectives of the targets. Some, likeCHeaP, are almost entirely focused on satisfying the social needs of their“market” area.[17,18] Others, like MediPlus and Microcare, are focused ondeveloping and managing profitable institutions. The objectives of each orga-nization often led to different methods of determining premiums and cover-age. For example, CHeaP and CIDR set premiums and coverage based onwhat their members “can afford.” Microcare and MediPlus price for profits,though within a competitive marketplace.
A key to profitability in health microinsurance is the efficiency of thetransactional processes and required activities, such as underwriting.[19] Table 4shows the most efficient program as CIDR, which is essentially run throughthe volunteer efforts of community members, and CHeaP, which is highlysubsidized by the Catholic Church. Another efficiency indicator is the numberof insured to the total number of staff. Regarding efficiency, KPPS with itstwo staff members, and MediPlus the for-profit HMO are significantly moreefficient than the others. This efficiency gives them greater flexibility in pre-mium setting because of the reduction in costs.[20]
Profitability
Another key to profitability is the loss ratio, or the value of claims to total pre-miums.[21] There was a striking difference between the loss ratio of the not-for-profit institutions and the for-profit institution. Compared with Mediplus,which had a loss ratio of 29%, four of the NGOs had a loss ratio well over100%. Thus, for these NGOs, premiums did not even cover the cost of treat-ment for their members. Continued growth without changes in premiums,coverage, or better controls could simply absorb all available funds. A verylow ratio could be related to a high claims rejection rate, very slow payment,or simply treating reinsurance transactions as administrative expenses. In thecase of MediPlus, each of these explanations is viable. MediPlus providerswere complaining of a long and expanding claims payment period. The aver-age duration was over 120 days at June 30, 2002 (Table 1). Indeed, withinnine months of the case study visit, MediPlus had declared bankruptcy due tooperational decisions of management.
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745
Tab
le 3
.B
asic
Hea
lth C
are
Prod
uct I
nfor
mat
ion
Inst
itutio
nM
icro
care
KPP
SC
IDR
CH
eaP
Med
i Plu
sP
oAC
HF
In-P
atie
nt c
over
Yes
No
Yes
opt
ions
No
Out
-pat
ient
cov
erY
esN
oY
esY
es o
ptio
nsY
esD
iagn
ostic
test
sC
over
edIn
-pat
ient
Cov
ered
Cov
ered
, lim
ited
Med
icat
ions
Cov
ered
, lim
ited
In-p
atie
nt n
eeds
Cov
ered
Dur
atio
n4,
6, 1
2 m
onth
s12
mon
ths
1 m
onth
12 m
onth
sL
imita
tions
(i
n U
S$)
IP 1
95 p
er 8
m
onth
sIP
-44
OP-
8 Pe
r vi
sit
44–5
6 pe
r ad
mis
sion
(v
arie
s by
gro
up)
63 a
nnua
lm
axim
umA
s pe
r se
lect
ed p
olic
yN
ot li
mite
d fo
r O
P (n
o IP
)Pr
emiu
m
(per
per
son
per
year
, in
US$
)
Adu
lt: $
22.0
0 C
hild
: $11
.00
$5.4
0$2
.00
(mig
ht v
ary
by
grou
p, d
isco
unt
for
big
fam
ily)
$4.5
0O
P: $
118.
00 –
$1
86.0
0 IP
: $1
32.0
0 –
$368
.00
OP
only
: $21
.00,
O
P &
bas
ic IP
: $6
4.00
, Com
p:
$213
.00
Ave
rage
$5.
32
(one
set
fee
for
who
le f
amily
)
Met
hod
of
Paym
ent
Lum
p su
m a
t sta
rt,
cash
or M
FI l
oan
Lum
p su
m
at s
tart
Ann
ual l
ump
sum
in
adva
nce,
sav
ed
over
pri
or th
ree
mon
ths
Mon
thly
in
adva
nce
Lum
p su
m a
t sta
rt
Co-
Paym
ents
? (i
n U
S$)
Yes
(OP:
$0.
56 O
P
and
IP: $
1.86
)N
o$1
.10–
$2.8
0 (v
arie
s by
gro
up)
No
Yes
($0
.63–
$1.2
5 fo
r O
P)N
o
Cla
ims
Paid
dir
ectly
to p
rovi
der
(IP
=In
-Pat
ient
; OP
=O
utpa
tient
).
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746
Tab
le 4
.B
asic
Key
Ind
icat
ors
for
Tar
get P
rogr
ams
(Jun
e 30
, 200
2)
Mic
roca
re*
Med
iPlu
s**
KP
PSC
IDR
CH
eaP*
**Po
AC
HF*
***
Tot
al #
cov
ered
live
s77
6†65
,000
1,75
083
710
0+60
033
0,00
0#
Insu
red
/ # s
taff
:38
.854
287
820
950
100
9.5
Adm
inis
trat
ive
cost
s to
Pre
miu
ms
N/A
70.9
%78
%18
%42
%N
/AN
/AC
laim
s to
Pre
miu
ms
70%
28.6
%89
%13
3%28
0%47
0%40
0%N
et I
ncom
e to
Pre
miu
ms
N/A
††0.
5%(6
7%)
(51%
)(2
22%
)<
(37
0%)
< (
300%
)N
on-r
enew
al r
ate
60%
15%
6.2%
100%
for
insu
ranc
e pr
ogra
mN
/A48
%64
%C
hang
e in
pre
miu
ms
wri
tten
−5.5
%98
.9%
11%
82%
(20
00–1
)91
%N
/A22
0%D
ays
of u
npai
d cl
aim
s89
.5<
120
Nil
Nil
N/A
N/A
180
*Dat
a at
May
31,
200
2.**
Staf
f in
clud
es c
omm
issi
oned
sal
espe
ople
, ann
ual d
ata
endi
ng J
une
30, 2
001.
***P
roje
ctio
ns f
or q
uart
ers
seve
n th
roug
h te
n.**
**T
otal
insu
red
num
ber
is f
or th
e w
hole
pro
gram
, oth
er d
ata
are
from
one
dis
pens
ary
for
peri
od e
ndin
g Ju
ne 2
002.
† Thi
s is
the
cov
ered
liv
es i
n th
e ur
ban
Kam
pala
pro
gram
fro
m w
hich
dat
a in
thi
s pa
per
is d
eriv
ed.
The
tot
al l
ives
cov
ered
are
app
roxi
mat
ely
9,00
0. H
owev
er, t
he o
ther
s ar
e un
der
a di
ffer
ent p
rem
ium
and
cov
erag
e re
gim
e.††
As
a m
eans
of
obta
inin
g ad
ditio
nal
fund
s fo
r th
e he
alth
car
e fi
nanc
ing
prog
ram
, M
icro
care
man
agem
ent
cond
ucte
d si
gnif
ican
t in
form
atio
nte
chno
logy
act
iviti
es. T
he c
osts
and
inco
mes
rel
ated
to th
ese
acti
vitie
s w
ere
inte
rmin
gled
with
the
mic
roin
sura
nce
resu
lts a
nd w
ere
read
ily s
epar
a-bl
e. T
hus,
dat
a fo
r ad
min
istr
ativ
e co
sts
and
net p
rofi
t for
onl
y th
e he
alth
mic
roin
sura
nce
activ
ities
wer
e no
t ava
ilab
le.
