Business

'Unnecessary' hospital visits add to health insurers' costs

'Unnecessary' hospital visits add to health insurers' costs

Outpatient services such as dental checks are the most misused benefits by health insurance beneficiaries, insurers say. 

The firms claim this stems from “ignorance” of how the insurance business works, with many beneficiaries rushing to seek services they may not need when their cover is about to lapse.

Jubilee Health Insurance Chief Executive Patrick Gatonga said the other commonly misused outpatient service is optical cover, which ends up costing insurers millions of shillings annually in unnecessary claim payouts. 

“We see a lot of abuse there where someone at the end of the year decides they want to look different, so they go for a new pair of glasses or they decide they want to get a dental check,” said Dr Gatonga.

For inpatient services, he said, maternity cover is the most abused, going by the alarming rise in the number of elective caesarean sections in the country.

While some of these cases may amount to fraud depending on the scope of investigations, they are not always easy to prove.

Conversely, cases of “unnecessary” inpatient visits are rare, according to the Association of Kenya Insurers (AKI).

“Outpatient cover is what is mainly misused. It is less frequent in inpatient, as care managers from insurance companies visit the hospitals frequently,” said AKI in a statement in response to our query on the state of medical insurance fraud.

The insurance sector lobby said such cases of fraud cost insurers an estimated 20-40 per cent of their revenues.

Other common forms of insurance fraud include the use of medical cards by uninsured persons and the exchange of drugs with personal items.

“The reason fraud it is not so common in inpatient is that it is a more difficult process as it involves someone being physically in hospital and lying in the ward,” said Mr Gatonga.

But as rare as it is, it still happens, especially in cases of impersonation.

Gatonga, however, notes that it is difficult to ascertain what amounts to abuse in some cases, as some visits are classified as “annual checkups.”

“But sometimes people abuse that. They walk in with the entire family for a checkup,” he said.

This behaviour, he said, stems from the perception by some beneficiaries that they need to fully utilise their cover.

“In some cases, it is out of ignorance, where a customer does not feel the value (of the premiums paid) because they have not utilised the cover,” said Gatonga.

He argued that it is only in insurance where one can buy something worth Sh1 million for Sh10,000.

“So you can pay a premium of Sh50,000 and get a benefit that is 10 or 20 times more. Inevitably, the expectation is that not everyone will claim, and that is how the business model operates.

“For example, among 1,000 people, it is very unlikely that all of them will fall ill at the same time unless it is a pandemic. That’s why in principle, a pandemic would not be covered,” he said.

The basic principle of insurance is to protect you in case of a calamity.

“But some people would rather create a calamity to feel the value of insurance, which is not right. and that is why for us, prevention is as important,” said Gatonga.

While beneficiaries are the main culprits when it comes to the abuse of health insurance cover, some service providers are just as guilty.

“The most common one is maternity. We see a lot of abuse in caesarean sections, where over 50 per cent of people delivering are subjected to one, the Jubilee CEO said.

“That is complete abuse. Normally, you would never have more than 20 per cent complications to require a caesarean section.”

A 2015 statement by the World Health Organisation (WHO) noted that while caesarean sections are effective in improving maternal and infant mortality numbers, they are only required for medical reasons.

“At the population level, caesarean section rates higher than 10 per cent are not associated with reductions in maternal and newborn mortality rates,” said WHO.

Claims paid out by the National Hospital Insurance Fund (NHIF) are evidence of how this procedure is misused.

For example, in the last three years, payouts for caesarean sections increased by over Sh200 million to Sh712 million.

In the 2016-17 financial year, caesarean sections accounted for 61 per cent of maternity reimbursements to hospitals.

The arithmetic makes business sense, considering if a mother delivers normally, NHIF pays Sh10,000 but in the event of a caesarean procedure, the State health insurer forks out Sh30,000.

Gatonga said the client may not be aware that the caesarean procedure recommended is unnecessary.

AKI confirmed cases where service providers order unnecessary tests just because the patient has medical cover.

The Insurance Regulatory Authority (IRA), in its second-quarter report for this year, listed medical as the segment with the highest claim payouts at Sh12 billion.

“Medical, motor private and motor commercial had the highest amounts of paid claims at 39.3 per cent, 26.9 per cent, and 21.5 per cent respectively of the total industry paid claims under general insurance business,” said the report.

Only two cases of medical fraud were reported during the period under review.

Gatonga said the use of data analytics is key in telling how a health insurance product is being utilised, thus eliminating fraud-related visits.

He said the average number of hospital visits per person is four annually, but when they hit six or seven, it raises concern.

“So it could be the individual who bought the cover abusing it, collusion with staff, or it could be a relative using the cover by impersonating,” said Gatonga.

He said when abuse happens, it interferes with the parameters used to price the particular medical risk.

“Abuse makes the risk appear larger than it was sized for and, therefore, unsustainable because we now have to charge way more premium than people can afford,” he said.

Another red flag for abuse of health insurance cover includes re-admissions and complications during procedures such as caesarean section.

“We monitor such outcomes and sit with service providers to understand how it happened,” he said. “In some cases, say negligence, we have had refunds or the cost significantly reduced.”

But AKI also noted cases of underuse of some health products.

“Companies have different products that offer various extensions like ambulance cover. This may be underutilised as you will find many people being driven to the hospital and only use the ambulance when the case is critical,” it said.

“Covers for congenital conditions may be deemed underutilised if the insured have no such conditions.”