Innovative Growth Models for Health Management Providers (HMOs)

The screenshot below makes you think.

Figure 1: Screenshot of a tweet that makes you think.

It should make you think. Especially if you are a business leader in a health management provider (HMO), who is concerned with solving the problem of access to healthcare services and, well yes, tomorrow’s profit.

There is another premise being put forward in this post too, and it is that the products and services offered by most HMOs in Nigeria are tailored to the same set of customer segments that comprise the 3% of Nigerians who have access to health insurance.

If the above is true, why in a country that can be classified as one having a large population (some estimates put it at 220 million men, women and children) does it appear that 74 listed health insurers are mainly contesting for the same 6.6 million people?

Is it simply a case of ‘strategic contentment’? Lack of innovation courage? Or genuine limits to growth despite lofty revenue and service delivery ambition?

The above questions are among the few one hoped to investigate in writing this post, after which there is an attempt to take a look at how innovative business design can guide concerned leaders of these HMOs to tomorrow’s growth/profit opportunities.

Quick and dirty analysis of what the feasible market should be.

First, we can establish feasibility parameters by investigating the non-out-of-pocket (OOP) rates of paying for healthcare in other countries and compare these percentages to that of Nigeria, precisely focusing on countries like Nigeria which have non-universal insurance systems.

Some of the countries selected for comparison have similar human-development indices (HDI) and extents of infrastructure development to Nigeria, a number have higher HDI, and a couple are in a state of war or conflict.

As mentioned, the main commonality is the presence of non-universal insurance systems i.e., the allowance for private sector organizations to play as much a role as they can in being an alternative to out-of-pocket payments for healthcare.

Figure 2: Percentage of population that doesn’t pay for insurance out-of-pocket. Source: Gumi Analysis

Either out of denial from the surprise that we surpass just Yemen (which has been at war for nine years) in the chart above, or due to green-blooded patriotism, the default may be to make an argument for why one can’t really compare any of the other countries to Nigeria. Choosing to make an argument will typically follow one of three routes:

The first being that Nigeria has a large population, so more people are likely to not access health insurance. Right. Indonesia has a higher population of 273.8 million compared to Nigeria’s which stands around 220 million.

The next route is, some of the countries with higher non-OOP expenditure are more developed and have the benefit of improved infrastructure, and the response to that will be to call out Burundi, the Democratic Republic of Congo and Ethiopia who have lower HDI indices than Nigeria but have higher percentages of their population covered by health insurance and other non-OOP alternatives.

For a non-practitioner, the next argument could be to question the relevance of health insurance in the first place and challenge the idea that good health insurance has any correlation with improved access to healthcare. The response here will be to introduce the evidence of what works by sharing the five-evidence based approaches to improving access to health care which have been proven to work in countries with more effective systems than Nigeria, and the five in order of decreasing effectiveness are:

● Expanding insurance to cover health care costs (surprise, surprise)

● Extending telehealth services

● Investing in mobile clinics

● Educating the public about multiple health care sites

● Improving cultural responsiveness

I certainly hope the above leads to two obvious conclusions — health insurance is critical in improving access to healthcare, and that Nigeria is performing much worse than it should as far as health insurance subscriptions are concerned.

Furthermore, the information presented in the chart above can be narrowed a bit more to answer the question of, what should the ideal non-OOP percentage for Nigeria be? Answering this question should then begin to steer the conversation towards HMOs, helping them to estimate the opportunity for growth as well as how growth can be achieved.

If we eliminate any better performing country in terms of HDI and others that can be considered as having low populations, leaving those with high populations, comparative HDI and geographical similarities by being situated in Africa, that leaves us with DRC and Ethiopia. Both have 66.92% and 60.28% respectively.

If Nigeria had the same percentage of people who don’t pay for healthcare out of pocket as the latter 60.28%, that would mean an opportunity for 132,616,000 million people to access health insurance. A whole 126 million more people than are currently subscribed.

However, stating that are 126 million more people who could be subscribed to health insurance isn’t a viable way for any single operator to assess growth opportunities because a large volume of the people that make up this non-consumer class are in the informal sector, reside in rural/semi-rural areas and given the demographic profile of Nigeria, 70% are young people under age 40, who are also beset by high under and unemployment rates.

But, they are still non-consumers and what do you do when there are non-consumers? You build a market-creating innovation stack to reach these non-consumers.

So how should health management operators approach this from a growth perspective?

Innovating the paths to growth

There are possibly 126 million activities to carry out to get a profitable slice of about 126 million people who can buy what you are selling, but all of these activities can be grouped under the four basic levers a business can pull to increase growth. Let’s re-establish them here:

I. Rethinking distribution channels to reach more of these non-consumers.

II. Innovate product lines by introducing new products and diversifying existing ones.

III. Rethinking the approach to marketing

IV. Innovative partnerships

Lever 1 — Rethinking distribution channels

A good portion of the health management players in the market actually have solutions intended for non-consumers. If that is step one, then steps two, three and 126 million are found in the answers to the following questions:

1. How do we make these non-consumers aware of our health insurance offerings?
2. How do we educate them on the features and benefits?
3. How do we make it super easy for them to buy?
4. How do we help them use these offerings?
5. How do we get them to keep using as well as refer others?

