HMOs will fare better with the new NHIA Act
Health Maintenance Organisations (HMOs) represent a major stakeholder in the health insurance industry. Our team also engaged Dr. Leke Oshunniyi, FWACS, Chairman, Health and Managed Care Association of Nigeria (HMCAN), the umbrella body for HMOs in Nigeria, on what the new law portends for the industry and stakeholders. Dr. Oshunniyi, who is the CEO of AIICO Multishield HMO, spoke glowingly about the law with high optimism. He assured members of the public that NHIA has what it takes to manage a population as high as that of West Africa! It is an engaging encounter.
Recently as you are aware, the President signed into law the new NHIA Act effectively replacing the old one. How would you react to the fallout of the new act?
As you well know, the major problem with the old act, the Decree 35, later Act 35 of 1999, was the fact that in section 16, the entire law was vitiated by a single word, which rendered the whole act optional. And the word was MAY which says a certain category of people MAY subscribe to the scheme. Now, we had expected a mandatory law in the industry and that mandatory word would have been SHALL. Unfortunately, the world MAY crept in. And, the day after the law was passed on May 30th, 1999, we became aware that this law was flawed. And the entire industry- the operators and the regulator- has worked assiduously from that time. It took 23 years, less 10 days (as at time of interview) to get the new law passed. And that new law is mandatory, which means that every resident of Nigeria must have health insurance cover. So it is a good one. Everyone should be congratulated for achieving that goal. Senator Oloriegbe was the chairman of the Senate Committee on Health, and he was the one who proposed it and it was passed by the Senate after passage by the House of Representative, and finally Presidential assent was obtained. And we must remark on the efforts of the DG of NHIA who did the last mile in ensuring that that act was signed into law.
Apart from the SHALL and MAY, that have now replaced each other. What other differences do we have between the old and the new law? Are there any improvements?
Well, there are several. It is a very technical document. As you know, all laws need to be operationalized. So this law has been passed, but hasn’t been operationalized, that is, the details have not been appended. This is a work in progress. And I expect that in the weeks and months ahead, we will be able to achieve that operationalization in the form of guidelines. It is these guidelines under that we will conduct the tenets of the law. However, there are a number of things which have shown up in this new law, which are not in the old law. For example, HMOs, and healthcare providers no longer have a seat on the council of the NHIA as they used to. Also, everyone is expected to purchase a government plan either at state or federal level before they buy a private plan. So the private plans are described as being supplementary and complimentary under this new law. The states have been given a very major role- there are now two tiers of regulation. There is a national level of regulation, the NHIA, and state level in the various state health contributory schemes. And it is expected that the kind of harmony that will be achieved would be such wherein the apex regulator, the NHIA, would supervise the state health and contributory agencies in order to achieve the drilling down to the grassroots.
Right now it seems the states are wearing two caps- they are going to regulate and as well operate. In your own estimation, is it good for the industry?
So this is where a well-designed operationalization process comes into play. For this kind of programme to work, it has to be a win-win for everybody. It has to be a win for the most important component, the most important stakeholder, the enrollees, you and me, the citizens of the Federal Republic of Nigeria. The customer journey must be simple, precise and easy to administer. For the operators under the scheme, who are the healthcare providers, it should be a win for them. It should not be a loss. It means that those who are entrepreneurs who have invested their monies to provide this scheme for Nigerians, knowing that up to 70% of healthcare delivery in Nigerian is from the private sector, they should not run their businesses at a loss. Neither should the other operator, the HMOs or the Third Party Administrators or Mutual Health Associations (MHAs) under the new law should also not lose. There should be value creation for them. The regulators or the referees also, it should be a win for them. They should succeed in expanding the scope both at state and national levels. So the guidelines must very carefully navigate this labyrinth in order to achieve a win-win for everyone. And that is doable. I am persuaded, I am convinced that that is a doable thing.
Do you think that the new law will help to achieve universal health coverage for the country?
Well, let us put it this way. How many of us in this room would have car insurance if it was not mandatory? So when you are stopped on the road, the law says you must have insurance for the vehicle you are driving. It could be third party or it could be comprehensive, you must have insurance. And because it is mandatory, people would pay just to get the law off their backs. So it is the same thing with this. It is actually an offense under the law not to enroll. And then of course, enforcement has been strengthened, monitoring has been strengthened, and we expect to see an increase from the current less than 10 million people. We hope to see an uptake of up to 60% of the population within the next decade, perhaps in the next five years.