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Subsequent closures notwithstanding, the efficiency levels and relativelylow loss ratios of CIDR, KPPS, and MediPlus are clearly reflected in their netincome ratio being dramatically lower than the other institutions.
Volume
Viability is also a factor of the volume of insured clients that used a healthcare facility compared with the total volume of patients that used the facility.Higher client ratio at a facility gives the health care financier a greater lever-age in negotiating lower rates with health care providers. The ratios for five ofthe cases in this study are shown in Table 5.[22]
Because 80% of the MediPlus clients came from the Purple HeartsClinic’s business, the HMI was able to negotiate substantial discounts on thecost of care.[23] St. Mary’s Hospital in Kenya had an effort to dispose of medi-cations that were almost expired. As a result, CHeaP obtained discounts ontheir medications. CIDR started with a 5% discount with their only providerpartner, but they have negotiated an agreement that as the insured and creditmembership numbers grow, this discount will increase up to 12.5%. Thisissue was reiterated by the managing director of Microcare, who noted that asMicrocare grows to the point where a significant portion of a provider’s busi-ness is represented by Microcare insured, then they will be able to negotiate aswell. He suggested that this level may be 15% to 20%.
In all cases except MediPlus, providers complained that microinsurerswere not insuring enough of their patients. PoA operated through a networkof twenty-five providers. Of these providers, management notes that theyhad to push all but one into participating. PoA is managed by a physicianwho was well known in Tanzania, so he cajoled his colleagues into partici-pating in PoA as providers. Recognizing the problem of low uptake, PoAmanagement urged providers to market the product from their offices. PoA
Table 5. Market Share of Microinsurer within a Health CareFacility*
MicroinsurerPercent of total facility patients that are
covered by the insurance program
KPPS 11% outpatient, 2% in-patientsMediPlus 80% (of the Purple Hearts clinic)PoA 3% (on average)CHF 30% (on average)Microcare 10% (on average)
*The percentage of the total health care facility’s patientsduring a period who are insured with the microinsurer.
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748 McCord
management noted, however, that only one provider had promoted thisproduct in any significant manner, and he was the only one that came to PoAto participate. None of the providers that were pushed into participationmarketed the product, even though they all have equivalent investments inthe program.
Financially, all of these institutions have weaknesses except the Tanza-nian government program where local groups collected premiums for thefund, but the government paid for the medications and the care. This allowedthe fund to grow. All of the institutions examined in this study had had capitalproblems at some point. Only the commercial HMO had insurance reserves tocover its claims. The others had no reserves. The CIDR program required eachof its groups to develop a reserve fund with a self-determined percentage ofpremiums. However, because of premium setting problems, these reserveswere quickly depleted.
Pricing had been extremely difficult for these institutions. Four of theseven began with premiums that were far too low to even cover the costs ofclaims, let alone covering operations costs and leaving reserve funds. Thisderives in part from a desire to charge only “what people can afford” withoutconsideration of the likely costs to be incurred.
Non-Renewal Phenomenon
A non-renewal occurs when a client chooses not to renew or continue payingpremiums for their health microinsurance. Non-renewals were shown to havea negative impact on HMI growth. This was particularly of note for thoseHMIs with products for low-income individuals with incomes that provide asubsistence living experience. Non-renewals for employer-based groups havebeen relatively low. This is because employers provide a stable base fromwhich premiums can be paid. Other institutions were not so fortunate, particu-larly those providing services for low-income populations.
HMI Controls
Controls assist in reducing fraud, moral hazard, and adverse selection withHMI products.[24] These are of particular importance in locations where fraudand abuse are the norm.
Controls were important components for the viability of health microin-surance programs. These controls took various forms. Key controls used bythese institutions are detailed in Table 6. Among the institutions in this study,two had employees stationed at covered health care facilities, and one had anetworked computer system set up in order to confirm identities and enterhealth care transactions for immediate analysis and invoice control. All
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Table 6. Managing Insurance Risks: Strategies used by Case Study Institutions
Risk General Strategy Specific Strategy
Moral Hazard Pre-selected providers
Work with a network of providers (all institutions)
Claims limits Depend on cover purchased (allows client choice) (MediPlus)
Fixed with single product (Microcare, CIDR for some groups, KPPS)
Co-Payments Depend on cover purchased (MediPlus)Always (Microcare, KPPS, some CIDR)
Loss review Conducted regularly (MediPlus, Microcare)Annually (PoA) and monthly (CIDR)
Exclusions and limitations
Extensive with MediPlusLimited – excludes chronic care (Microcare and
CHeaP)Proof of event Staff nurses daily in-patient check (MediPlus and
Microcare)Confirmed for both in- and out-patients
at insurer check-in desk (Microcare and KPPS)Confirmation by group executives (CIDR)
Client identification
Each client must present ID at health care facility to receive treatment. (All institutions).
Client ID matches client number and / or photoin data base so further confirmation of ID is possible (Microcare)
ID Cards are replaced each year (CIDR)Pre-approval of
treatmentOut patient registration nurse must check validity
of patient’s cover prior to receipt of treatment (MediPlus)
Patient must get admission pre-approval (MediPlus, Microcare)
In emergency, patient must get admission approval within 48 hours (MediPlus)
Deductibles None required (too difficult to track such a system)Initial exams None required (MediPlus, Microcare, PoA,
CHeaP, CIDR, CHF)Adverse
SelectionWhole family
membership required
Require member plus at least three (Microcare, KPPS)
Whole family (“living under one roof”) membership required (CIDR)
Required membership within groups
Require greater of 50% or 15 members of groupto join (Microcare)
60% of each group required though it has been completely ignored (CHeaP, KPPS)
(Continued)
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Table 6. (Continued)
Risk General Strategy Specific Strategy
60% of each group required though it has been completely ignored (CHeaP, KPPS)
Defined risk pools
Detailed application analysis allows for this, (MediPlus)
Adults and children priced differently (Microcare)
Use of pre-existing groups
Required (Microcare, KPPS, CHeaP)Form community groups for insurance purposes
(CIDR)Waiting periods 30 days for outpatient care (except for corporates
and individuals previously enjoying cover with a different health insurer) (MediPlus)
14 Days (Microcare), 90 Days (CHeaP), 120 days for inpatient, except in the case of emergencies (MediPlus)
Tying insurance to other products
Tied to MFI loan, employment, or some group membership (Microcare, KPPS)
Require savings but not linked (CHeaP)Periodic cost
evaluationCompany systems automatically conduct
variance analysis sending alerts where provider has overcharged (MediPlus)
Monthly (Microcare)Cost
escalationPreset pricing
agreements with providers
Providers only treat within agreed price limits and if there is the expectation that a procedure’s cost will exceed agreed price limits, pre-approval must be sought (MediPlus)
Fixed price agreement for consultation and medications (CHeaP)
Preset drugs list Adherence to approved drug list is required (MediPlus, Microcare, CHF, CHeaP)
Negotiated discounts
10% plus (CIDR)Fixed price for consultation and medications
(CHeaP)Near limit
warningsNotification of clients and health care facilities
when a client is about to reach their limit (MediPlus)
Fraud and Abuse
Computerized ID systems
Each patient has ID card (all institutions)Continuous data base updating halts use beyond
expiration and maximum use (MediPlus)ID card with photos of each covered person,
matching digitized photos at insurer check-in desk (Microcare)
(Continued)
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Supplying Health Microinsurance 751
institutions had at least some well-considered controls however, for marketingexpediency, and sometimes because of poor control over staff, these processeswere occasionally ignored.
