Decentralization of corporate operations: Innovative management to increase operational efficiency A case of the National Health Insurance Fund

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1 Good Practices in Social Security Good practice in operation since: 2006 Decentralization of corporate operations: Innovative management to increase operational efficiency A case of the National Health Insurance Fund National Health Insurance Fund United Republic of Tanzania Published

2 Decentralization of corporate operations: Innovative management to increase operational efficiency Summary The National Health Insurance Fund (NHIF) is a compulsory scheme responsible for facilitating the provision of health services, initially to formal sector employees. Now the Law has been amended to cover workers in the public, private, informal and semi-formal sectors. Preliminary actuarial studies recommended the NHIF s operations be centralized in Dar es Salaam. However, in view of the fact that the majority of the NHIF s members live in rural areas, particularly primary school teachers, the NHIF took initiatives to decentralize its services. The main objective of decentralization was to improve services with the expectation of accentuating a spirit of ownership in members, reducing operational costs and bringing stakeholders closer to the scheme. The NHIF decentralized and initiated an on-going strategy to convey the health insurance concept to the rural population. By June 2011, the scheme had opened 12 area offices country wide. These offices are mandated to make operational decisions in their areas of jurisdiction. Thus, decentralization has led to tremendous cost reductions, increased awareness among members, and a reduction in members complaint and the time taken to process claims. CRITERIA 1: What was the issue/problem/challenge addressed by your good practice? Please provide a short description. Preliminary actuarial studies recommended that the NHIF should operate centrally from Dar es Salaam. In view of the fact that the majority of the NHIF s members live in rural areas particularly primary school teachers, the NHIF took initiatives to decentralize its operations. Now, the NHIF boasts a national network of branch offices which perform functions which could otherwise have been the mandate of the Head Office in Dar es Salaam. The NHIF believes that decentralization is crucial to improving service delivery to members, service providers and the general public. Before decentralization, the NHIF grappled with many challenges including: Service providers took a very long time to submit claims because the only receiving point was the Head Office. This resulted in delayed reimbursement. Feedback on members complaints took a very long time given that Information and Communication Technology (ICT) infrastructures were underdeveloped.

3 2 CRITERIA 2: What were the main objectives and the expected outcomes? Objectives Decentralization was a must to enhance efficiency. Since the inception of the NHIF, it has undergone turbulent moments. One cause of such turbulence is that members resist joining the NHIF even though it is a compulsory scheme. The major reasons for this were poor services at accredited health services and delayed reimbursements to service providers for services rendered to members. Therefore, the NHIF had to find a way of best responding to members complaints and paying service providers in the shortest time possible. The motive behind the continued decentralization of the NHIF and adopting a rural approach is to locate services closer to its stakeholders to serve better its members, beneficiaries, health service providers and the general public. Decentralization was particularly intended to: Afford NHIF members easier access to NHIF offices where they could present their grievances such as concerning poor services at accredited facilities. Afford service providers with easier access to NHIF offices where they could lodge their claims easily and quickly. Enable the NHIF to increase the recruitment of members. It was difficult to recruit members countrywide from Head Office because of high operational costs. Relieve Head Office of operational tasks so that the Head Office could become a think tank for policy making and strategic engineering. Change the methodology of informing stakeholders from traditional Information, Education and Communication (IEC) materials to face-to-face communication as IEC materials were not reaching the rural population due to geographic problems and a high degree of illiteracy. Cost effectively collect contributions from employers other than central government whose contributions are not deductible from the Government pay roll. Enable the NHIF to work closely with the rural based Community Health Funds (CHF) and pilot possible linkages between the two schemes. Expected outcomes Yield and bring dialogue closer to the scheme s stakeholders i.e. members of parliament, government leaders, scheme members, service providers. Reduce operational costs without compromising efficiency. Accentuate an ownership spirit among members so they consider the scheme as theirs. CRITERIA 3: What is the innovative approach/strategy followed to achieve the objectives? To explain how decentralization and implementation of a rural programme were done, the first step is to identify input costs required. This step included the identification and costing of financial, human and physical resources before the approval of the Board of Trustees was sought and granted. Options for build or rent office accommodation were analyzed and results

4 3 revealed that renting was more cost-effective as building would require hefty initial financial outlays. Members were informed through various forums of the need to decentralize and also made aware of the locations of branch offices. After having furnished the Field Offices, human resources were recruited to run them. To support full time staff, the NHIF innovated with the recruitment of NHIF Coordinators. NHIF Coordinators are local government employees who are themselves members of the NHIF but are not on the NHIF pay roll. They assist the NHIF in some of its administrative activities e.g. delivery of ID cards to members and are rewarded in kind for their work. At its inception in 2001, the NHIF had a typical centralized system whereby all decisions came from headquarters. This management style led to counter-productive inefficiencies. In recognition of this, the NHIF decided to change its strategy from a centralized system to a decentralized one and shift the thrust of its operations from urban settings to rural settings to serve better rural beneficiaries, who are the majority. In Tanzania, the NHIF is not the only health insurer. Other health insurance companies conducting a similar business to the NHIF have concentrated on urban areas, particularly the capital, Dar es Salaam. Having noted this vacuum, the NHIF decided to decentralize and initiated its rural strategy to drive home the concept of social health insurance to rural communities through awareness campaigns. In view of the fact that rural communities now receive enough knowledge about the basic tenets of social health insurance and the advantages of joining such schemes, the NHIF receives a myriad of applications to join from excluded groups. CRITERIA 4: Have the resources and inputs been used in an optimal way to achieve the set objectives and the expected outcomes? Please specify what internal or external evaluations of the practice have taken place and what impact/results have been identified/achieved so far. Optimal use of resources and inputs to implement decentralization As of June 2011, the scheme had opened 12 area offices countrywide servicing over 5 million people. These offices are mandated to make operational decisions in their areas of jurisdiction. Before decentralization, Head Office managers provided out-reach services which increased the administrative costs in terms of travel and living expenses. Following decentralization, all customer support functions are now executed by Area Offices which has led to a tremendous cost reductions. Results of the practice The reduction in members complaints is one of the indicators of improved performance as a result of decentralization. It is noted that decentralization has brought services closer to members and bridged the information gap that existed before.

5 4 The time lapse to process claims i.e. the time taken to pay service providers has reduced from 120 days before decentralization to 20 days post-decentralization. This has enhanced the finances of service providers and is ploughed back into the improvement of services to members. The number of physical files being sent to Head Office for approval of payments has been reduced because NHIF authorities at branch level can now process and authorize payments. Each month, about eight files are received from branch offices at Head Office for claim approval as opposed to 200 files previously. Increased awareness about the NHIF s operations is also another remarkable result of decentralization and the rural strategy. NHIF officers at branch offices meet physically with stakeholders at pre-arranged meetings in a Q&A session. CRITERIA 5: What lessons have been learned? To what extent would your good practice be appropriate for replication by other social security institutions? Please explain briefly. In the course of implementing decentralization, several lessons have been learnt by the NHIF: In developing economies where ICT is not well developed, decentralization of operations of health insurance schemes is the only way to increase the publicity about schemes such as the NHIF. Standard models of preliminary actuarial valuations at the inception of health insurance schemes may not work well in Africa and we thus need home-grown approaches. Management initiatives including decentralization being used by the NHIF to run a social health insurance scheme have been applauded regionally and internationally. Countries such as Uganda, Zambia, and Lesotho just to mention a few have sent delegates at different times to learn about the NHIF experiences on how to run social health insurance schemes. These countries are at various stages of establishing similar social health insurance schemes.