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Medical insurance proposal for civil servants bogged down by sheer size

Tuesday August 2 2011



The government is in a tight spot over the proposed medical scheme for civil servants.

Two months ago, it put out a tender requesting insurance companies to bid for the job.

Because of the sheer size of the cover – medical insurance for a population of 860,000 individuals – it was recognised that no single company in the market had the capacity to handle such a gigantic assignment.

Thus, insurance companies were asked to organise themselves in groups and to bid as consortia. But when the bids were counted, there were only two.

The first group – comprising the major players in medical insurance business – offered to provide cover at a price of Sh12 billion.

The second group, mainly second-tier companies in the medical insurance field, quoted Sh4 billion.

Several questions arose. First, how is it conceivable that two bidders reading the same tender specifications can arrive at such widely disparate figures?

Secondly, is it feasible to craft a financially sustainable medical scheme on the basis of the two quotes? Thirdly, can the government pay Sh12 billion on medical insurance for its employees?

Fourthly, if the government chose to go by the lower bid, is this level of premium enough to meet the billions in claims the gigantic scheme is inevitably going to generate?

The government has been forced to go back to the drawing board. The effective date for the new scheme has been postponed for the umpteenth time.

I gather that as at the weekend, the government had commenced totally new negotiations with the two consortia.

From what I hear, the proposal on the table now is that the price of the insurance cover be set at Sh5.6 billion.

The second is that the National Hospital Insurance Fund be brought in to manage the out-patient side of the scheme.

As I write this, the new proposals are still under discussion. But I still can’t see how the government is going to navigate the situation.

It risks breaching the rules of competitive bidding. You only need one disaffected player to file a case at the Public Appeals Procurement Tribunal and the deal is dead.

Bringing the NHIF into the picture this late in the day is not going to be easy either.

We all remember the disagreements between Public Service minister Dalmas Otieno and Health minister Anyang’’ Nyong’o over the role the NHIF can play in this arrangement.

In the current circumstances, the NHIF might just insist on engaging actuarial consultants to assess the pros and cons of participating in the scheme before it commits the contributions of its members into this risky experiment.

Make no mistake. I fully support the idea of a medical scheme for civil servants. As a country, we need to increase the number of citizens who benefit from medical insurance.

And mark you, the proposed scheme will increase the number of medical scheme beneficiaries in a big way, enrolling nearly one million more people.

When you put more Kenyans on medical insurance, you reduce pressure on public sector health facilities and minimise the public sector’s patient load.

The government is going into a very risky experiment. We have to remember that the medical insurance industry has been incurring huge losses mainly as a result of a high incidence of fraudulent claims.

In 2009, the sector registered an underwriting loss of Sh235.8 million. What if the scheme collapses under the weight of claims?

If the money runs out after six months due to unexpected levels of claims, what protection does the government and its employees have?

Where is the ombudsman to make sure that hospitals do not turn civil servants away because of the so-called exclusions?

What happens to a civil servant working in Wajir where there are no hospitals?

How equitable is a medical scheme that treats a government clerk working in Lokichoggio and Nairobi the same way?

I have read the Cabinet memo on the basis of which this scheme was approved. I have also read the report of the actuarial consultants hired to advise on how to craft such a scheme.

The government is in a quandary precisely because it failed to apply the advice of the experts.