When thinking about distribution to informal or semi-rural consumers, there often isn’t a requirement to deploy new mechanisms beyond the use of trusted intermediaries or associations. An example of a non-insurance business using this approach in reaching informal segments can be found in the case of Sabi whose B2B retail platform seeks to facilitate informal trade by providing access to domestic goods and services which aren’t typically available through the formal economy. The Sabi platform understands that a defining characteristic of the informal sector is the use of highly specialized middlemen, and it doesn’t seek to cut out the middlemen in delivering its value proposition. As a matter of fact, these intermediary middlemen play key sales and customer service roles in its interaction with the informal sector.

Similarly, and this time in a similar space, is another study with useful insights in this regard. The Enhancing Financial Innovation and Access (EFInA) study on access to financial services in Nigeria looked at insurance as a whole, and according to the research carried out and shared in their 2021 report, 2% of adult Nigerians have or use insurance products from formal financial institutions, and both lack of awareness and suitability of products are reported as the main barriers to access. Take the clip below from the report showing the reasons respondents have for not being insured.

Figure 3: Reasons for not being insured. Source: EFInA Access to Financial Services in Nigeria 2020 Survey

Looking at the above graphic, five of the reasons namely — ‘I have nothing to insure’, ‘I do not believe in insurance’, ‘I haven’t thought about it yet’, ‘Not sure about the benefits’, and ‘Lack of information’ have everything to do with the customer awareness and education aspects of effective distribution channels.

The importance of customer awareness and customer education begins to answer the question of how any reasonably successful distribution of health insurance can be carried out when relating with the informal segments of the market.

Another report by EFInA provides key insights that support this hypothesis in the report titled Driving Financial Inclusion: Lessons from other countries (that have gone ahead of Nigeria). When comparing India and Kenya with Nigeria, the key statements from the use of distribution models are — linking of informal associations with financial institutions, and sustainable and ubiquitous agent networks. These represent useful intermediary groups that any provider of health insurance services can seriously take a look at.

Having more effective distribution channels is the first growth lever, and it is important but perhaps the next lever could be equally or more important. Think about it this way, you have found a reliable way to reach me and for me to get to trust you, now what are you reaching me for/with?

There is no overlooking the idea that there is an insufficiency of products suitable for non-consumers in an industry that is almost over-saturated in serving a particular type of customer — the white-collar business, its employees and their families. This perfectly tees up the next, simple innovative idea which is increasing and/or diversifying product lines.

Lever 2 — Increase/diversify product lines.

A look through the corporate web pages of most of the 74 registered HMOs (a few don’t have websites) turn out the same result, which can be harshly but best put as — they are all the same company, just with different names, brand colors and key people listed under the who we are section.

The most common information about the provider and its products being:

● A declaration as being the best or largest HMO for all Nigerians.

● A product listing encompassing individual, corporate, elderly people and community plans.

● In some cases, a mention of the use of technology such as data science, intelligence and analytics and;

● 24/7 customer-care line availability.

Some have additional features such as COVID-related care, a companion mobile app and perhaps only one has flexi-payment option i.e., being able to pay premiums monthly asides the default quarterly or annual payments.

On the surface you might conclude that this means almost all the HMOs in Nigeria are poised to cater to every Nigerian from every walk of life, but is that really the case?

When you consider the earlier uptake percentage of 3%, and survey the experience of users of their service delivery stack, the story begins to look different, and the paragraphs that follow highlight a few observations/theories:

If a tree takes a tumble in a forest and no one is around to hear it, does it make a sound?

This is the case of most health management provider offerings outside of the ones offered to corporate organizations/SMEs.

Non-consumers i.e., informal economy, community residents, freelancers, independent contractors, and older people are being sold the same repackaged product offerings either as a form of free community initiative or under different names but possessing a stricter list of exclusions or hoops to jump through to access non-basic care options.

From a business design perspective, the above is a growth curse, as when a business tries to grow by stretching its current business proposition design to serve customers that the proposition was not intended to serve, it finds itself in a mismatch where it is forced to lower prices, alter product offerings or expand its scope into an area where it is not operationally efficient.

And it isn’t the fault of business leaders per se but down to the conventional way of thinking about growth/market share:

Figure 4: Conventional way of thinking about growing market share.

How about seeing it from the following perspective instead?

Figure 5: Innovative ‘stating the obvious’ way of thinking about growing market share.

An effective way of summarizing the above point is, avoid looking at growth as listing out all possible customer segments and offering them the same core offering with just a few tweaks. How about investigating why non-core customers are non-consumers and operate in the uncontested space of profitably delivering them tailored products and services?

Moving on from expanding product lines, how can diversifying existing products for existing customers be looked at?

Viewing existing customers as an installed base can prove useful here. After the sale of the initial offering (health insurance subscriptions), there is a chance for growth from follow-on products and these products sometimes offer an opportunity for higher margins, repeat income, and could even become standalone ventures of their own in future.

