The recent social media revelations of an apparent scheme by Nairobi Women’s Hospital to fleece its patients brings to the fore the need for medical insurance industry to confront the problem of fraud at health service centres.
Indeed, the medical insurance business has continued to bleed money, primarily fraud-driven, to the extent that providers have recorded Sh3.5 billion in underwriting losses over the past decade.
In the nine months to September 2019, medical underwriting losses stood at Sh231 million and are set to close the year in loss position.
Yet the medical business is the second largest segment in general (short-term) insurance and accounts for a third of general insurance business gross premiums—the largest being motor vehicle cover.
In my view, medical underwriters are co-authors of the Nairobi Women’s Hospital case as well as many other cases. Some months back, I was part of a project team to collect views that would go into a solution to automate the entire general insurance journey, especially medical and motor vehicle.
My interaction with a few local underwriters revealed a deep-rooted penchant for status-quo. At the surface of it, it appears to be a win-win set-up for everyone. Further, local medical underwriters, under the weight of disunity and undercutting, are almost powerless and have to bend to the whims of providers, despite funding them.
Specifically, hospitals, especially the so-called big five, appear to have taken full advantage of the disunity to dictate engagement terms to underwriters. With the Nairobi Women’s Hospital incident, underwriters must seize the opportunity to (i) seize back control and (ii) innovatively seal the loopholes behind service-provider frauds.
First, they must seek to automate claims processing. There has been some unsuccessful attempts to automate all aspects of the claims process.
For instance, the existing biometric card solutions were meant to make patient interactions at every service point real-time, thereby giving insurance companies full visibility of their transactions.
However, for a number of reasons, service providers chose to transact offline which created a lag, and in turn gives hospitals room to interfere with the integrity of the bills.
The lag means the bills are sent to insurers for payment typically in cycles exceeding seven days. Insurers then have to spend significant amount of resources to scrutinise the bills.
Some of them, under pressure from the big five, do not even check and simply make the payments. However, there is a strong case for real-time tracking of claims processing, and there are a number of fintechs with solutions in this space and underwriters do not need to go far.
Second, medical underwriters should now adopt medical wallets especially for outpatient services, which can be funded either by an individual (retail), a corporate body (especially in the case of employees) or a donor entity.
Wallets, when implemented on the back of real-time claims management, remove the billing lag that is a major source of fraud as well as introducing some element of deterrence on the part of wallet owners.
Finally, there is also a case for medical underwriters to backward-integrate with service providers in whichever permissible form.
A case in point is Jubilee Insurance which has some form of integration with Aga Khan hospitals. There are cases of motor vehicle insurers who have integrated with car spare part shops as well as garages.
So even as stakeholders widen the investigation of hospital billing practices to other providers, insurers must take advantage and seal all loopholes.