TBY talks to Ramesh Kurup, CEO of Hygeia HMO, on consolidation in the sector and the significance of SMEs.

As of today, Nigeria has over 70 health maintenance organizations (HMOs) spread across the country. How do you see this number evolving in the future?

I see consolidation on the horizon. Within the existing regulations, the National Health Insurance Scheme (NHIS) has pursued a reaccreditation of the HMOs to look at their minimum requirements to operate. The foremost requirement is that HMOs that are operating in all states and geo-political zones of the country (called national HMOs) should have a minimum capital of NGN400 million, slightly above $2 million. The deadline for the HMOs to meet the requirements was August 31, 2014. This criterion is one thing that could bring about a lot of consolidation in the form of HMO mergers and acquisitions. With this consolidation happening, the number of HMOs will come down from the present 77 and the remaining players will be financially stronger. Something similar just happened here in the banking sector; it has also happened in the insurance sector. Another reason why I feel it will happen and the health insurance industry will become strengthened is that there is a National Health Insurance Commission Act that has been passed by the parliament and the senate. It is now waiting to be signed by the president. Once that is enacted then the NHIS will no longer be the NHIS in its current form. It will be repealed and this new act will come into play, which will be more like the National Insurance Commission (NIC). It will be called the National Health Insurance Commission. The commission will have a number of members; there will be a commissioner and an executive council with other members. There will be nominees from the NIC and from the Central Bank of Nigeria. It will be a financial cum healthcare regulator in practice. Look at the case of Tanzania, for example. There, health insurance is regulated as just another insurance company. There are a lot of drawbacks because of this, and that sector cannot grow. It is just a tiny portion of the insurance business. But here, one great thing is that it is regulated separately. The healthcare providers (the hospitals) are a critical player in the healthcare segment, and any regulation of health insurance without a correlated regulation of the healthcare providers will not bring about the desired outcomes in the healthcare sector of the country. That is one of the most positive things about Nigeria relative to some other African countries. And so, it has its own strengths, and I would say that the strengths outweigh the weaknesses. You only need people with the skill and the will to execute the model.

What is Hygeia HMO's customer segment? Do you see any other market in the population potentially in need of your services?

The market has different segments. One is employees in the formal sector. It is easy to identify them. Naturally, the client is the employer because in this case they are the ones paying for it. That is one of the factors that has contributed to the growth of health insurance in Nigeria and even in other African countries. In India, for example, it does not happen that way. Employers do not even pay for their employees' healthcare except in very few companies or industries. In our case, what we normally do is differentiate employers by size in terms of the number of employees, because for us the size of the employer is what matters. That is not in terms of revenue or profitability, it is in terms of number of employees. We operate today in segments where there are at least 10 employees. There are multiple definitions for SMEs, but this is what we do. From 10 up to 50 employees is an SME. We have plans for them. Then we have differentiated that into various levels. Up to 200 or so is “corporate" and up to 500 is “large corporate." The idea is to have structured pricing and product packaging depending on the level of the client. We have clients with more than 65,000 enrollees also. We only do SME and corporate business today. But as far as the needs of the nation are concerned, or the potential of the market is concerned, we must bear in mind that the majority of the population is not formally employed or they are employed in organizations with three or four employees. It is the people who are either employed in the informal sector or on their own, in SMEs, who are looking for coverage for themselves and their families, or themselves and their two or three employees. That is the next market. Reaching out to them is the biggest challenge. Customer retention in this segment is also a problem. If they do not feel that there is value for the money they are spending, they will not renew the next time. At the end of this year we will venture into the SME sector for the high-end market. The mid and low segments will follow. We will not venture into the lowest segment of the market, as our not-for-profit venture called Hygeia Community Health Care (HCHC) is handling that segment of the market.

Do you foresee coming up with any special plans to serve these sub-segments of the market??

Yes. Today we have HyEssential Plus, HyPriority Plus, HyClassic Plus, and HyPrestige Plus. Our vision is to be fully up to international standards. All of our existing plans only cover domestic care. You are not up to international standards if you do not provide coverage outside of Nigeria, because there is care that is not available in Nigeria. Providing coverage outside of Nigeria is part of the strategy. We will be venturing into that direction this year. Hygeia is the strongest brand in this business in the country, and we will be building strategic partnerships with the strongest international brands. That will be the stepping-stone for us to start venturing into the SME segment and the retail segment in a big way. When we start that, by the end of 2015, we will venture into the next segment down. So by the end of third year we will be fully into retail. This year we are investing in technology and building the capability to support the business ambitions I just mentioned.

“I see consolidation on the horizon."

How can the country hit the Universal Health Coverage goals for 2015 and provide 30% of Nigerians with health coverage?

There are a lot of things changing. The regulators are working very hard to achieve change. The players in the market also feel that they have a duty to the nation to make this possible. Yes, the margins might be low, but the numbers are huge. Even if you are able to give people the most basic primary care coverage, don't you think that you are adding value to their lives? I think we need to look at it that way. If you find a person who is not able to have three square meals a day, and you say that you will not give him something unless you have the resources to give him three meals, then you are living in an idealistic world. Give him half a meal and he will be better off than he was. Make tomorrow a better day. There is no “best day." Maybe the 2015 deadline is ambitious, but I'm positive about it.

© The Business Year - November 2014