While big US insurers outsource some profit
|April 14, 2010||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
While big US insurers outsource some profit
Africa’s micro-insurance firms cut costs
Medical insurance in Africa is generally much cheaper than in the US. Doctors earn far less money, medical malpractice lawsuits are almost absent, and hospitals often receive some subsidy. One insurance company lowers its costs by partnering with hospitals, not disputing claims, and only offering a single plan that covers all preexisting conditions. We trim, blend, and append two 2010 articles from on health insurance reform by (1) Reuters, Mar 25, on India by Taylor Barnes, and (2) AP, Apr 9, on Africa.
by Taylor Barnes and by AP
- US healthcare reform is boon for India outsourcing companies
President Obama signed into existence not just healthcare law but also monumental piles of paperwork: New member registration forms. More claims. Ever-expanding databases. And on top of that, pressure to cut costs.
The bulge in administrative work may look like a nightmare to American insurance firms and government employees. But to outsourcing executives in India, the addition of 32 million insured Americans is very significant as US health insurers and hospitals scramble to reorganize to comply with the new law.
This extra work will include processing new enrollments, organizing bigger member databases, processing more claims, providing more support services, and managing more revenue.
In particular, outsourcers can expect to benefit from insurers need to minimize administrative costs. A recent Deloitte Center for Health Solutions study shows up to 41% of the cost of a health plan is administrative.
The US healthcare reform offers a “natural extension” of the back-office outsourcing that Indian companies already specialize in.
But some services in the US healthcare industry cannot be outsourced beyond America’s borders due to regulations. Thats one reason major Indian outsourcing firms have set up shop in the United States. In a twist, America’s outsourcers are now outsourcing back to America.
Wipro, one of the world’s biggest information technology firms with nearly 100,000 employees worldwide, says the new healthcare law dovetails with two of its focus areas: servicing governments and servicing the healthcare industry. “The healthcare reform should translate to more demand,” says Rajiv Shah, Wipro’s senior vice president for healthcare.
JJS: Moving on from the US making busy work for the poor on two continents to Africa making full-coverage insurance affordable for poor sick people.
- Micro-insurance plans extend health care in Africa
A heart operation is the sort of surgery that often bankrupts families in Africa. Families normally would pay by selling off land, the inheritance for their children. But micro-insurance has covered the $5,000 operation in full.
In Micro-insurance, people earning less than $2 a day pay tiny weekly premiums of sometimes less than a cent. The policies usually cover all conditions and are written in language that is easy to understand.
Nobel-prize winning economist Muhammad Yunus said his Grameen bank already provides health insurance to around half a million poor Bangladeshis.
Some 14 million Africans use micro-insurance, and the number of African policy holders has increased by 80% in the last five years.
The US government has increased its commitment to micro-enterprise development which includes micro-finance from $193 million in the 2007 fiscal year to $265 million in 2010.
About half of Kenya’s 40 million people survive on less than $2 a day. When children get sick from the raw sewage that trickles through fetid slums, families must choose between medicine or food. A hospital stay is usually out of the question. Hospitals sometimes detain patients, including new mothers, when they can’t pay their bills.
Sometimes the poor conduct deliveries in the house and there are complications. Both the mother and the fetus can lose their life. Other patients only go to hospitals when they are gasping or in a coma.
In Kenya, the government offers a plan that covers an adult and all their children for just under $20 a year. It covers up to 180 days of hospital care a year, although there is no provision for outpatient care. But patients may still be required to pay fees for some surgeries, such as a heart operation.
Ghana’s government-run health insurance introduced in 2003 now covers about half the population. About 90% of Rwandans also have access to basic health care thanks to a government-run plan.
Medical insurance in Africa is generally much cheaper than in the US because doctors earn far less money, medical malpractice lawsuits are almost absent and hospitals often receive some government support.
But still, It’s difficult to persuade those struggling to survive to part with precious cash to pay for care that they may never need.
Jamii Bora, a Nairobi-based nonprofit micro-lending organization, began offering insurance after many of the poor that took its tiny loans defaulted because they or a family member fell sick. After they introduced an insurance scheme in 2001, defaults fell by 93%.
Jamii Bora lowers its costs by partnering with mission hospitals, not disputing claims and only offering a single insurance product. The group has about 60 partner hospitals that receive small but regular payments. The scheme is completely self-sufficient and covers all preexisting conditions, including HIV/AIDS, and maternity care.
In some cases the insurance also helped drive down prices. Once three hospitals in western Kenya offered services at government-approved rates under the program, five other area hospitals followed suit and dropped prices to remain competitive.
JJS: While doctors and lawyers do provide some service, they also sure do make life expensive in developed nations. I bet both fields could do with a bit more competition. And would hospitals need subsidy if patients were not poor?
If you want prosperity, try geonomics. Replace taxes and subsidies with recovering then sharing the socially-generated values of sites and resources. Even small doses have worked wherever tried.
Jeffery J. Smith runs the Forum on Geonomics.
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