DISCUSSION
For all these institutions, break-even or better, profitability was somewhatquestionable. When the effectiveness of some of the key areas of consider-ation in microinsurance was observed, in terms of management and staffcapacity, pricing, controls, growth, and reserves, all had at least some strengthin one or more areas. However, in the insurance business one weakness can bean Achilles’ heel. Although all institutions were significantly vulnerable, formost of them vulnerability could be mitigated. However, for the smaller pro-grams, remedies were unlikely given their capabilities.[14]
The key lesson here is that if deficiencies in the five areas of efficiency,loss ratio, volume, pricing, and controls are adequately addressed the institutionmay have a better chance at reaching breakeven and profitability or a surplus.
Table 6. (Continued)
Risk General Strategy Specific Strategy
Expense verification
Providers to process separate claim for each patient (MediPlus)
Costs verified against limits of cover, before treatment (MediPlus)
Expenses verified against agreed price limits with provider and for drugs, against international drug prices (MediPlus)
Monthly (Microcare, CIDR)Coverage limits Range with cover purchased for both in- and out
patient (MediPlus)In-patient limited to value and time hospitalized
(Microcare)Limits (not exclusion) for chronic care (CIDR)
Full premium payment in advance
In some cases, require eleven post-dated checks to cover monthly payments (MediPlus)
Full payment in advance required (all institutions)Physical
identificationID card required for treatment access (all
institutions)Presented to insurer staff at the facility
(Microcare, KPPS)Cancellation of
serviceCurrent and future care of anyone who
defrauds the company including through false information on their application (MediPlus)
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It is important to remember, however, that addressing the issues is not a guar-antee of success, simply an indicator of potential. For example, if KPPS, a rel-atively inexpensive program, can manage to improve its pricing andmarketing, the effect could be growth and improvement in its cash flow. Thepotential for improvement, however, would be predicated on managementskill in pricing and marketing insurance products.
For most of these institutions, improving management capacity and insur-ance knowledge would be essential for the development of health microinsur-ance products that work. For several institutions some elements of managementshould be outsourced to skilled insurers. Microcare and MediPlus, for exampleoutsourced actuarial services. Implementing actuarial recommendations, usingeven basic calculations, may significantly improve the pricing of the other pro-grams. However, such professional pricing would almost certainly requireincreases in premiums. Increased premiums would be undesirable, based on themission and objectives of several of these institutions.
Health Care Prevention
One other area deserves discussion. The development of prevention strategiesis often thought to have potential for reducing health care costs.
Researchers found that some of the institutions were implementing healthprevention programs, such as discounts for bed nets in efforts to reducemalaria rates among their clients.[25] Others were planning health preventionactivities and several of the institutions were in some way related to healthcareoutreach entities. However, none of the HMIs had yet effectively worked withoutreach programs on a coordinated effort that would link the two programsand further improve the general health of their market area, which could leadto more effective interventions and reduced claims. Table 7 provides an out-line of the different health prevention methods that were implemented byhealth microinsurers included in this study.
The effectiveness of any of these methods as applied within these orga-nizations is unknown. All of them are trying to identify and address theissues that raise costs, not only for the microinsurer but also for the insured.The primary objectives of health prevention programs for microinsurers havebeen to improve the health of the insured, which will directly lead to a reduc-tion in claims costs. Theoretically, at least, consistently lower claims costsshould translate into reduced premiums and the ability to attract clients fromeven lower economic levels. However, two issues are critical if this objectiveis to be met. The first is that the intervention must be efficient if it is toreduce the overall costs of the health prevention activity. The second issue iseffectiveness.
Institutions that were actively mining their utilization data were most likely topinpoint effective interventions. When they understand the characteristics of
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Tab
le 7
.E
xam
ples
of
Hea
lth P
reve
ntio
n A
ctiv
ities
Met
hod
Inst
itut
ion
Com
men
ts
Sale
of
inse
ctic
ide-
trea
ted
bedn
ets
agai
nst m
alar
iaC
IDR
, KPP
S, C
Hea
PT
ypic
ally
, the
se a
re s
ourc
ed f
rom
a s
ubsi
dize
d ve
ndor
. E
ffec
tiven
ess
of th
e ne
ts is
lim
ited
unle
ss a
larg
e pr
opor
tion
of th
e lo
cal p
opul
atio
n us
es th
em. N
one
have
rea
ched
suc
h a
leve
l and
eff
ectiv
enes
s is
unk
now
n fo
r th
ese
grou
ps.
Rel
ated
org
aniz
atio
n pr
ovid
ing
heal
th c
are
educ
atio
nK
PPS,
CH
eaP,
PoA
, CH
FT
hese
pro
gram
s al
l bel
ong
to la
rger
mul
ti-pr
oduc
t org
aniz
atio
ns
that
hav
e an
arm
that
pro
vide
s he
alth
car
e ed
ucat
ion.
How
ever
, no
ne o
f th
ese
intr
a-or
gani
zatio
n pr
ogra
ms
are
inte
grat
ed w
ith
the
heal
th c
are
fina
ncin
g pr
ogra
ms.
Dis
trib
utio
n of
edu
catio
npa
ckag
esM
ediP
lus
The
se a
re d
istr
ibut
ed th
roug
h em
ploy
ers
and
prov
ider
s an
d in
clud
e in
form
atio
n on
con
trol
of
hype
rten
sion
, HIV
pr
even
tion
and
mai
nten
ance
, dia
bete
s co
ntro
l, an
d nu
triti
on.
Free
che
ck-u
psPo
AO
ffer
ed to
new
mem
bers
but
non
e ha
ve u
tiliz
ed th
e op
port
unity
.A
nten
atal
car
eM
icro
care
, PoA
, CH
F,C
Hea
P, K
PPS
, Med
iPlu
sA
s an
ince
ntiv
e, M
icro
care
req
uire
s th
ree
ante
nata
l vis
its to
ob
tain
cov
erag
e of
bir
th e
xpen
ses.
Dai
ly p
reve
ntiv
e he
alth
pr
esen
tati
ons
at c
linic
sC
HF
The
se w
ere
star
ted
by C
HF
but t
hey
foun
d ve
ry li
mite
d de
man
d an
d ha
ve s
topp
ed th
em.