The private operators, are they prepared for that in terms of capacity?
You may not be aware, but the NHIA has put in place a very robust information technology architecture. In fact, according to the DG of NHIA, it says it has enough capacity to manage the entire population of West Africa! So I figure that we are talking about an IT backbone that can cater for half a billion people. Those are not small numbers. And so once you have an IT backbone in place, you have a dashboard where you can monitor all activities. You have portals for the enrolled, the HMOs, the healthcare providers and the regulator. A lot of the manual tasks are taken up automatically by this backbone, which I understand has been extremely well-designed with terrestrial servers, for security reasons, there are no cloud servers. There are mirror-servers in various parts of Nigeria to back up in case of catastrophic events. So the NHIA has thought of everything as regards automation of this project. We only need to add some staff to help to keep this going.
Are you confident and believe that backbone is there? And will it be functional? Will it be ready? You know the Nigerian situation whereby something is promised and another thing is delivered?
I have no reason whatsoever to doubt the DG of NHIA. He is a man of his words. He is a very knowledgeable man. If you have an interaction with him, you will be impressed. The scope of his knowledge is huge. In one conversation, he will discuss economics, social sciences, health and finance. So if he gives his word, I will not doubt it. He has been a man of his word ever since he began to lead the industry.
Let’s go to the benefit package. Now, the new law created a national minimum package to be managed by the NHIA, what is the position of HMOs on this?
Well, so the Health Act of 2014 prescribed a basic package but not everyone has complied with that. So, the Lagos State package, Ilera Eko package is different from the federal government’s NHIA package, which is Group Individual Family Social Health Insurance Programme (GIFSHIP). So the aim of that GIFSHIP is to lay down what the NHIA feels should be provided for. And it’s an almost all-encompassing programme. There is cancer care, there is infertility, there is maternal and childcare, a whole plethora of ailments is accommodated under that. But Lagos State doesn’t cover everything.
And no scheme is as robust as this scheme. So this is one of the things that the guidelines would elucidate. It will be very simple if everyone has the same plan so that if you are living in Kwara State and you have to visit Anambra State and, God forbid, something happens, one requires care, you have an easy integration everywhere. So as much as possible, I would recommend that we have this basic plan that is harmonized across the length and breadth of the country.
Is that a minus on the part of the new law?
There’s no way a law can anticipate everything, which is why I keep on talking about this operationalization, that is the one that will flesh the bones of the law. The law is now like a skeleton. And the guidelines will flesh-out all these little details, how much people pay, how you collect (premium) it, and so on and so forth.
Let’s look at the law again. The law specifies that all private sector organizations are to enroll in the basic national benefit package. Does it not mean a loss of income to HMOs since most of their current clients will move to the government scheme?
Quite frankly, the way I see this basic plan is like third party insurance for motor vehicle. It is the barest minimum. Now if you buy a brand new Toyota Corolla, these days, I think, it costs about ₦20 million. Insurance on that Corolla will be about, I think 4% -5% is the going rate so the value you pay is about ₦800,000 insurance premium per annum on that car. Meanwhile, the man with third party insurance is paying maximum ₦10,000. So, there’s a huge gap. Someone may say “I am not going to sit down in one General hospital to wait for care. No, I want to be treated specially, I’m a big man. I want all the comforts.” And that is where the HMOs come in because everybody now has insurance. There will be differentiation in the market. It is just like in any country, people want to move around. Some people will buy bicycles as their means of transport, some motorcycles and some cars. And the cars may even be as luxurious as Rolls Royces. We have a plan here (in his HMO), which is a concierge plan. That means the doctor can visit you at home, whereas under the government GIFSHIP, home visits are not covered. I said, look, you want me to come and see you at home? Pay me a premium of a million naira per annum. I still practice medicine in my personal capacity. If you tell me to come and see you at home, with my 40years experience in industry, you are going to have to be able to pay. So we are looking at a scaling up of the industry. There is room for growth and I think I can speak authoritatively that HMOs expect that their businesses will grow through this law.
Looking at the barest minimum package, that it is robust, do you think many clients will still require more benefits?
So it depends on which plan is taken up, is it the state plan or the federal plan? Even the federal plan, it is comprehensive, but not every hospital will take it up. That is the key. For example, I know a lot of practices in Lagos that do not do the government plans. They say the tariffs are too low. Capitation (the amount paid per person per month) on some of these plans is below ₦400 per member per month. Even the federal government plan, the capitation is ₦750. Now, there are some hospitals in Lagos where a single day admission may cost as high as half a million naira. They are the high end. It is just like we have people buying means of locomotion. So people are buying bicycles for ₦50,000 and people are buying cars for ₦50million, a thousand fold difference! We are going to see that kind of scenario with health insurance.
