Rwanda health insurance underwriters are in a bind amid flat premiums and rising tariffs by service providers especially in private clinics and hospitals, adding to the burdens of a sector already weighed down by fraud and losses.
Tariffs charged by polyclinics have tripled since February, while rates at smaller clinics have doubled, leaving medical underwriters on the edge since they cannot adjust premiums until the running contracts are over.
“There has not been any improvement, things keep getting worse,” said Dr Blaise Uhagaze, the executive secretary of the Private Insurers Association.
“Tariffs have significantly increased, in some cases three times and in others doubled. The higher you go in treatment the higher the costs, and it’s not even easy to increase premiums since many have ongoing contracts with clients.”
General clinics have raised their charges by 15 per cent.
Mr Uhagaze says it will take time to adjust to the situation as salaries are also not growing yet medical costs keep rising. The only option underwriters have is to increase premiums.
He said consultation alone in a polyclinic has increased from Rwf5,849 ($7) to Rwf9,468 ($11) while charges for other medical procedures and treatments have increased by a higher margin.
Late last year, the Cabinet approved an upward adjustment of the portion of treatment bills to be settled by the client in public health facilities, where patients subscribing to RAMA, a scheme managed by the Rwanda Social Security Board (RSSB), were to pay 25 per cent of the bill, while those subscribing to schemes offered by private insurance companies will pay 15 per cent.
“Fraud is one of the biggest challenges. Pharmacies collude with patients to defraud insurance companies,” Mr Uhagaze added.
A report compiled by KPMG indicated that fraud adds an extra 18 per cent to premiums in the region, while 5 per cent is the extra cost fraud adds to premiums in Rwanda.
The pain caused by the volatilities in the insurance industry is not limited to private players.
RSSB recently came up with a directive restricting RAMA insurance plan subscribers from going to private hospitals unless they are referred by a government hospital, a move industry observers say is intended to minimize medical costs spent by RSSB.
Much as this move makes business sense for the insurer, many policy holders, mainly government workers, who prefer going to private hospitals or polyclinics because of easy access to doctors and quality treatment which most times is lacking in public hospitals, castigated it as unfairly restrictive.
An industry analyst said that currently for RSSB, when Rwf100 is earned in premiums, Rwf105 goes out in expenses, and that it is even higher than that for private underwriters.
The net underwriting profit for private insurance companies stood at Rwf15.9 billion ($18.9 million) at the end of 2013 but fell to Rwf8 billion ($9.5 million) in 2015 and to a record low of Rwf2.4 billion ($2.8 million ) in September 2016.
According to data from the Central Bank, total liabilities and equity for the insurance industry were Rwf233.2 billion ($277 million ) in December 2013. This increased to Rwf309.4 billion ($367.8 million) in 2015 and by September 2016 it stood at Rwf345.6 billion ($410.8 million).
Unearned premiums have also been increasing. In December 2013, they stood at Rwf13 billion ($15.4million) rising to Rwf15.9 billion ($18.9 million) in 2015, and Rwf20 billion ($23.7 million) in September 2016.