Health insurers tap bio-card to stem surging fraud cases

Posted Monday, January 31 2011 at 00:00
Insurance companies are rushing to phase out photo cards in favour of fingerprint technology hoping to curb fraud — a move that is yielding cheaper premiums for group medical schemes.

Fraud in the medical insurance sector caused revenue losses estimated at 40 per cent of total claims or Sh1.6 billion of the claims lodged in 2009.

This resulted in underwriting losses of Sh235 million for the industry, keeping insurance products expensive at a time when the sector is in dire need of more customers.
Jubilee Insurance medical scheme has given its members medical access smart cards to identify them through bio-metric features when the right thumb is placed on a reader in hospitals.

The bio-metric card has a microchip carrying personal data including names, a picture, signature and the patient’s treatment history.

Resolution Health East Africa said it will start phasing out photo identity cards in March while APA Insurance and AAR Health Services plan a similar phase-out within the year.

Early users of the bio-metric technology such as UAP Insurance said the benefits include business growth and reduced number of claims from non-members who deceive hospital attendants that they belong to some schemes.

“It has led to faster identification of genuine policyholders and beneficiaries and growth of our business,” said James Wambugu, the CEO of UAP Insurance. Insurers who are implementing the new identity systems control about 70 per cent of the market.

Fraud has resulted in high cost of medical insurance that has put off individuals from buying health covers, leaving welfare schemes run by big companies as the main source of managed medical financing.

Outside the corporate world, less than a million Kenyans out of an estimated work force of 12 million have a private medical insurance cover.

Fraud has not spared members of corporate insurance schemes with some providers now demanding they pay part of a doctor’s consultation fees as a cost sharing measure.

The cost of premiums has been under pressure from the rising cost of medical services, including doctors’ fees, drugs and equipment that are mostly imported.

For example, the cost of antibiotics in Kenya was highest among 93 countries surveyed last year.

Official statistics indicate that purchase of antibiotics constitutes over 70 per cent of the average Sh1,500 pocket medical spend by Kenyans in a year because of respiratory tract infections that have a high occurrence in Kenya.UAP, which started using the biometric card in 2007, said it would scale up the scheme beyond the third of its membership who now use the biometric card.

Impersonation accounts for the bulk of medical insurance fraud, followed by fictitious treatment or dispensing of drugs and treatment for maladies that are covered. In all cases collusion with service providers is believed to be at play.

Some medical insurers, however, plan to introduce innovations beyond the biometric card which is only as effective as the integrity of medical services providers like doctors or pharmacists.“In the long term, the sector requires a system that goes beyond biometric identification to managing limits of the policy in real-time,” said Peter Nduati, the CEO of Resolution Health.

He said Resolution Health will tap into the technology of its latest partner Africa Development Corporation that runs a similar health insurance management model in South Africa.

“The future is not in biometric cards only,” said APA chief executive Ashok Shah. “We are evaluating several proposals that go beyond the identification. Medical insurance has become a big problem for everyone.”

AAR Heath Services said it has established biometric card-readers in all its clinics across Kenya to handle schemes that use biometric cards.

The company’s general manager, Edward Rukwaro, said it will use part of the money from the recent sale of 20 per cent stake to private equity Fund for Health in Africa to improve its anti-fraud ICT systems.

The ability to access instant treatment history of a patient will for example help the doctor to decide the best treatment way for a patient.

The cards will enable medical insurance schemes to make real-time monitoring of the utilisation of the policy such that in case a member account has no money, then they pay for services from their pocket.

Data generated by the use of the card will help insurers to have a better risk profile of their member that can be used to decide the pricing model for particular policy.

Insurers will also gain from monitoring how much is to be paid for particular treatment faster and therefore make better use of standardised treatment cost.

Service providers like hospitals and clinics will gain because the card eliminates opportunity where fraudsters present fake medical scheme identity cards that are later rejected by the scheme when a claim is made.

Insurers are banking on the information communication technology bandwidth provided by the fibre-optic cables to rein in astronomical claims paid in medical insurance.

The impact will be felt in revenue inflows in the sector that players termed as “a big problem.n 2009 for instance, medical insurers –except AAR and Resolution Health – earned net premium of Sh5 billion but paid claims of Sh4 billion and another Sh1.2 billion in administration expenses leading to a loss of Sh235 million, compared to an underwriting profit of Sh33.1 million in the previous year.

Out of the 16 medical insurance companies in Kenya, only six made underwriting profit in 2009, said .

Cutting fraud will therefore be a big win in terms of improving the cash flow for medical insurers and could in the long term lead to review of the premiums enabling the industry to expand its possible market.The use of such integrated anti-fraud system will also impact on a wider healthcare management in Kenya, as hospitals said the turnaround time it takes the insurers to pay will be reduced drastically, and improve the time hospitals take to pay their suppliers.

It takes about 70 days, more than two months, for hospitals to receive payment from insurance companies said Kanyenje Gakombe, the CEO of Metropolitan Hospital.

Hospitals keep claims for about 30 days, so that they can send them as a bunch, and the insurance companies take as much time to process them.

Sometimes hospitals are not paid for some claims because the patients they treated are found to be non-members of the insurance company.

Such fraudsters presented fake insurance membership cards. Such fraud is difficult to commit when using biometric card unless there is collusion with a doctor.

The new anti-fraud investments will result in the upshot of the automation of insurance companies in Kenya, most of which have failed to use ICT to improve business efficiency and make related gains.

Software developers and vendors said in earlier interviews that slightly more than a half of the 43 insurance companies in Kenya are using up-to-date insurance software.

Up to 40 per cent still rely on the paper-intensive mode of record keeping.

Most of the companies that say they are computerised just use computers for data entry purposes that cannot be used for decision making.

Sometimes hospitals are not paid for some claims because the patients they treated are found to be non-members of the insurance company.” Photo/LIZ MUTHONI

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One Response to "Health insurers tap bio-card to stem surging fraud cases"

  1. Dr. Kalsi says:

    As far a I am aware it is not ethical to collect ones biota without their consent . Does it mean that if you need an insurance cover you will have to submit your bio data and if not then then you will not be covered?
    Are kenyans just blindly following a trend that is set by companies trying to sell technology and do insurance companies not understand the risks of trying to collect bio data

    We seriously need to re evaluate the bioethics of this country
    There are consent forms and should be made available for those who do not wish to enter their data into a system and understand the implications of data storage.

    Companies also using the software for employees should not force employees to give in their data unless they have their consent in form of a signed document stipulating where the data is to be stored and for what purpose

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