Some people have expressed the opinion that the provisions of the new law are capable of dampening investors’ confidence in the industry? What do you think?
As a private sector leader, I believe in choice. There is no country in the world that can provide for every health need of its populace. No country can afford it. I give you an example. The United Kingdom has a health system called the National Health Service (NHS) founded in 1948 after the Second World War. The NHS has become a darling of the British people. It is one of the biggest employers of labor in the world. Today, it costs about £170billion to fund that service in 2022. That amount is in the region of $200billion. These are the kind of numbers we are talking about. Now, the budget of the Federal Republic of Nigeria is under $30billion. So you have a country of 60million people who are almost a 100% literate, who have running water, who have no snakes, no mosquitoes, no scorpion, very little HIV, very little TB, that is spending $200billion a year. And that system has so many complaints. The complaints on the NHS are frightening, people are dissatisfied, and waiting lists for surgery are as long as six months or one year for non-emergency surgery for elective cases. So if you then turn the searchlight on Nigeria, which has over 200million people, that is three times the size of UK, a literacy rate which is quite low, life expectancy of 52 years, Nigeria carries 10% of the health burden of the world. One in ten women who die globally from childbirth is a Nigerian. I was reading some horrific statistics earlier today to the effect that about 2,300 children die daily in Nigeria and 145 women of childbearing age die daily. Those are horrific, horrendous statistics. So even if we were to match the healthcare expenditure of UK population-for-population, we would need to spend over $600billion on health annually, population-wise. And we are not even talking quality yet.
Like I said, no country in the world can afford but the saving grace is a private sector. The private sector is able to scale up once there is the opportunity for value creation. The private sector is capable of infinite growth. So I have very great hopes that the private sector will be unleashed because if government decides to fund this, it will bankrupt the country. It is unaffordable, it is impossible. When, I started medical practice, there were no CT scans. Even all these ultrasound scans they were not there. I think there was one machine in UCH Ibadan in one of the theaters. So, if you come with a headache at that time, I will examine you; look at your cranial nerves, see if there is any possibility of a space-occupying lesion or something and I will say “you know what don’t worry, we can treat this”. I give you a few tablets and you go home. But now we have CT scans. So all the doctor has to say is, I think you may need a CT scan. I promise you, you won’t rest until you get that CT scan done. So instead of tablets that cost maybe ₦500, you end up doing a test that costs ₦50,000. So those are the realities of modern medicine. It is much more expensive than it used to be and we simply cannot afford it. So what I would recommend in the meetings that lead up to the articulation and publication of this guidelines is for the private sector to give the populace choice to allow entrepreneurs to invest in the private sector with a hope for good returns in exchange of very good service. That is what I will be fighting for; a system that is totally government-run may not encourage growth.
Having said that, I must take us to the field of macroeconomics. There are two ways of financing the operations of the country. And that is what we call the budget. So how do you earn money? How do you pay for the budget? You can go the way of the oil rich countries and will not put Nigeria in that category simply because our population is too large. If you look at Saudi Arabia, which has a fraction of the population of Nigeria but has a capacity, at full production, to sell 10million barrels a day of oil and you compare to Nigeria with 200million people right now, we are producing between one or two million barrels a day. You have a 50-fold difference in per capita income from oil. So those are the oil rich countries. That model works for them. Other countries in the world fund government operations by tax.
Nigeria is a country of tax avoiders. I will not say “evaders”. I think our tax-GDP ratio is about 6%. We are at the same level as Afghanistan, Syria, Yemen, whereas, the European countries have between 40-45% tax-GDP ratio. Now if we were collecting tax at that rate with our GDP of about any anywhere between 300 and 400 PPP dollars, we would be talking about 40% of 400. We would be talking about $160billion in tax coming in, then, we are talking. Right now, it is under 30. So we have a capacity to both deepen and broaden our tax net. And this is really what should be financing things like education, health, defence, external affairs. Nigeria is an impoverished country no matter what anybody tells you, we are poor because it is all about per capita. It is not the aggregate that matters. Once you divide the aggregate by the population, you get the per-capital figure and it is appalling here. So funding schemes like this would put large burden. My fear is that it may turn out to be something like fuel subsidy which is costing trillions of naira. There are other subsidies in Nigeria. For example, you and I are not paying the true price of power. I think I pay in my dwelling place ₦51 per kwh International price, economic price of power is about, 50cents per kwh. Even if you take the rate of the dollar to be the official rate, assume it is between ₦200 and ₦220 a kwh. Without attending to these economics, we cannot attract people to come and set up power industries here. They will not. Why would Siemens come in here or Alcatel or General Electric when they know that they are going to, even on paper, record a loss?