The ideas below help to illustrate the point:

Some HMOs have companion apps, but the bulk of these apps are limited in features and functionality. Imagine for a minute that the companion app enables:

a. Secure, cloud stored biodata and health record information of the plan holder

b. Connection/compatibility with the most common wearable devices to track daily activities with permission.

c. Connections to merchant add-ons in the areas of health, wellness and lifestyle services e.g., meal trackers, gyms.

d. Communication and payment.

In this instance, the simple companion app which most providers currently use for just registration and scheduling, could become an ecosystem or one-stop shop for the following growth opportunities:

1. The app can merge online and offline experiences, enabling members to book physical fitness classes and personal trainers, purchase healthy food and more. Users can discover and access bespoke workouts and sessions in home or in their neighborhood gyms.
2. The bulk of the Nigerian population and future subscribers to HMO plans are younger millennials and older Gen-Zs, who are keener on learning how to cope with stress, and physical and mental self-care. The companion app can evolve to analyze a user’s health metrics from all their wearables, smart sensors, and smartphones, give them a cohesive view of their health conditions and stress indicators, and offer personalized benefits such as:

● Deeper and personalized health insights to the user.

● Recommendations on health metrics like sleep, calm, and activity and using that to suggest proactive treatment.

● The creation of AI personas to coach as well as to challenge in the form of advice and encouragement, and nudges to carry out activities that enables the user to become a healthier version of themselves.

● A direct connection with prompts to rescue services in case of emergencies such as a fall, and other features such as on-demand medicine orders, or perhaps offer something more robust like comprehensive diabetes management or cardiac care.

A personal favorite idea where seeing existing customers as an installed base is concerned, is that a fair amount of urban dwelling consumers of health insurance have animal pets. (Case in point — the estimated dog population in Lagos is 1,527,718) With a sizable number owned/parented by individuals or families who pay more attention to issues relating to their pets than ever before, what if pet health insurance is an exponential growth opportunity in Lagos or Abuja?

Lever 3 — Rethinking the approach to marketing.

More effective marketing can help drive improved growth for HMOs and the stats back it up. Revisiting the results of the EFInA study above, reiterates that lack of awareness is one of the most commonly reported reasons as to why people don’t consume insurance services.

A non-consumer might ask, how can I consume something I don’t know about or know how it benefits me?

The marketing lead or CEO of a health management provider reeling from the millions of naira expended on marketing is likely to be poised to counter that idea vigorously.

But hold a thought, and let’s examine the two points of view in light of how marketing should work, how it is often carried out and perhaps this could help see where any faults are or bridge gaps.

The two illustrations below help to make the distinction between how businesses situate marketing in their service delivery value chains, and how they should.

The more common marketing paradigm:

What it should be like:

Imbuing this change in approach to marketing by re-ordering the position marketing occupies in the service delivery sequence makes marketing products to current or future customers more effective.

This change in thinking also cuts across to the physical and online brand experience for customers as they interact with the brand. For example, tailoring the marketing mix to the way the informal worker wants his health management priorities addressed is far more effective and cheaper in the long run than extensively describing the health insurance product you have tailored for him on the business website, when he neither has access to nor time to use a computer.

AXA Mansard gets this, and in their recent (re?)launch of AXA Pass have emphasized the use of USSD/text in collaboration with Airtel to inform, educate and onboard as many non-computer or smartphone members of the informal economy into their health insurance scheme.

Lever 4 — Partnering with competitors or a company in a different industry.

The final lever for growth is partnerships, and this can be in the form of mergers and acquisitions, joint ventures or partnerships with the competition, or other companies in a different industry.

Partnering with or acquiring a competitor stronger in a different area of the market increases market access. For example, two providers with regional licenses can merge.

In the case of a company in a different industry, it is the opportunity to incorporate market or technical or operations synergies that can be piggybacked to help scale the delivery of one’s offerings. The same way a logistics startup leverages Google Maps, or a food business partners with a delivery technology startup. How can HMOs begin to think about other players in other industries and how their built infrastructure can be leveraged? The answer on the other side of this question can be a key growth start point.

Conclusion

This post was written because the health management offering in Nigeria is filled by gaps on every side. There is a gap in potential number of users i.e., 126 million more, there is a gap in awareness of health insurance products and their benefits, there is a gap in claims management efficiency and how it impacts costs, there is a gap in marketing and customer brand experience design.

The past 8 weeks of one-on-one conversations with talented leaders at some of Nigeria’s leading HMOs have further illuminated the interesting nature of some of these gaps but the clear, unifying ideology driving all of these executives is the desire for growth from a revenue perspective as well as from the altruistic angle of helping people get healthier and better access to medical care.

This post only starts to explore the rudimentary threads that can be tugged at, but tugged at they should, as they aren’t done enough at this point. And while this doesn’t diminish the need for macro-infrastructure such as input from policymakers/regulators or industry-wide collaboration among the 74 players, being able to think of new products for new customers, new products for existing customers, innovative ways of marketing and using channels should comfortably provide any player with avenues for growth.

There is a gap in the market, and there is a market in the gap.