Health Insurance financing: Insurance buy now pay later
In WHO data retrieved in January 2022, the out-of-pocket health expenditure for Nigeria was 70.52% high.
I wrote about embedded insurance a year ago - "Getting everyone insured: microinsurance and embedded insurance". At that time, insurance penetration in Africa was <3%. It is still below 3% today in Africa - 2022. In Nigeria, only 0.5% have insurance while about 3% of that have health insurance. When represented in whole numbers, it makes more sense: only 1 in every 200,000 people in Nigeria has health insurance.
That means the others are self-medicating and paying out-of-pocket (OOP) for healthcare. Quality healthcare is expensive, and this means that if there's an emergency, more people are not able to make payments because as long as inflation keeps rising, more people will be thrown into poverty; healthcare will keep getting costlier while more and more people will resort to self-medicating. Have you heard of alagbo? We'll talk about it another time.
In WHO data retrieved in January 2022, the out-of-pocket health expenditure for Nigeria was 70.52% high.
Out-of-pocket payments are spending on health directly out-of-pocket by households.
Keep your eyes on these numbers 👇🏽
14.6% of Nigerians are unable to access adult medical services
9.5% cannot access maternal health care services.
11.7% are unable to access child healthcare services
How to get more people insured and reduce out-of-pocket payment for households
Africa’s health sector could be worth $259 billion by 2030, representing a massive investment opportunity, approximately $66 billion annually, according to an article by WEF.
By 2030, 14% of business opportunities in global health are expected to be in Africa. - UNECA
The problem with low health insurance adoption remains the same: low insurance education, low buying power and zero-to-minute trust. That’s the issue right there.
To drive insurance inclusion and adoption, we must create an elaborate and inclusive educational plan and outreaches, working with the right agencies.
This article will attempt to provide a workable financing solution to address the problem of low buying power, caused by low income, and aggravated by the recent inflation - "Nigeria rose to 21.09% as stated in a recent NBS report".
Download the NBS inflation report here.
Introducing Insurance Buy Now Pay Later
The buy-now-pay-later (aka BNPL) has been on a rampage until recently slowed down by the ongoing global meltdown. Nevertheless, it's still a viable concept that can apply to many areas of our lives where money is exchanged for value.
Making a case for BNPL. Why now? And why is it a better choice when compared to regular consumer loans? Because "inflation is not likely going to catch up with you".
For instance, whatever you're saving for to buy two months from today, won't be at the same price as when you started saving. Inflation will happen. And in the case of using loans, the interest rates are usually something you don't want to keep accumulating.
With BNPL, usually, there is no interest attached unless you default. And you get to buy what you need or want when you feel like it. Only do it responsibly.
Read about using BNPL as a strategy to drive inclusion here.
Driving insurance inclusion with BNPL
Flip it 👉 INPL = :Insure Now Pay Later" 😎
Bear in mind, this article focuses on health insurance and how to reduce out-of-pocket payments for households.
Though, INPL can be applied to a whole lot of other parts of insurance.
Embedded insurance products can be bundled with BNPL offers. For E.g. an exercise bike purchase might contain gadget insurance, shipping (GIT), warranty insurance, plus supplemental heart attack coverage.
Insurance buy now pay later.
It's high time health insurers start considering the convenience of alternative payment methods like BNPL.
A handful of companies are starting to offer buy now, pay later programs for health care.
Depending on the lender, the process can start as a payment option at the doctor’s office directly or as a service where you provide your bill for the procedure.
How it works. The insurer (HMO, insurtech or lender) checks eligibility through pre-qualification to ascertain patient is likely not to default. Some lenders will also assess larger financial data beyond what the traditional lenders look at. For instance, they can use a combination of machine learning and artificial intelligence to check relevant users' data - "and that might include frequency and timliness of paying phone bills".
The approved amount and terms vary depending on the BNPL provider or insurer. The amount can be structured to be repaid in 3, 6, 12 or 48 months.
Patients apply, manage and make monthly payments online or with a mobile app.
