3 challenges affecting community-based health insurance in Ethiopia

Achieving universal health coverage (UHC) requires improvements in service accessibility, utilization, quality and financial risk protection worldwide. In Ethiopia, average primary health care utilization rates are extremely low (1.09 outpatient visits per capita (2021)) and out-of-pocket spending is estimated to be 31% of total health expenditure (2019/20).

To promote universal access to health care through the involvement of the rural and urban informal sector participants, Ethiopia started implementing community-based health insurance (CBHI) schemes in 2011. First launched as pilots in 13 districts, CBHI has been scaled up to 720 districts, covering about 68 percent of districts in the country and about 8.98 million households (with about 41.6 million household members). CBHI members in most regions are entitled to the full benefit package by paying only ETB 240 (less than $5 USD) in annual premium contributions.

In general, CBHI has contributed to improvements in quality and equity of health care services and is a step toward universal health coverage. A retrospective cohort study conducted in 2021 indicated that annual outpatient visits per capita among CBHI member households was higher (2.09) than the annual outpatient visits per capita of the general population (1.77). Treatment seeking during illness is higher among CBHI member households (70%) relative to households from non-CBHI Woredas (58%). CBHI membership has reduced total annual per capita out-of-pocket (OOP) payments at the point of use among CBHI member households (ETB 308 or 6 USD), compared to households from non-CBHI Woredas (ETB 614 or 12 USD).

Around 20% of covered households are non-paying members experiencing extreme poverty, whose contribution to the schemes is covered by regional and district governments. The federal government also provides a general subsidy for all scheme members. However, only about 1% of total heath expenditure in the country is pooled into the government system through CBHI.

Three Challenges

Despite CBHI’s contribution to health service utilization and protection from financial catastrophe, a series of challenges have hindered its progress:

1. Small, fragmented risk pools

In Ethiopia, CBHIs are organized as individual schemes at the district level and provide financial protection to their members only. However, this fragmentation has resulted in inequities in terms of coverage and contribution rates. Each scheme has a limited pool of resources which can be put towards members, and this makes them susceptible to failure. Furthermore, there is no cross subsidization among districts so an insolvent scheme cannot be bailed out by another successful scheme.

2. Limited financial viability

The financial capacity of most CBHI schemes is low. Some are already bankrupt and unable to pay what they owe to health service providers. This is due to low enrollment rates among eligible populations (61%), weak financial management, premiums that are set too low, and insufficient government funding allocated to schemes. What is more challenging is that the number of bankrupt schemes has been increasing over time. The revenue generated from CBHI members and the government’s subsidies is not sufficient to pay costs associated with running the schemes.

3. Low health facility readiness and quality of care

Enrollment in CBHI schemes is widely challenged by the low perceived quality of care in public health facilities mainly due to shortages of medicines, medical supplies, reagents, and laboratory and diagnostic services, as well as poor referral systems. These challenges, coupled with low readiness of health facilities (inadequate and unreliable infrastructure, power, water, functional equipment, funds, and trained staff), have put CBHI implementation in perpetual jeopardy.

Moving toward solutions

Under the USAID Health Financing Improvement Program (HFIP), Results for Development (R4D), in partnership with Abt Associates, the Institute for Healthcare Improvement (IHI), Breakthrough International Consultancy, Dimagi, and Harvard School of Public Health, supports the Ethiopian government in its efforts to further strengthen and institutionalize health financing reforms and initiatives, including streamlining insurance mechanisms for wider access to primary health care services with reduced financial barriers. HFIP is helping Ethiopia address each of these CBHI challenges:

1. Larger risk pools 

In order to address fragmentation, HFIP and the Ethiopian Health Insurance Service (EHIS) in collaboration with regional health bureaus are piloting zonal CBHI schemes. Amhara and Oromia regions have initiated technical consultations with key partners and are preparing directives to start cross-subsidization among CBHI schemes in a given zone. Furthermore, cognizant of the fact that the larger the pool of funds, the more predictable and stable the finances of the scheme, the MoH and regional governments are also considering regional pools that will gradually grow to a national CBHI scheme, covering more members and generating larger pools of resources.

2. Increasing revenue generation and subsidies

To promote the financial sustainability of CBHI schemes, EHIS in its five-year strategy has proposed gradually increasing the government’s subsidy to CBHI schemes from the current 10% to 50% and raising CBHI scheme members’ contributions to ensure equity and financial sustainability. An independent study conducted in 2021 indicated that CBHI member households in both rural and urban areas are willing to pay more than what they are currently paying. This indicates a potential for raising additional revenues for the schemes.

HFIP is also striving to increase resource availability for enhanced provision of quality PHC services by deepening revenue retention and utilization reforms. These allow public health facilities to collect, retain and use their user fees revenue for quality-improving activities.

3. More strategic purchasing

R4D in collaboration with the Strategic Purchasing Africa Resource Centre (SPARC) is supporting EHIS to conduct a scoping review and provider payment mechanism (PPM) assessment to enhance strategic health purchasing (SHP). Adopting strategic purchasing approaches can help the government of Ethiopia incentivize quality, promote efficiency, deliver priority services, and better reach target populations. The ongoing SHP and PPM assessments are supporting the country to get away from the current passive approaches of purchasing health services (historical, input-based budgets and fee-for-service) and identify the best methods to maximize health system performance by making decisions about what health services to purchase, from whom these should be purchased, and how to pay for them. The assessment will generate recommendations to support EHIS to implement its planned Social Health Insurance (SHI) program and deal with the current key challenges faced by CBHI schemes. By leveraging its strategic partnership with SPARC and the Joint Learning Network for UHC, R4D is working to sustainably build capacity within the MoH and EHIS and bring in contextualized regional and international experiences.

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Overall, regardless of the challenges CBHI schemes currently face, it is clear that the schemes are indeed contributing to protecting the poor from financial catastrophe and increasing health service utilization. Both government and key development partners should join hands to circumvent the challenges by continuing to design and implement proven, tested and customized strategies.

Photo © USAID/Audrée Montpetit