Medical costs to go up as hospitals raise charges

Major private hospitals have increased their charges by an average of 10 per cent this year, setting the stage for higher medical insurance premiums.

Guru Nanak, Aga Khan, Nairobi, Eldoret hospitals and Avenue Healthcare are some of the private hospitals that have raised fees for inpatient and outpatient services.

Patients paying out of pocket will equally be hit hard by the new rates that hospitals attribute to higher operating costs.

Insurers say the higher medical cost is hurting margins in the short term, adding that the firms will be seeking to protect profits by raising premiums when policies come up for renewal.

“Medical insurance premiums will rise by up to 10 per cent to cover for the higher medical costs,” said Lydia Kibaara-Nzioki, the chief operating officer at Jubilee Insurance.

The rising cost of medical insurance comes at a time that short-term revenue growth is expected to remain sluggish as uncertainties over the March 4 General Election take toll.

Companies with employees that run a large medical bill relative to their contributions are expected to face higher premiums when they renew their policies as insurers seek to avoid losses.

Households without medical insurance will be forced to dig deeper into their pockets to fund the higher cost of healthcare that has seen millions of poor families unable to afford quality treatment. Only a quarter of Kenya’s population has medical insurance—mostly provided by employers.

Aga Khan Hospital and Guru Nanak have increased charges by an average of 10 per cent this year, raising consultation fees, ward beds and intensive care charges among others.

Medical insurers say the cost of covering an employee with four family members stands between Sh30,000 and Sh50,000 per year depending on the set ceiling. The premiums are higher for individuals whose medical insurance policies typically cost more than the corporate schemes.

Hospitals say they have reviewed charges upwards due to an increase in costs of items like electricity and staff salaries in 2012.

Some of the hospitals were forced to raise the pay of doctors and nurses by more than 20 per cent last year as the health workers went on strike demanding higher compensation.

Gertrude’s Hospital, MP Shah, and health management firm AAR are some of the institutions that gave their workers a pay rise of between Sh40,000 and Sh60,000 last year as the battle for talent heated up.

READ: Private hospital doctors demand salary raise

The pay increments issued by private hospitals came after the government gave its healthcare staff large pay rises with the least paid worker earning at least Sh110,000, sparking a talent war.

Persistent surge in medical costs this year is expected to have a negative impact on profitability in the insurance sector before the planned reviews of premiums come into force.

READ: Rising hospital costs sink insurers deeper into losses

The industry paid Sh5.4 billion out of the total Sh6.4 billion net medical premiums collected in 2011, representing an 83.3 per cent loss ratio, according to the Association of Kenya Insurers.

That left players in this segment of the market with the highest loss ratio, followed by liability covers at 66.3 per cent.

“There is need to monitor the premium rates charged for these classes of business, or the claims management process or both,” the association said.

Jubilee controls the largest portion of medical insurance market at 24.7 per cent followed by APA and UAP with 13.4 and 12.3 per cent respectively.

Medical insurance has about 165 players battling for the Sh9 billion gross premiums on thin margins.

Consumer apathy, stiff competition, and fraud have kept the uptake of insurance at a low level of less than three per cent.

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