Cla
ims
hist
ory
revi
ewM
ediP
lus
Mon
thly
rev
iew
of
clai
ms
help
s to
iden
tify
conc
entr
atio
ns o
r in
dica
tors
of
issu
es th
at s
houl
d be
rev
iew
ed b
y sp
ecia
lists
. M
ediP
lus
then
sug
gest
s su
ch a
dditi
onal
car
e to
mem
bers
.
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Tab
le 8
.C
omm
on S
tren
gths
, Wea
knes
ses,
Opp
ortu
nitie
s, a
nd T
hrea
ts*
Stre
ngth
sW
eakn
esse
sO
ppor
tuni
ties
Thr
eats
PRO
DU
CT
•Si
mpl
e pr
oduc
ts•
Wea
k pr
icin
g pr
oced
ures
•A
ddre
ss id
entif
ied
mar
ket n
eeds
, re
quir
es g
reat
er f
ocus
on
the
dem
and
side
•D
epen
denc
y on
ext
erna
l fun
ding
•Pr
ovid
es a
cces
s to
qua
lity
prov
ider
s•
Con
trol
s no
t wel
l des
igne
d•
Flex
ibili
ty in
pro
duct
des
ign
and
dist
ribu
tion
will
impr
ove
out-
reac
h
•L
egis
latio
n m
ay re
stri
ct fl
exib
ility
in
test
ing
new
app
roac
hes
•Q
ualit
y pr
ovid
er n
etw
orks
•St
ruct
ured
pro
duct
dev
elop
men
t pr
oces
s is
rar
ely
follo
wed
•L
inka
ges
for
loan
and
sav
ings
pr
oduc
ts a
vaila
ble
with
MFI
s•
Mod
ular
app
roac
h to
pr
oduc
t dif
fere
ntia
tion
•L
imite
d ef
fort
in a
idin
g cl
ient
pr
emiu
m g
ener
atio
n•
Com
preh
ensi
ve c
over
age
optio
ns
OPE
RA
TIO
NS
•So
me
have
str
ong
com
pute
rize
d tr
acki
ng
syst
ems
•W
eak
insu
ranc
e tr
aini
ng le
ads
to p
oor
capa
city
•Po
tent
ial f
or r
elat
ivel
y lo
w
oper
atin
g co
sts
•C
laim
s pa
ymen
ts le
ngth
enin
g w
ill
caus
e pr
oble
ms
with
pro
vide
rs
•In
nova
tive
appr
oach
es•
Lim
ited
stru
ctur
es to
man
age
cont
rols
•M
uch
inte
rest
fro
m h
ealth
car
e fa
cilit
ies
•In
adeq
uate
sup
port
fro
m M
FIs
•R
elat
ivel
y lo
w
adm
inis
trat
ive
cost
s•
Wea
k go
vern
ance
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MA
RK
ET
ING
•R
eput
able
pro
vide
rs•
Hig
h no
n-re
new
al r
ates
for
th
ose
wor
king
with
MFI
s•
Wid
e un
tapp
ed m
arke
t•
Ope
rati
onal
mis
step
s ha
ve
redu
ced
cred
ibili
ty
•St
rong
rene
wal
for t
hose
with
lo
w in
com
e co
rpor
ate
clie
nts
•W
eak
mar
ketin
g st
aff
•M
uch
dem
and
for
fina
ncin
g of
qu
ality
hea
lth c
are
•M
arke
t con
fusi
on a
bout
insu
ranc
e
•C
omm
issi
on b
ased
mar
ketin
g•
Lim
ited
mar
ket e
duca
tion
•A
cces
s to
pot
entia
l clie
nts
from
fo
cal p
oint
org
aniz
atio
ns•
Lac
k st
anda
rdiz
ed m
arke
ting
•Su
ppor
t fro
m o
pini
on le
ader
s
AC
CO
UN
TIN
G
•E
ffec
tive
invo
icin
g sy
stem
s•
Lim
ited
insu
ranc
e ac
coun
ting
know
ledg
e•
Acc
ount
ing
syst
ems
for
insu
r-an
ce a
re a
vail
able
•L
imite
d ac
coun
ting
know
ledg
e op
ens
the
door
to f
raud
•W
here
pre
miu
ms,
cla
ims,
and
ke
y ra
tios
are
trac
ked
ther
e is
us
ually
bet
ter m
anag
emen
t
•Po
or c
ostin
g an
d pr
icin
g ab
ility
•A
ccou
nts
have
lim
ited
inpu
t in
man
agem
ent d
ecis
ion
mak
ing
•L
imite
d da
ta f
or th
is m
arke
t for
ac
tuar
ial s
tudy
RIS
K M
AN
AG
EM
EN
T
•St
rong
er w
hen
ther
e is
re
pres
enta
tion
in th
e he
alth
ca
re f
acili
ty
•Po
licie
s an
d co
ntro
ls n
ot
docu
men
ted
•L
ack
of r
eser
ves
or r
eins
uran
ce•
Non
-com
plia
nce
with
con
trol
s•
Lim
ited
abili
ty to
acc
ess
risk
•W
eake
r st
rate
gies
in r
ural
are
as
•T
here
is s
igni
fica
nt in
form
atio
n av
aila
ble
on in
sura
nce
cont
rols
•M
icro
insu
ranc
e co
ntro
ls a
re
begi
nnin
g to
be
docu
men
ted
inte
rnat
iona
lly
•L
ack
of r
eser
ves
•P
oten
tial r
egul
ator
y pr
oble
ms
•L
ack
of d
ue d
ilige
nce
with
pa
rtne
rs
*The
se in
clud
e is
sues
that
aro
se m
ulti
ple
times
, but
do
not n
eces
sari
ly r
efle
ct e
very
inst
itut
ion.
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health insurance utilization, it is easier to control how they set premium. Asan example, MediPlus could track utilization patterns of either individualsor corporate entities. They could then create interventions specifically forthose individuals or groups. Of course, HMIs would then need to adjust pre-miums based on these patterns. Most of the health microinsurance programsvisited do not differentiate their pricing based on client risk. They offer asingle premium to all clients even though their risk profilers are different.
Further, to protect themselves, the premium is usually set based on thecosts of older people. Such mining of data should allow for more accuratepricing and thus reduce the burden on others, allowing for a premium reduc-tion over time. Using a database is another way of determining health pre-vention needs. Microinsurers can efficiently coordinate with otherorganizations that conduct health prevention activities as their primary mis-sion. It is interesting that none of the four institutions that have access tosuch a program have made any significant attempts to coordinate activitieswith them.
RECOMMENDATIONS
There is tremendous need in low-income markets of these countries, whereformal insurers cover between 1% and 5% of the population, leaving the restof the people to identify other ways to pay for health care. These institutionsare servicing the low-income market and are learning important lessons in theprocess. Most of these HMIs have attempted to apply these lessons learned asthey move forward.
