Universal health coverage (UHC) is a global agenda with particular relevance for low- and middle-income countries (LMICs), whose populations face challenges in access to services of sufficient quality when needed, and remain at risk of health related impoverishment [1]. For countries to make progress to UHC, it is important that their health financing systems promote UHC goals: revenue generation mechanisms to which contributions are fair and offer financial risk protection [2]; pooling arrangements that reduce fragmentation and allow for effective income and risk cross subsidization to ensure equity and sustainability [3]; and purchasing arrangements that actively pursue the best possible ways to optimize quality, efficiency, equity and responsiveness of health service provision [4].
Purchasing involves determining what to buy (benefit package), for whom (target beneficiaries), from whom (healthcare providers) and for what price [4]. Purchasing can be passive or active also known as strategic purchasing [1]. The former implies a reliance on historical patterns of priority setting, resource allocation and financial management while strategic purchasing involves seeking the optimal way to organize these activities with the aim of reaching health system goals [5]. Strategic purchasing, therefore, involves performing the purchasing activities in a way that continuously seeks to promote quality, efficiency, equity and responsiveness of the health system [4, 5]. Strategic purchasing is critical for the attainment of UHC [6], and is arguably even more important for micro insurance, which targets low-income earners, who often have higher need for health services.
Micro insurance refers to insurance services targeting principally low-income earners, who are excluded from mainstream commercial and social insurance schemes, due to affordability barriers [7,8,9,10,11]. Generally, micro insurers provide a limited set of benefits to members at low premiums, making them affordable to low-income households.
Micro health insurance (MHI and also referred to as HMI) refers to the provision of health insurance services to these households in exchange for premiums charged on the basis of the risk involved [8, 12]. MHI can improve access to health services, offer financial risk protection through reduction in out of pocket expenditures [12]. It has been shown that MHIs, and micro insurance firms in general, tend to have small risk pools and face difficulties in generating sufficient resources [7] which can impact their ability to act as strategic purchasers. More specific evidence on purchasing arrangements suggests that MHI face challenges in designing benefit packages that remain affordable while offering sufficient coverage, obtaining health service providers who offer quality and efficiency, and managing claims in an administratively efficient way [12].
Some LMICs have experimented with micro health insurance (MHIs) to purchase health services [7, 13]. It is thought that in these settings MHI can expand social protection mechanisms; reach groups usually excluded from health insurance such as the informal sector; address gender-inequalities in access to insurance; be designed to better suit customer preferences; and offer better accountability arrangements for financial and service delivery performance [8]. The limited empirical evidence shows that strategic purchasing practice is not widespread among MHI [14,15,16,17]. The key aspect of strategic purchasing employed was determining who to buy from with evidence of selection and contracting based on capacity, quality and cost considerations [13, 15, 17]. Other activities identified were benefit package design, where the trade-off between affordability and comprehensiveness was identified; and the use of provider payment mechanisms with fee for service and budgets being the most widely used forms [13, 15, 17].
Health micro insurance in Kenya
As with other LMICs, Kenya’s pursuit of UHC has gained momentum and several reforms have been implemented. These include the removal of user fees in government-owned dispensaries and health centres and the introduction of free maternity services in public facilities [18, 19]. Other reforms have targeted the National Hospital Insurance Fund (NHIF), Kenya’s social health insurance scheme, and include expansion of the benefit package to include outpatient and specialized services such as renal dialysis, an increase in contribution rates, and governance restructuring [20,21,22]. Despite these efforts, only 17% of Kenyans had any form of health insurance in 2013 [23], and this number is unlikely to have increased significantly in the recent past. Health insurance coverage remains low especially among the poor and low-income households who mainly work in the informal sector, which makes up 83% of Kenya’s labour force [23,24,25,26]. For example, provisional estimates from 2015 show that only 16% of all informal sector workers in Kenya have NHIF insurance [27]. The low levels of insurance coverage present a challenge for Kenya at a time when mandatory health insurance is being considered as a main financing mechanism for UHC [28,29,30]. Micro insurance is expected to play a role in the country’s progress towards UHC and broader social protection [28, 31].
Micro-insurance schemes are categorized in several models: partner-agent, provider-driven, mutual model (community-based) and the direct agent model [7, 8, 32]. In the partner-agent model, an insurance firm contracts another entity to sell it products, while under direct agent model, an insurance firm controls the entire chain and sells its product directly to consumers [8]. The mutual or community-based model is owned and run by scheme members through participatory mechanisms [7, 8, 33]. The provider driven model is led by a health service provider who takes on an insurance function [7]. All four models of micro insurance are present in the Kenyan health insurance context. The provider-driven model and the community-based model are frequently lumped together and referred to as community-based health insurance (CBHI) schemes [34]. These two models lack a legal and policy framework and tend to be administered as societies or community-based organisations [33, 35]. On the other hand, the partner-agent and direct agent models are labelled as MHIs and have received increasing policy and regulatory attention from the Kenyan government [31, 36].
There are other features that distinguish CBHI and MHIs in Kenya. CBHI operate within a specific small geographical location [33, 37], while MHIs operate nationally [38]. Access to services for CBHI members is usually restricted to low-cost public facilities and faith based facilities within the same geographical area, while MHIs have a nationwide network of low- to mid-cost public and private providers [35]. Additionally, while MHIs offer risk rated premiums to members calculated individually or for groups, CBHI schemes base premiums on members’ decisions, informed by very limited financial analysis, if any [33].
There is no accurate data on the number of and population covered by MHIs in Kenya, largely due to weak regulation, and existing reporting requirements where their activities are recorded under the insurance firms that underwrite the products [31, 38]. A report published in early 2014 suggested that about 300,000 lives were covered: about 1% of Kenya’s population [39].
There is growing interest in Kenya and globally on the role of MHIs as a mechanism for health financing towards UHC [7]. MHI are not only of interest to health policy makers, but also to those from the finance and social sectors who may be interested in the financial and social inclusion potential of MHI [8, 40]. This concern has not been matched with a systematic examination of whether these purchasing practice of MHI are strategic. This paper addresses this evidence gap by examining purchasing practices of MHIs and the extent to which these are aligned to strategic purchasing.