Why Your HMO Is Not Scamming You
Back in medical school, the first time I told one of my friends that I was doing my electives at an HMO (Health Maintenance Organisation), an unconventional choice at the time, he called me a scammer. It was a friendly jab, but beneath it, he was unknowingly perpetuating the narrative that HMOs are entities that collect money for the care of a patient and gave them low quality healthcare in return.
For those that do not know, HMOs exist primarily as middle men in the health space. They sell health benefit packages to individuals, SMEs and giant corporations, at rates determined by premiums or agreed prices between both parties, and buy health services from service providers at agreed rates. Basically, they help you shop for health services depending on your spending power either as an individual or a business.
The beautiful thing about this is that valuable health insurance packages often give you access to health care exponentially worth more than your premium. For example, the lowest individual plan at a top HMO in Nigeria currently is worth N29,000 a year, and it gives you access to health services worth about N700,000. This in itself is the secret of health insurance; Risk pooling and sharing. Of course, it is beautiful, but the truth is that because HMOs are private entities, and hence, the form of health insurance they provide is Private Health Insurance, they are prone to many challenges. One of which is the ‘death spiral’, which is a long story, and not the crux this article. Another is ensuring that the enrollees get true value for their money and the HMO remains profitable. HMOs often have a department filled with health workers who ensure that enrollees get health care according to global standards. This often helps to checkmate the HMO and prevent it from being a purely profit making venture without any care for the health of the enrollees.
This makes you wonder why HMOs owe so much money, and why they do not pay the service providers. Truth is, being a middle man has it down sides. Most HMOs get most of their money from businesses. Individual plans do not contribute majorly to profit. Also, HMOs often scramble to ensure that they have high profile businesses on their network. This way, it gives them credibility, and instills more confidence in any prospective client. The issue is that, sometimes, businesses delay with payment of premiums of their employees enrolled in HMOs. This leaves the HMO with a daunting task of continuing provision of care to enrollees, paying service providers for services rendered, and also paying the staff of the HMO.
This is no mean feat, and the Managing Directors are often under a lot of pressure. There is a board to answer to, there are targets to be met, irate enrollees who are not satisfied with services, clients promising to pay up soon, and with whom you cannot just cut off the business relationship because you know that having them on your portfolio is good for you, and you also know that they will pay up.
There is also the part of being economical. Efficiency can be defined as combining the variables of production optimally to get the maximum output possible from that set of variables. This means that the HMO ensures that it meets the primary goals of providing quality healthcare and making profit. In this light, not all enrollees will get an expensive drug brand, if another equally efficacious generic, or not as expensive brand is available. The challenge is often that service providers are sometimes guilty of providing the cheapest services possible, for instance, giving very cheap and ineffective generic drugs instead of reliable brands to reduce their own expenses and collect more money than they actually spend. HMOs have entire departments dedicated to vetting bills from service providers, and sometimes, these bills are filled with inflated prices, and unnecessary services not entirely related to the patient’s case.
Lastly, there is always the case some people try to make, “I have been on health insurance, but have never used it for anything”. Insurance is basically risk shifting, when you sign up for an insurance package, you transfer the risk associated to that service to the insurer. The interesting thing about risk is that it may or may not occur. If you own a car, you pay premiums for your insurance, you hope to never have any business with the insurance company actually, still you pay everyday to avoid harassment from the Law Enforcement Agencies, and to avoid sweating unnecessarily if you have an accident. Also, it is unhealthy to never step foot in a medical facility for many years, no matter how fit you may feel.
Proactive HMOs often employ a lot of health education and preventive medicine to catch disease conditions early. No HMO actually wants you to come down with a chronic /severe illness, and that is a win-win incentive for everyone involved. The less time spent in the hospital by employees, the more time spent working for the company. The less enrollees with chronic ailments an HMO has, the more money to spend on those with serious ailments, and the more profit made too! Best of all, the less chronic / severe ailments you have, the better your quality of life!
Universal Health Coverage is the provision of health services (preventive, therapeutic, palliative, promotional & rehabilitative) that are effective to every individual as needed, without the risk of financial ruin of the individual. A system based on HMOs is not the best way to achieve this long term, in truth, but they are what we have at the moment, and they are doing the necessary grass root work needed to increase coverage. Calling them scammers or inciting the public against them will do the average Nigerian no favour.
N.B This article was written to expatiate on my response on Twitter to the HMO slander that was making rounds.