Let's paint a scenario. A patient, Usman, gets to the hospital and after seeing the doctor, he was recommended to take some tests. He got to the cashier for an invoice to get his tests done. Alas! the cost was above his budget. Usman does not have health insurance. He will pay out-of-pocket. He has options: take from his savings or borrow from someone. And if he's a businessman, take money out from his business - capital or profit.
The above story is about a typical day for an uninsured person at the hospital. They access healthcare, quality or not, by paying out-of-pocket. And nobody saves for health emergencies, per se.
Insurance BNPL can fix this. Back to our guy - Usman. He has options - go back home, take money from his savings or business capital, borrows from family or friend or from loan apps. None of these options is nice. They affect his wealth. The other option is to opt to make payment with Insurance BNPL, which can be made right there on the go. And get his medical bill sorted right there. And without any significant effect on his wealth.
Africa’s healthcare system could end up keeping more Africans below the poverty line. - Brookings
What if Usman can get his tests done without zero or little down payment? And with zero interest rate and relationship embarrassment. That's the usefulness of Insurance BNPL.
With most BNPL providers, there is zero interest rate but the patient must fulfil payment by the due date. If the patient defaults, then an interest fee starts compounding.
Why Now. According to the World Bank, there were 89 million poor persons in Nigeria in 2020. The number is projected to hit 95.1 million in 2022. The over-reliance on out-of-pocket payments could exacerbate the level of poverty in the country.
Referencing a 2010 report by the National Library of Medicine; "Only 0.8% of households are not living in poverty but would be pushed into poverty if OOP health spending were netted from total consumption expenditure. OOP health payments led to a 0.8% rise in poverty headcount ratio." (OOP = out-of-pocket)
As a patient. Should you consider BNPL to cover health care expenses?
If you default, an insurance BNPL can be expensive for covering medical bills. Let's do some breakdown:
Yes to BNPL for health care if:
It is interest-free
You can afford the monthly payments
Don’t consider BNPL if:
Your healthcare provider can offer a payment plan. Ensure you verify.
You already have high debt. If you are already paying back other loans, be careful about taking on more debt. You don't want financial stress.
You have health insurance.
Alternative ways to pay for health care bills
The whole idea of Insurance BNPL is to use it as a strategy to reduce out-of-pocket healthcare payments. This, by all means, is not the surest of ways. Let's explore other options.
Negotiate a payment plan. If your medical bill is higher than what you budgeted, ask your doctor if a payment plan is an option. It allows you to build and commit to a plan that splits the bill into affordable monthly instalments, often at no extra cost.
Ask your family or friend. This is a good option but as it relieves the pain of paying out-of-pocket, it is likely not a very comfortable time for those you are asking. And they might not be able to say NO because it's a health issue. Even if you're going to pay it back, it's still not quite convenient. In all, before you ask, you should weigh the potential effect this arrangement can have on the relationship.
Personal loan. As explained above, explore the personal loans option if you don't have a (heavy) running debt. You can borrow from your bank, loan apps or online lender and pay back in monthly instalments, depending on the agreement. Be mindful of the interest rates.
Get a health insurance plan. This is by far the option you should opt in for. This saves you from all the issues of paying out-of-pocket by taking money out of your savings, business capital or borrowing from BNPL or any lender. For as low as NGN1,700 ($4), you can access quality healthcare for yourself, your family or your business. Many insurance companies such as Cover Genius, Zaidi, and Paddy Cover, have enabled monthly plans you can subscribe to start enjoying quality healthcare without the weight of a heavy medical bill.
Bottom line: If health Insurance inclusion in Africa is built for inclusion and easy adoption with an appropriate distribution strategy, then more people would have to pay out-of-pocket for medical bills, which further throws them deeper into poverty.
The high percentage of catastrophic health expenditure and poverty in Nigeria shows that health financing reform such as the NHIS which became fully operational in 2005 is not achieving its aim of reducing the financial burden of OOP health payment among households. - NCBI
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About Omamuzo Samson
Omamuzo Samson is a writer at The Africa Tech Memo writing about the tech and emerging economy. He also works as a Product Marketer at Curacel. Based in Lagos, he can be reached at omamuzosamson@gmail.com or on LinkedIn.
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