The providers, 23 of them with close to 200,000 subscribers, are still adjusting to shockwaves set off by the depreciating cedi, energy and utility costs which they claim have swallowed investment and premium incomes.
Major health insurance companies are looking forward to imminent big rate increases to cater for increases in the input costs, which they argue experienced a 49 percent increment while premium increment in 2014 stood at only 15 percent.
According to data provided by the health insurers, in the first half of 2015 the sector experienced a 32 percent increment in average cost of care, but on average only 12 percent increment in premium was recorded for the period.
In an exclusive interview with Anthony Sowah, General Manager of Nationwide Private Health Insurance, the industry’s biggest player noted that the worsening macroeconomic situation poses real challenges to the industry and could crumble it.
He said the industry’s inability to respond to economic realities poses a threat to a burgeoning industry which, if care is not taken, could crumble even before it blossoms to its peak in the provision of healthcare financing.
“The industry is not adequately responding to the economic realities on the ground. The economy has suffered some setbacks from the beginning of 2014, and they have been consistent up till now.
“We have experienced massive depreciation of the currency, interest rates going up; utility tariffs adjusted upward consistently, and fuel hikes. For any industry to perform well, it has to respond to its input cost; in this case, healthcare cost,” he said.
Ghana’s entire healthcare system relies on imported products – from medications, beds slept on, hospital equipment, re-agents, cotton needles, virtually everything is imported. Thus, when currency depreciates prices of products and services go up.
He explained that it is, therefore, not difficult to understand that the cost of healthcare is heavily dependent on the local currency’s performance.
“When we start seeing fast depreciation of the local currency, cost of healthcare naturally responds. No hospital or healthcare service provider is going to absorb the effect of these increments, and they pass these costs on to consumers.”
Mr. Sowah has thus called for a system that will allow charging realistic premiums to reflect realities on the ground.
According to him, without premiums that reflect the economy’s true nature, the entire industry will head in the direction of Summit Mutual Health and First Fidelity Mutual Health, both of which collapsed – in 2010 and 2015 respectively.
“It is up to us to have a pricing model that reflects these factors, so that we will be in tandem with economic trends. When cost of care goes up, premiums should go up to reflect the trend,” he said.
But then Mr. Sowah bemoaned the unhealthy competitive practices being pursued by colleagues, which he claims are damaging the sector. Most players, according to him, are just undercutting prices’ in order to win business.
“Instead of being true to ourselves as private health insurers and coming up with realistic premiums which reflect the economic realities, unfortunately, a number of our competitors are engaged in undercutting. So, everybody is feeling the pinch; but just for the desire to win one business or another people are turning a blind eye to the realities.”
To him, the effect or danger of this is that the entire industry stands a risk of collapse. Citing the failures of Summit and First Fidelity, he explained that they both were involved in giving huge discounts to clients which led to their obvious collapse.
“You cannot charge premiums that do not correspond with healthcare cost and expect to survive. It is not ‘possible. They charge to make money or get business, but unfortunately they were unable to maintain that trend; and when reality hit them they were out of business, leaving healthcare providers and clients who have paid premiums shortchanged,” he said.