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Insurers blame doctors for Sh1.1bn slide into losses

jubilee

Jubilee Holdings Chairman Nizar Juma during the firm’s release of the 2016 financial results at Jubilee Centre in Nairobi, March 27, 2017. FILE PHOTO | NMG

Medical insurance firms have accused doctors of engaging in fraud and colluding with pharmaceutical firms to fleece health insurers who last year suffered a net industry loss of Sh1.1 billion.

The health insurers say falsified claims and the high cost of drugs prescribed by doctors has pushed more than half of medical cover providers into losses, putting the stability of the industry in peril.

According to one source, upto 40 per cent of medical claims have an element of fraud, while a significant number of medical procedures, such as caesarean section operations, and laboratory tests are unnecessary.
Twelve out of the 21 medical insurers, being 57 per cent, of the industry, sank into underwriting losses weighed down by rising claims ratio, fraud and high cost of drugs. Total claims paid out amounted to Sh20.5 billion compared to net earned premiums of Sh27 billion, according to industry data.

“The increase in cost is because of preference of branded drugs over generics. Of the total cost of medical attention, 40 per cent is on medication,” said the Jubilee Holdings chairman Nizar Juma.

Over-prescription

Jubilee insurance estimates that Kenyans are paying at least 50 per cent more for their medications due to over-prescription of branded drugs.

“In Kenya, we are using more brands than generics yet economies like US use 80 per cent generics despite being richer than us. Doctors, patients and hospitals are united in this,” said Mr Juma.

The insurers now say doctors should be barred from prescribing drugs in brands because it makes patients fear the use of generic medicines which have the same effective molecules as the originals.

In January this year a letter purportedly written by Madison General Insurance directed doctors to only prescribe generic medicines for its customers, kicking up a storm after doctors vowed to defy the order.

Kenya Medical Practitioners, Pharmacists and Dentists' Union (KMPDU) secretary-general Ouma Oluga at the time advised doctors to ignore the directive, arguing that it was up to patients to talk to their insurers regarding the treatment options available to them.

The Kenya Association of Private Hospitals’ secretary-general, Dr Timothy Olweny, in an interview last week said the porous nature of the Kenyan market meant that many generic drugs are not up to the required standard, and therefore doctors hesitate to prescribe them.

“In an environment where we have so many generics, some of them with questionable quality, doctors become reluctant to prescribe generics only,” said Dr Olweny in an interview.

Deplete insurance cover

Pharmaceutical Society of Kenya (PSK) president Louis Somoni Machogu estimated that medicines on average account for 40 per cent and 70 per cent of inpatient and outpatient care respectively and most customers holding insurance covers deplete their benefits before their policy period expires.

“There is need to have drug-focused interventions to save costs by adopting best practices in disease diagnosis and prescription by doctors, drug selection and review by pharmacists and compliance and utilisation patients,” he said.

The Insurance Regulatory Authority (IRA) fourth quarter industry report shows that incurred claims ratio, a measure of the claims incurred as a percentage of net earned premium income, hit 75.71 per cent.

This was the highest ratio compared with other insurance classes given the average industry average ratio over the past three years was 61.8 per cent.

Combined, the 12 loss-making insures had a loss ratio of 80 per cent, with cumulative underwriting loss of Sh2.1 billion.

AAR Kenya had the largest loss (Sh626.7 million) despite cutting gross written premium by three per cent to Sh5.5 billion.

Underwriting losses

Resolution Health had Sh489 million loss while that of First Assurance was Sh360 million. Others who closed in medical underwriting losses included UAP, Madison, British American, Sanlam, Pacis, ICEA Lion, Kenindia, Takaful and Kenyan Alliance.

Jubilee Insurance, which was among the nine insurers to close financial year ended December 2018 in underwriting profits, had incurred claims ratio, also called loss ratio, of 67 per cent.

The firm, the largest insurer in the region, posted Sh771.97 million underwriting profit with Mr Juma saying the foremost challenge for the medical business is the escalation in costs.

“We continue to make every effort on cost reduction by challenging service providers to justify price increases, standardise payments for equivalent services from service providers, and to champion the use of quality generic drugs which are just as effective as branded drugs for a fraction of the cost,” he said.

Underwriting margins for the nine profitable medical insurers was 5.7 per cent. After Jubilee’s profit, the closest firms were CIC (Sh179.8 million), Saham (Sh24.5 million) and Heritage at Sh24 million. Others who made profits were GA, Tridend, Tausi and Allianz.

All medical guidelines in Kenya and globally identify medicines by their chemical or generic name, according to PSK, but there is no framework that compels doctors to prescribe generics instead of brand names.

Affordable alternatives

Yet, Dr Machogu said generic drugs are an affordable alternative, which is not inferior or of reduced quality to the innovator branded versions as many people believe.

Currently none of the medical insurance providers, have set professional protocols for medical services and drugs they pay for.

This exposes them to fraudsters as well as counterfeiters of drugs and proliferation of hospitals without right professionals.