HMI programs continue to multiply.[26] Lessons learned from this studyin East Africa provide valuable insight into the issues faced by HMI develop-ers. A list of lessons learned from this study is provided in the Appendix A.Some of the basic findings include the nuances of product development, man-agement and governance, operations such as pricing and underwriting andinfrastructure, and marketing, risk management, and intermediary relations.
Many of the issues facing HMIs can be addressed through proper man-agement, training, and capacity building processes, including: client educa-tion, data and marketing management, control for adverse selection, anddevelopment of intermediary provider relationships. Findings suggest that ifprograms are to be successful, the pricing process should be outsourced toprofessional actuaries, training programs should focus energy on non-renewal.Training HMIs about outsourcing might also contribute to achieving thedesired result.
Relationships are also important to the success of HMIs. Working withhealth care providers who have realistic objectives, and who see the benefitsof the health microinsurance are most suited to these programs. Managersmust make sure that the relationship they are entering will not damage their
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company or their clients. Yet, when partnerships are well matched and man-aged properly, these relationships can provide synergies that benefit the client,the intermediary, and the insurer.
IMPLICATIONS
This study looked at seven very different organizations providing health carefinancing to individuals and groups in the low-income market. All of theseinstitutions provided important practical lessons that can help new and alreadyactive microinsurers in their efforts to provide health financing to low-incomepopulations.
Sustainability and profitability have been difficult objectives to reach foreach of the institutions studied. All of these organizations are trying innova-tive ways of reaching the market in terms of specially designed products ordelivery channels. Some of these approaches are effective, while others arenot. Most of the methods for service delivery are relatively new, and the insti-tutions that are trying them, indeed developing them, should be commendedfor their efforts to bring what is clearly an important addition to the risk man-agement strategies available to low-income households. Their successes pro-vide lessons, as do their mistakes. Their flexibility to continue adjusting asthey learn new lessons is an important one.
These institutions are moving forward into the health-financing frontier.Their experiences help others to improve and to be more efficient and moreeffective on the way to achieving the lofty goal of providing affordable, highquality health care to low-income families.
To more adequately understand the health microinsurance market andenhance the potential for success of other health microinsurance organiza-tions, additional research is needed. A broader study or a synthesis of severalregional or country activities from other regions and other types of institu-tional and delivery mechanisms would be helpful. Formal microinsurance pro-grams remain nascent and further longitudinal studies on these and healthmicroinsurance institutions in other regions would provide important informa-tion about the impact of decisions these managers have made to address theconcerns of their programs. Additionally, health microinsurers need more, andbetter, information about the actual effective demand from the low-incomemarket. At present, the Working Group on Microinsurance is attempting toaddress some of these issues.[27,28]
REFERENCES
1. Microinsurance is “the protection of low-income people against specific per-ils in return for regular premium payments proportionate to the likelihood
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758 McCord
and cost of the risk involved.” Working Group on Microinsurance,Preliminary Donor Guidelines for Supporting Microinsurance. October2003. www.microinsurancecentre.org (accessed October 31, 2003).
2. McCord, M. J.; Buczkowski G. CARD MBA, The Philippines: CGAPWorking Group on Microinsurance, Good and Bad Practices Case StudyNo. 4. ILO: Geneva, 2004.
3. McCord, M. J. Health Care Microinsurance—Case Studies from Uganda,Tanzania, India, and Cambodia. Small Enterprise Development, 200112(1), March 25–38.
4. Financial and Institutional Viability refers to the ability of the business modeland its application within the particular organization to result in financialprofits being generated through strong and knowledgeable staff and manage-ment, as well as systems that will enable continued growth and profitability.
5. Osinde S.; McCord M. J.; Millinga A. Poverty Africa HealthProgramme—Health MicroInsurance: Notes from a visit July 2002. TheMicroInsurance Centre: Chilton, WI, 2002.
6. McCord, 2001.7. McCord, 2001.8. McCord, 2001.9. These included the Community-based, Provider-based, Insurer, and Part-
nership models. A detailed discussion of these models relative to healthmicroinsurance is provided in McCord, 2001.
10. McCord, M. J.; Osinde S. MediPlus Health Services: Notes from a VisitJuly 2002. The MicroInsurance Centre, Chilton, WI, USA, 2002.
11. Papers providing expanded discussions of each of these institutions are avail-able on The MicroInsurance Centre website www.microinsurancecentre.org
12. Sebstad, J.; Cohen, M. MicroSave-Africa Research Plan Assessing theDemand for MicroInsurance in East Africa, MicroSave-Africa: Nairobi,May 2002.
13. Churchill C.; Liber D.; McCord M.; Roth J., Making Insurance Work forMicrofinance Institutions: A Technical Guide to Developing and Deliver-ing Microinsurance. ILO: Turin Italy, 2003.
14. Cohen, M.; Sebstad J. Reducing Vulnerability: The Demand for Microin-surance in East Africa. MicroSave-Africa: Nairobi, 2003.
15. For a more detailed discussion on the risks to an affiliated MFI see:McCord & Buczkowski, 2004.
16. McCord, & Osinde, S. International Centre for Development andResearch (CIDR-Uganda) Community Based Health PrepaymentProgramme, Luweero, Uganda – Notes from a visit June 2002. TheMicroInsurance Centre: Chilton, WI, 2002.
17. McCord, M. J.; Osinde S. Microcare Ltd. Health Plan: Notes from a visitJune 2002. The MicroInsurance Centre: Chilton, WI, 2002.
18. McCord M. J.; Osinde S. Community Health Plan (CHeaP Kenya)—Notesfrom a Visit July 2002. The MicroInsurance Centre: Chilton, WI, 2002.
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19. Sebstad, J.; Cohen, M. MicroSave-Africa Research Plan Assessing theDemand for MicroInsurance in East Africa, MicroSave-Africa: Nairobi:May 2002.
20. McCord, M. J. Introduction to and Key Success Elements in Microinsur-ance. Presented at the VII Inter-American Forum on Microenterprise,Cartegena, Colombia, September 2004.
21. McCord, M. J.; Osinde S. Kitovu Patients Pre-Payment Scheme(Uganda)—Notes from a Visit June 2002. The MicroInsurance Centre:Chilton, WI, 2002.
22. Churchill, et al., 2003.23. This data was unavailable for CHeaP and CIDR.24. However, the lack of payer diversification put Purple Hearts at great risk
since their continuing business relied so heavily on MediPlus.25. Churchill, et al., 2003.26. McCord, J., Rivers, K. Health Microinsurance, Social Marketing, and
Disease Prevention: Perspectives from the Field: International Journal ofPublic Administration, 2007, 30(8–9): 791–812.
27. Wiesmann, D.; Jütting, J (2000). The Emerging Movement of Community-Based Health Insurance in Sub-Saharan Africa: Experiences and LessonsLearned. Afrika Spectrum, 35(2). Retrieved October 25, 2004 from http://www.oecd.org
28. The Working Group on Microinsurance was started in 2002 and is lead bythe Social Finance unit of the ILO. Its members include insurers, donors,insurance regulators, and microinsurance experts. The Group has alreadypublished Preliminary Donor Guidelines for Supporting Microinsurance,and is conducting over twenty case studies on microinsurance organizationsas background for a book on “good” and “bad” practices in microinsurance.