So, there is power subsidy, there is fuel subsidy, there is education subsidy. We are loading up to health subsidy. We have to be careful. We have to be able to generate cash. It is the rich countries that embark on those social initiatives; poor countries cannot really afford it. Our priority is to grow the private sector so we can tax them. You grow a company; you tax it. This company (referring to his HMO) is owned by shareholders and the government of Nigeria. How? From our profit every year, we pay a third of it out to FIRS as tax, 2% education tax to TETFUND, there are some other taxes coming in but a third of this company is owned by the government, that’s why government wants to see your books. So when you grow the private sector, as a government, you are doing yourself a favor. Ease of doing business is critically important because that is what runs countries. It is not selling your natural resources. No, that is an aberration. Of the almost 200 countries in the world, I am sure less than 10% go the way of sales of natural resources, others collect tax and the efficiency of collecting tax is an indication of just how well you will be able to fund the programmes.
NHIA plans to pay capitation directly to health care facilities as against the current practice of paying the health care facilities through the HMOs. What is your Association doing about it?
Many people do not know that the payment of capitation for us is an “in and out” thing. We are not even allowed to invest the money. We are paid quarterly. The money comes into the bank account and goes out to the healthcare providers. We have a whole list of over a thousand providers that we pay every month. We do not touch it (the capitation). We have never touched it. The reason why it is paid through us is so that we can have authority to demand proper care, proper service from the healthcare provider. If the regulator wants to take it, honestly, it is a relief. So (for us) capitation is not the issue.
The issue is fee for service. In insurance we have a law. If you set the premium, you must pay the claim. If you have a driver and you send him to buy you a newspaper, you are the principal; the driver is your agent. If he gets to the newspaper vendor and finds that the newspaper is ₦300 and you gave him ₦200 and he takes money from his pocket, adds to the money given him and buys the newspaper and then comes back to you and says, ah, sir, this newspaper was not ₦200 like you thought but ₦300. The laws of natural justice dictate that you reimburse him because the agent should not be made to pay the principal’s liabilities. So these are the kind of things that we want to make sure that do not happen under this new law. So if I write a premium now, I say okay to care of all of us in this room, I am going to charge for a year let me see our ages (looks around interview room), we are between 30 and 65 years. If I design a plan that will cover 95% of health needs which cost maybe ₦300,000 per person per annum, decent hospitals, Now, if we incur claim more than that ₦1.2 million which we have allocated, then I as underwriter, I must pay. So that’s what we do in insurance. When you underwrite a policy, you have to be able to pay that claim. Now, my fear is that we may have insurance schemes because we do not have enough data for proper actuarial studies, we may underwrite policies that will lead to a negative balance. So we must be very careful to make sure that the professionals are the ones who are doing their work. These are very complex calculations that will lead us to a scheme that is not the loss-maker. This thing is like a snowball, if it makes a loss in the first year, it will keep on making losses in subsequent years because the population is growing; the cost of medical care always outstrips the inflation rate. Medical inflation is always higher than general inflation. Premiums in the United States of America are average of $10,000 per person per annum while here in the private sector scheme it is an average of maybe $40-$50. Compare that. So people say, ah, doctor, is it because of money? Are Are you not going to treat me? You can’t have the heart to say yes but that is it. People die. If you take ₦1,000 to LUTH today, you will save a life to buy insulin or antidiabetic or antibiotics drugs for somebody. That is how bad things are. So when you have 10% of the global health burden, you need 10% of the world’s wealth to manage it and we do not have it.
You talked about NHIA having capacity to take the entire West African population. The current HMOs, do they have capacity as it is envisaged that 83million Nigerians would be enrolled in the next few years? Do you think the HMOs are up for it?
