Zack Oloo and Sam Agutu have been friends since they met at school 43 years ago. They followed similar career paths, working their way up Kenya’s health insurance industry until each ran successful brokerage businesses in the sector. Then, a few years ago, they both quit.
With less than 10% of Kenyans covered by health insurance, whether by private companies or the mandatory national hospital care scheme for those in formal employment, most of the population potentially faces devastating out-of-pocket expenses if they fall seriously ill.
Oloo and Agutu decided there must be a better way. So in 2008 they launched Changamka Microhealth, a company that helps Kenya’s urban poor access and finance healthcare through use of mobile phones, mobile money and smart cards.
While all employers are required by law to enroll their employees into the National Hospital Insurance Fund, membership is voluntary for the 77% of the working population who are self-employed or work in the informal sector. The scheme covers limited hospital care solely, and as of last year, only 800,000 people from the informal sector were enrolled. Other private insurance schemes cost upwards of 50-80,000 KES ($600-900) to cover a family. The average per capita income in Kenya is only $1,800 a year.
“For self-employed Kenyans [and those in the informal economy]… formal insurance mechanisms do not exist,” says Oloo. And they are the ones who need it the most. Even malaria treatment, which costs as little as half a US dollar can cause financial difficulties for someone making just $2-$3 a day.
Dr. G. Mbugua, who has run a small clinic called Uhuru Prestige in a low-income area of the capital Nairobi for the past seven years, says that most of his patients are uninsured.
“In Kenya, we have a problem with saving for health care,” he says. “Most of my patients pay out of pocket. They prefer to tackle health care when someone is sick. They’d rather buy food than save for health.”
Christina Synowiec, of the Center for Health Market Innovations in Washington, DC, agrees. “There is lack of sensitisation to insurance, and, as part of that, pre-payment is a hard concept,” says Synowiec. “The notion of paying in advance for access to health services is foreign, but can help in preventing financial catastrophes.”
Synowiec adds that it can be difficult to identify uninsured individuals and their families, encourage enrollment and collect premiums.
Yet while a culture of saving among the poor is lacking because of low wages, fluid employment, and extended family emergencies, “saving is better understood than insurance,” Oloo says.
So in 2009 Changamka launched a “smart card” that enabled Kenyans to save small amounts over time to cover the costs of outpatient services, drug prescriptions and consultations. Customers could buy Medi-Save cards in shops, and then add money whenever they liked using M-Pesa, the mobile money service that allows the nearly 75% of adult Kenyans who subscribe to it to use their phones to store money and make payments. Medi-Save users could then transfer extra money into an account linked to their card number simply by sending a text message.
When they attended clinics, hospitals and other healthcare providers, their cards were swiped and their accounts charged at point-of-sale terminals. Changamka pre-contracts prices with medical providers, and takes a 10% cut for services charged. Providers are happy to pay, since the system eliminates time consuming and expensive paperwork.
Last month, the company introduced new E-cards, which work the same way as the previous system except now providers bill patients via a secure website, meaning they don't need separate point-of-sale devices.