29. Working Group on Microinsurance. Preliminary Donors Guidelines forSupporting Microinsurance. October 2003. Retrieved February 23, 2005from www.microinsurancecentre. org
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App
endi
x A
.L
esso
ns le
arne
d fr
om th
ese
inst
itutio
ns.
Prod
uct D
evel
opm
ent
Kee
p th
ings
sim
ple
Sim
ple
prod
ucts
and
pro
cess
es a
re e
asie
r fo
r pe
ople
to u
nder
stan
d, a
nd n
eces
sary
for
this
mar
ket.
Pric
e re
alis
tical
lyA
n ai
m to
war
ds c
ompr
ehen
sive
cov
erag
e by
som
e or
gani
zatio
ns s
how
s an
eff
ort t
o pr
ovid
e co
mpl
ete
care
at a
re
ason
able
pri
ce. H
owev
er, t
hat p
rice
is o
ften
err
oneo
usly
cal
cula
ted
and
not f
ully
incl
usiv
e of
all
cost
s, th
us
limiti
ng th
e po
tent
ial f
or s
usta
inab
ility
. Rea
listic
pri
cing
req
uire
s co
nsid
erat
ion
of c
laim
s co
sts,
all
oper
atin
g co
sts,
and
wel
l as
rese
rves
, and
pro
fit,
less
any
inco
me
mad
e fr
om p
rem
ium
inve
stm
ents
. Exc
ludi
ng a
ny o
f th
ese
in th
e pr
emiu
m c
ompo
nent
s w
ill le
ad to
pro
blem
s.D
evel
op c
apac
ityT
here
is a
n at
tem
pt to
dev
elop
inno
vativ
e pr
oduc
ts a
nd d
eliv
ery
mec
hani
sms
to p
rovi
de q
ualit
y he
alth
car
e an
d fi
nanc
ing,
but
man
agem
ent o
ften
lack
s th
e ca
paci
ty to
mak
e th
ese
inno
vatio
ns e
ffec
tive
or s
ucce
ssfu
l, be
caus
e th
ey d
o no
t hav
e ex
peri
ence
or
know
ledg
e ab
out i
nsur
ance
pri
ncip
les.
Edu
cate
clie
nts
Alth
ough
the
mar
ketin
g ap
proa
ch is
fre
quen
tly c
ondu
cted
thro
ugh
com
mis
sion
ed s
ales
, a v
iabl
e st
ruct
ure
for
mar
ketin
g m
icro
insu
ranc
e is
lack
ing.
Mar
ket e
duca
tion
is n
eede
d, w
ith m
arke
ting
coor
dina
tion
and
stan
dard
ized
mar
ketin
g pr
esen
tatio
ns to
kee
p th
e m
essa
ge s
trai
ght.
Hea
lth m
icro
insu
rers
are
bor
row
ing
the
aspe
ct o
f co
mm
issi
oned
sal
es f
rom
insu
rers
but
hav
e no
t ful
ly r
ecog
nize
d th
at th
ere
is a
n un
derl
ying
str
uctu
re
of a
ppro
pria
te tr
aini
ng a
nd to
ols
that
mak
es th
is w
ork.
Ana
lyze
the
data
Som
e or
gani
zatio
ns a
re a
sses
sing
at l
east
som
e of
thei
r ac
coun
ting
dat
a, is
inpu
ts to
man
agem
ent d
ecis
ion
mak
ing,
but
gen
eral
ly th
ese
depa
rtm
ents
are
wea
k an
d m
anag
emen
t is
left
to m
ake
deci
sion
s w
itho
ut th
e va
lue
of a
ccou
ntin
g da
ta. T
his
mak
es th
em v
ulne
rabl
e.Pl
ace
cont
rols
at
prov
ider
site
sR
isk
man
agem
ent i
s st
rong
er w
hen
ther
e ar
e m
icro
insu
ranc
e re
pres
enta
tives
at t
he h
ealth
car
e fa
cilit
y as
at
Mic
roca
re a
nd K
PPS.
Thi
s al
low
s fo
r on
-site
impl
emen
tatio
n of
con
trol
s by
the
orga
niza
tion
that
has
the
mos
t to
gain
if c
ontr
ols
wor
k. L
eavi
ng c
ontr
ols
to th
e he
alth
car
e fa
cilit
ies,
whi
ch h
ave
an in
cent
ive
to c
heat
to g
ener
ate
addi
tiona
l fun
ds, i
s ri
sky,
and
som
e of
the
orga
niza
tions
in th
is s
tudy
are
exp
erie
ncin
g th
epr
oble
ms
that
ari
se f
rom
suc
h re
lianc
e. F
or e
ffic
ienc
y an
d co
st c
ontr
ol r
easo
ns, t
his
is n
ot a
pra
ctic
al s
olut
ion
for
all s
ites,
but
may
be
appr
opri
ate
for
faci
litie
s w
ith
grea
ter
volu
me.
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761
Edu
cate
and
in
cent
iviz
e st
aff
Esp
ecia
lly f
ront
line
sta
ff a
re th
e pe
ople
who
ope
ratio
naliz
e th
e he
alth
mic
roin
sura
nce
busi
ness
. Thi
s bu
sine
ssis
oft
en f
ar f
rom
the
educ
atio
nal o
r ex
peri
entia
l bac
kgro
und
of m
ost o
f th
ese
busy
wor
kers
. If
they
do
not
unde
rsta
nd th
e m
icro
insu
ranc
e pr
oduc
t the
y do
not
sel
l wel
l and
thei
r re
new
als
are
very
low
.O
ffer
em
erge
ncy
loan
sE
mer
genc
y lo
ans
with
dis
burs
emen
ts m
ade
dire
ctly
to th
e he
alth
car
e fa
cili
ty c
an b
e ap
prop
riat
e an
d so
met
imes
pr
efer
red
over
insu
ranc
e by
clie
nts,
as
obse
rved
at C
IDR
.Fo
llow
a s
trin
gent
pr
oduc
t dev
elop
men
t pr
oces
s
Follo
w a
str
inge
nt p
rodu
ct d
evel
opm
ent p
roce
ss w
hen
deve
lopi
ng th
ese
prod
ucts
. Too
man
y of
thes
e in
stitu
tions
sk
ippe
d th
e de
man
d re
sear
ch a
nd w
ent f
rom
pro
toty
pe to
rollo
ut w
ithou
t any
pro
per t
estin
g. M
ost o
f the
pro
blem
s th
ey e
ncou
nter
ed c
ould
hav
e be
en a
ddre
ssed
in a
mor
e co
ntro
lled
man
ner
if it
had
bee
n te
sted
fir
st. F
ixin
g pr
oble
ms
whe
n th
e pr
oduc
t is
alre
ady
rolle
d ou
t has
pro
ven
very
dif
ficu
lt an
d ne
gativ
ely
impa
cts
grow
th.
