The Ethiopian Health Insurance Agency (EHIA) will launch novel social health insurance, allowing individuals working in the formal sector to be covered by an affordable health insurance scheme administered by the state.

It is a policy that would enable employees of private entities and public enterprises to lessen out of pocket payments for medical expenses and attain access to healthcare services using a pool of funds contributed in the form of membership fees.

A part of the life insurance lines of business, policyholders of health insurance are very few in Ethiopia. Life insurance constitutes around five percent of the total premiums written by insurance firms, which reached 15 billion Br during the last fiscal year. Insurers have been pleading to implement a mandatory health policy, similar to third-party motor insurance, to buck this trend. The new scheme does not, however, include plans to incorporate the private sector.

The draft directive gives the Agency the sole mandate to collect the funds for the scheme from employees and pay claims to partner healthcare institutions. But for insurers, the new scheme has the potential to turn things around, though only if options for public-private partnerships are put on the table.

"We'd be happy to work with the Agency after reviewing the policies," said Gudina Legesse, CEO of Awash Insurance, which wrote over 330 million Br in life insurance premiums last year, the highest figure among private insurers.

Involving the private sector to assure sustainable social health insurance is crucial for the scheme's success, says Fikru Tsegaye, an executive officer for strategy and development for Ethiopian Reinsurance and an expert in the insurance industry with two decades of experience. The state certifies the health professionals and builds infrastructure, and private insurance firms have the knowledge and skill, according to Fikiru.

"If the implementation is guided by well-designed policies and properly regulated, it will enhance the healthcare ecosystem," said Fikru.

While only those with full employment are eligible for social health insurance, family members will also enjoy similar benefits under the scheme, measures officials of the Agency hope will protect households from financial burdens arising from medical costs. Out-of-pocket spending is high in Ethiopia, accounting for 37pc of the total expenditure in the health sector, according to a 2018 report from the World Bank.

Employers are expected to contribute six percent of the monthly fee, with half covered by employees. The salary contribution of employees depends on their monthly earnings and is voluntary, but the amount determines the scope of benefits they are entitled to. With the collected funds being non-returnable even if employees leave their jobs, the scheme is designed to enable them to get medical treatments ranging from basic checkups to intensive surgical procedures. However, the scheme does not cover work-related injuries.

The scheme is also hoped to subsidise the public health costs, which account for six percent of the annual budget that stands at a little over half a trillion Birr this fiscal year.