Healthcare Experience Translates to Better Insurance Models

Q: How can Reinsurance Group of America (RGA) collaborate with the public sector to innovate Mexico’s healthcare system?
A: Private health insurance companies should adapt to the local healthcare system in every single country. Those with a strong public offering, such as the UK or Canada, do not require private health insurance products, because their public healthcare systems are comprehensive, so insurers must only fill certain gaps, such as coverage for medicines or dental and optometry services that are not included in the public catalog. RGA wants to improve Mexico’s healthcare system by introducing affordable products for the middle and middle-low income classes. Since total expenditure in healthcare accounts for 6.5 percent of national GDP and 49 percent of that comes from private expenditure and considering that 92 percent of such private healthcare spending is out-of-pocket, this means that 2.93 percent of Mexico’s GDP is linked to out-of-pocket healthcare expenses. Therefore, we need to create affordable and comprehensive health insurance products. The worst way to finance healthcare is out-of-pocket, as this only makes healthcare services more expensive.
Although reinsurance companies do not work directly with the final user, RGA has developed strategies to go beyond the common reinsurer practice and ensure companies are providing the products needed by the market. Only 8 percent of the private health expenditure in Mexico is paid by insurers, since most Mexicans prefer to visit pharmacy-sponsored doctors or wait as long as necessary to receive an appointment at public systems before paying for private insurance, which is why we are betting on specialized and affordable products that target specific ailments. We do not believe that a single company has all the answers but we can use our global experience to replicate successful implementations from other markets, such as South Africa and Southeast Asia.
Q: How can insurance companies better address the needs of the Mexican population?
A: We believe there are serious problems with the business model of many insurers, which offer complex products that do not properly address the underlying morbidity of the insured population. In addition, companies face complications in balancing complex regulation, financing, service provision and product integration, the latter referring to how companies bring together financing and delivery of healthcare services.
In Mexico, insurers act mainly as financers and do not have the accurate focus to reflect that. Financers are supposed to provide the financial resources to pay for a medical covered incident. However, the key to effective health insurance is not just paying the medical expenses covered but to make this sustainable, while managing the type and quality of treatments received by the patient, as well as their cost. To perform all these activities, insurers require better health management services, provider network infrastructure, cost-management processes and specialized IT systems.
Q: How can insurers increase their profitability in the healthcare sector?
A: Hospital bills for insured patients tend to be higher than those for the uninsured, even after having the same medical procedure. Uninsured patients always ask for an itemized bill and address with the physician and/or the hospital any irregularities related to items that were not used or requested. Moreover, these clients can negotiate a discount with the doctor or the hospital. Insurers, on the other hand, are not negotiating with providers in the right way and incentives between financers and providers are not aligned, so bills remain higher, which is reflected in larger premiums.
The lack of true partnerships and mutual understanding between financers and healthcare providers may also lead to abuse, waste and fraud in the use of medical services. In the US, these three elements represent approximately 30 percent of the total cost of an insurance premium.