Gat
ekee
ping
with
in
-pat
ient
pol
icie
sIn
-pat
ient
-onl
y co
vera
ge r
equi
res
a m
echa
nism
to a
llow
clie
nts
to g
ain
hosp
ital
adm
issi
on e
ffic
ient
ly. R
isks
to
the
clie
nt, c
osts
, and
rel
atio
nshi
ps s
houl
d be
min
imiz
ed s
o th
at w
hen
they
nee
d ad
mis
sion
, the
y ca
n ob
tain
it w
ithou
t sig
nifi
cant
add
ition
al c
osts
. CID
R d
ocum
ents
not
ed th
at a
ppro
xim
atel
y on
e pa
tient
in th
ree
who
tr
avel
ed to
the
hosp
ital w
as a
ctua
lly a
dmitt
ed.
Man
agem
ent a
nd G
over
nanc
e
Gen
erat
e in
sura
nce
capa
city
To
mak
e m
icro
insu
ranc
e pr
ogra
ms
succ
essf
ul, m
anag
emen
t cap
acity
in in
sura
nce
is n
eces
sary
.
Star
t wit
h a
busi
ness
ap
proa
chA
lthou
gh m
anag
emen
t ski
lls a
nd e
xper
ienc
e ar
e cr
itica
l to
effe
ctiv
e m
anag
emen
t and
dev
elop
men
t of a
n in
sura
nce
prod
uct,
the
bias
or p
rior
ity o
f man
agem
ent a
nd th
e bo
ard
in fa
vor o
f dev
elop
men
t or b
usin
ess
obje
ctiv
es is
ano
ther
ke
y el
emen
t. In
fact
, bot
h of
thes
e pr
iori
ties
can
be fu
lfill
ed, b
ut it
see
ms
clea
r fro
m th
e ta
rget
inst
itutio
ns th
at a
bu
sine
ss a
ppro
ach
mus
t be
follo
wed
firs
t. T
hose
inst
itutio
ns th
at u
tiliz
e a
busi
ness
app
roac
h (M
ediP
lus
and
Mic
roca
re) s
how
a d
ecid
ed p
oten
tial f
or p
rofi
tabl
e in
sura
nce
oper
atio
ns w
hile
at t
he s
ame
time
serv
ing
the
low
-in
com
e m
arke
t. In
stitu
tions
that
are
mos
tly o
r ent
irel
y fo
cuse
d on
soc
ial d
evel
opm
ent (
CID
R, K
itovu
, CH
eaP)
are
ex
peri
enci
ng s
igni
fica
nt p
robl
ems
beca
use
of a
com
bina
tion
of p
rici
ng is
sues
and
man
ager
ial a
nd b
oard
obj
ectiv
es.
(Con
tinu
ed)
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762
App
endi
x A
(Con
tinu
ed)
Ope
ratio
ns a
nd A
ccou
ntin
g
Impr
ove
pric
ing
Pri
cing
of
mic
roin
sura
nce
prod
ucts
mus
t im
prov
e. I
nsur
ance
pri
cing
is a
tech
nica
l act
ivity
and
this
stu
dy r
esul
ts
sugg
est t
hat N
GO
mic
roin
sure
rs a
re n
ot d
oing
it w
ell.
Prof
essi
onal
act
uari
al a
ssis
tanc
e is
exp
ensi
ve. H
owev
er,
to b
e su
cces
sful
, mic
roin
sure
rs m
ust b
egin
usi
ng th
em to
mov
e to
war
ds c
harg
ing
prof
essi
onal
ly d
eriv
ed p
rem
ium
s.Si
mpl
ify
unde
rwri
ting
Und
erw
ritin
g ne
eds
to b
e si
mpl
e an
d ef
fici
ent f
or th
e lo
w-i
ncom
e m
arke
t. T
here
mus
t be
effi
cien
t, ea
sy-t
o-un
ders
tand
un
derw
ritin
g to
ols
and
polic
ies,
bot
h in
term
s of
ass
essi
ng in
divi
dual
ris
k, a
nd in
edu
catin
g pe
ople
to u
nder
-st
and
the
appl
icat
ions
. It i
s cl
ear
from
the
rese
arch
that
man
y lo
w-i
ncom
e cl
ient
s ha
ve d
iffi
culty
fill
ing
out
appl
icat
ions
whe
n th
ey a
re to
o de
taile
d.U
se o
pera
tiona
l dat
a in
man
agem
ent
deci
sion
s
Mic
roin
sure
rs n
eed
good
acc
ount
ing
syst
ems
and
timel
y ac
cess
to m
anag
emen
t dat
a. W
here
this
is th
e ca
se, m
an-
agem
ent a
ppea
rs m
uch
bette
r eq
uipp
ed to
mak
e de
cisi
ons.
How
ever
, cap
acity
to k
now
wha
t the
y ar
e se
eing
, an
d th
en w
hat t
o do
abo
ut it
, is
also
a c
ritic
al r
equi
rem
ent,
thou
gh ty
pica
lly la
ckin
g.U
se c
ompu
teri
zed
syst
ems
with
hea
lth
mic
roin
sura
nce
A c
ompu
teri
zed
syst
em m
ay b
e ex
pens
ive,
but
it c
an b
e ex
trem
ely
help
ful i
n tr
acki
ng h
ealt
h ca
re u
tiliz
atio
n th
at
is n
eces
sary
for
pro
per
pric
ing,
und
erw
ritin
g, r
isk
man
agem
ent,
corp
orat
e m
anag
emen
t, cl
aim
s, a
nd h
ealth
pr
even
tion
activ
ities
. With
out t
his
info
rmat
ion,
man
agem
ent d
ecis
ion-
mak
ing
is w
eake
ned,
and
the
chan
ce o
f ob
tain
ing
rein
sura
nce
is c
onsi
dera
bly
redu
ced.
Use
an
insu
ranc
e pr
ofes
sion
al in
any
m
icro
insu
ranc
e
The
se c
ases
hav
e sh
own
the
diff
icul
ty o
f m
anag
ing
mic
roin
sura
nce
espe
cial
ly w
ithou
t ins
uran
ce e
xper
tise.
An
inst
itutio
n th
at ta
kes
on th
e in
sura
nce
risk
sho
uld
have
sta
ff, m
anag
emen
t, an
d bo
ard
mem
bers
that
are
kno
wl-
edge
able
of
insu
ranc
e re
quir
emen
ts.
Mar
ketin
g
Dev
elop
str
ong
mar
ketin
g m
anag
emen
t
Mar
ketin
g m
anag
emen
t is
a cr
itic
al in
gred
ient
in c
reat
ing
an e
ffec
tive
com
mis
sion
ed m
arke
ting
team
, and
is
ofte
n ab
sent
fro
m h
ealth
mic
roin
sura
nce
prog
ram
s.