So what they have the capacity for is processing of data. Now, the vision of the DG of NHIA is that all the insurance system be plugged into that huge architecture, private, state, and government will be able to say, okay, how many cases of malaria were treated today? And the system will throw up the answer immediately. Information is coming in as being processed by the second? It is almost a miraculous tool that has been created to capture the data in the system- payments, defaults, disease incidences, treatment models, medication used. You can cost the care being given in the entirety of Nigeria in a single day. Technology allows you to leapfrog other technologies because when it is created it is a state-of-the-art. We may end up with a system that is even better than some in European countries because they are using five year old technology. It is like buying car today. So maybe it is an electric car, you just plug it in at night and in the morning you drive your car, you carry it 300 kilometers before another charge. So this is that the vision that the NHIA has developed and is going to deliver to all Nigerians.
Now the 83million vulnerable, even though I was informed by the World Bank/IFC officer last week, that the number has risen to 93million vulnerable. These are the people considered as being poor or incapable of taking care themselves. People who are earning, I think the benchmark is now $2 per person per day. These are the vulnerable group that NHIA is considering raising funds to provide healthcare for, people who are the ones that are making our health indices so poor, they cannot afford healthcare. So it is laudable thing. But whether we would be able to raise the ₦1.3trillion required at ₦15,000 per person per annum, which is about $3billion. To raise the money year on year, that is where the work really is.
How do we make Nigerians to pay considering the fact that many of these people live in the rural areas?
No, they are not supposed to pay. Government is going to pay for them. So you now have a sweet and sweeten beverages tax that should bring in some money. As we are told, the telco tax is not forgotten. That would have brought in ₦90billion in one year. Far from what we need but sizeable fraction no doubt and then you add taxes on tobacco and alcohol. So it, it can only be generated by tax or the much beleaguered oil sales. Right now we are paying off our loans at a rate higher than what we are earning. We are not in good economic shape but people are happy going about their daily business. That’s the miracle of Nigeria.
There are complaints that the leadership of NHIA is not carrying HMOs along in the development of the operational guidelines that will serve as the implementation document for the new law. What do you say to this?
That is not true. I have been assured by DG of NHIA on the 9th February 2021, on the 9th of August 2021 and only recently at an exhibition event, that whenever those guidelines are going to be articulated, both the HMOs and healthcare providers would be at the table. I have no reason to doubt him. No, I will not say that we are not being carried along. The guidelines have not been defined. Period. And I have the assurance of the DG of NHIA that we would be there at the table. Even before the new law came, he had already assured us.
With the taking off of the new law, where do you think the industry is heading to?
That is why it is important that we get it right because if you do not get it right first time, it will discredit the scheme. And when people hear insurance they will run in the opposite direction. So those of us who understand the market, who understand the thinking, the psychology of the Nigerian purchasing health insurance, our views are critically important in determining the workability of any scheme. This is what we do and we were doing it even before the NHIS, as it then was, commenced in 1999. This company (Multishield HMO) is 25years old. This company was registered on the 4th of August, 1997. So, we have been in the business even before the regulator and we have gained a lot of experience on how to and how not to do things. Insurance is a game of numbers. If you get the numbers wrong, for a private enterprise it means bankruptcy. We call it insurance ruing. If for example, like I said earlier, you underwrite a plan for the four people here at ₦1.2 million and you expect ₦2million (in claims), then you may well have to fold up your business.
But it can also happen on the national level. There are some countries; Ghana is an example, where they were unable to pay their claims. There was a time gap between incurring the claims and paying of several months. Recently the DG of Ghana NHIS was also at a conference and he said they have been able to close the gap now to about six months. But can you imagine if the gap is two years. That means hospitals do not get paid for two years. How do they fund their operations? So it is very, very important that we get the numbers right, that we carry along those who know the market. It is not guess work, is experience. There’s the actuarial, the mathematics of it and how does mathematics work? You look at the population and say, what is the probability of one in a hundred people in this company right now fracturing his leg? What would be the cost of that fracture be to repair? So we say, okay, out of a hundred people, one person will have a fracture to repair that fracture, maybe ₦250,000. We then divide that ₦250,000 by the number of people here, so we put in ₦2,500 for fracture. What is probably that they will have malaria, maybe 30%, that means 30 people here on this building will have malaria in the next one year. What is cause of malaria. Maybe ₦6,000. Divide ₦6,000 by 100 people you get ₦60. Add ₦60 to ₦2,500. Add for pneumonia, hypertension, diabetes, etc. But we need the incidences of those conditions happening, the probability of their happening multiplied by cost and divide by number. That’s how you get the premium, you then add the admin, salaries, you add profit 5% or 10% and that is how you get a premium. So you say, okay, to insure people here I will charge you an average of ₦60,000 per person per annum for the cover. So it is a very careful computation.
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