Dow
nloa
ded
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Ston
y B
rook
Uni
vers
ity]
at 0
3:29
02
Nov
embe
r 20
14
763
Impl
emen
t mar
ket
educ
atio
nSu
cces
sful
mar
ketin
g re
quir
es a
str
ong
com
pone
nt o
f m
arke
t edu
catio
n. I
n th
eir
push
to m
ake
the
sale
, mar
kete
rs
do n
ot a
lway
s in
form
peo
ple
prop
erly
abo
ut e
xclu
sion
s an
d lim
itatio
ns in
fav
or o
f pr
omot
ing
the
prod
uct.
Met
hodo
logi
es u
sed
by p
rogr
ams
like
the
Free
dom
fro
m H
unge
r “C
redi
t with
Edu
catio
n” m
ight
pro
ve to
be
effe
ctiv
e m
echa
nism
s fo
r pr
ovid
ing
mar
ket e
duca
tion.
Impr
ove
effi
cien
cies
an
d in
cent
ives
for
M
FI
MFI
s st
ill h
old
sign
ific
ant p
oten
tial a
s a
sale
s an
d se
rvic
e in
term
edia
ry f
or m
icro
insu
ranc
e pr
oduc
ts. H
owev
er,
ther
e is
stil
l wor
k to
be
done
to d
evel
op a
com
bina
tion
of e
ffic
ient
inpu
ts a
nd in
cent
ives
to h
elp
HM
Is b
ecom
e su
cces
sful
.
Ris
k M
anag
emen
t
Mai
ntai
n a
clos
e ph
ysic
al p
rese
nce
to
the
prov
ider
fac
ility
The
clo
ser
staf
f is
to th
e he
alth
car
e fa
cili
ty th
e ea
sier
it is
to m
anag
e co
ntro
ls. T
hose
with
sta
ff p
lace
d in
a p
ro-
vide
r fa
cilit
y to
wor
k w
ith c
lient
s ap
pear
to h
ave
min
imiz
ed th
e po
tent
ial f
or f
raud
, as
wel
l as
impr
oved
cos
t m
anag
emen
t.C
ontr
ol f
or a
dver
se
sele
ctio
nA
dver
se s
elec
tion
mus
t be
cont
rolle
d, e
spec
ially
in th
e lo
w-i
ncom
e m
arke
t. W
ith p
eopl
e w
ho h
ave
little
dis
pos-
able
inco
me
and
littl
e kn
owle
dge
of in
sura
nce,
the
firs
t pur
chas
ers
are
likel
y to
be
the
sick
who
are
con
fide
nt
that
they
will
ben
efit
from
thei
r pr
emiu
m. M
inim
um a
bsol
ute
num
bers
or
perc
enta
ges
of g
roup
s sh
ould
be
impl
emen
ted
and
enfo
rced
.T
he r
isk
take
r m
ust b
e w
ell c
apita
lized
The
par
tner
that
car
ries
the
risk
sho
uld
be w
ell c
apita
lized
and
will
ing
and
able
to lo
se s
ome
mon
ey w
hile
the
prod
uct i
s gr
owin
g. I
nstit
utio
ns w
ithou
t res
erve
s or
sig
nifi
cant
cap
ital a
re a
t ser
ious
ris
k an
d ul
timat
ely
may
lo
se th
e in
sure
d’s
mon
ey a
nd th
e in
stitu
tion’
s ca
pita
l, as
wel
l as
leav
e pr
ovid
ers
wit
h la
rge
unpa
id in
voic
es.
Follo
w th
e po
licie
sR
isk
man
agem
ent p
olic
ies,
like
the
requ
irem
ent o
f up
take
of
sixt
y pe
rcen
t of
a gr
oup
by K
PPS
and
CH
eaP,
mus
t be
fol
low
ed r
elig
ious
ly. S
ome
inst
itutio
ns h
ave
adeq
uate
pol
icie
s, b
ut f
or m
arke
ting
expe
dien
cy th
ey ig
nore
th
em a
nd a
lmos
t alw
ays
suff
er f
or th
at la
pse.
(Con
tinu
ed)
Dow
nloa
ded
by [
Ston
y B
rook
Uni
vers
ity]
at 0
3:29
02
Nov
embe
r 20
14
764
App
endi
x A
(Con
tinu
ed)
Prov
ider
/Ins
urer
/Int
erm
edia
ry R
elat
ions
Obt
ain
activ
e su
ppor
t fr
om M
FI m
anag
e-m
ent
Mic
rofi
nanc
e in
stitu
tions
hav
e be
en w
eak
part
ners
in m
icro
insu
ranc
e. B
efor
e th
ey w
ill m
ake
a st
rong
eff
ort,
MFI
m
anag
emen
t mus
t und
erst
and
and
appr
ecia
te th
e be
nefi
ts to
the
inst
itutio
n th
at s
houl
d ac
crue
fro
m a
mic
roin
-su
ranc
e pr
oduc
t. W
ithou
t act
ive
supp
ort f
rom
the
MFI
and
its
man
agem
ent,
mic
roin
sure
rs a
re fo
rced
to m
arke
t di
rect
ly to
MFI
clie
nts
and
whe
n th
is o
ccur
s th
e be
nefi
t of
the
effi
cien
cies
they
had
hop
ed to
gai
n is
lost
.Fo
rmal
ize
rela
tion
ship
sF
orm
al a
gree
men
ts b
etw
een
insu
rers
and
inte
rmed
iari
es a
re n
eces
sary
to r
educ
e co
nfus
ion
and
faci
litat
e ef
fici
ent
com
mun
icat
ions
and
tran
sact
ions
. Suc
h ag
reem
ents
with
par
tner
s al
low
all
part
ies
to b
e cl
ear
abou
t the
ir r
oles
.C
ondu
ct d
ue d
ilige
nce
Con
duct
due
dili
genc
e ex
erci
ses
on p
artn
ers.
The
se p
rogr
ams
can
go v
ery
wro
ng, a
nd a
goo
d in
stitu
tion
shou
ld
not b
ecom
e em
broi
led
in p
robl
ems
beca
use
of is
sues
wit
h a
part
ner.
Pro
blem
s w
ith th
e pr
ovid
er, t
he in
term
edi-
ary,
or
the
insu
rer
have
cre
ated
pro
blem
s fo
r th
e ot
hers
.L
ink
heal
th f
inan
cing
w
ith h
ealth
out
reac
h pr
ogra
ms
Coo
rdin
atio
n be
twee
n he
alth
mic
roin
sure
rs a
nd r
elat
ed h
ealth
info
rmat
ion
outr
each
pro
gram
s co
uld
prov
e an
ef
fici
ent a
nd e
ffec
tive
mea
ns o
f im
prov
ing
the
volu
me
and
qual
ity o
f he
alth
car
e in
form
atio
n ge
tting
to th
e in
sure
d cl
ient
s. B
ette
r kn
owle
dge
of p
reve
ntiv
e ca
re s
houl
d he
lp r
educ
e th
e cl
aim
s co
sts
in s
ome
area
s, a
nd
keep
mor
e pe
ople
hea
lthy.
Dow
nloa
ded
by [
Ston
y B
rook
Uni
vers
ity]
at 0
3:29
02
Nov
embe
r 20
14