Last Updated: July 3, 2008
Briefing Paper: Overview of SKY
Rachel Gardner and David I. Levine
July 2008
1 SKY Product
1.1 History
SKY is a health micro-insurance program created and run by the Groupe de Recherche et d’Echanges Technologiques (GRET), a French NGO that has been operating in Cambodia since the late 1980’s. The program was originally created as part of the micro-credit program EMT (now called AMRET), founded by GRET in 1991. GRET’s micro-credit endeavors were highly successful and AMRET became a financially viable, independent Cambodian operation, now serving over 150,000 clients in 11 provinces.
However, GRET recognized that micro-credit was not enough to protect the poor from large health expenses and the long-term problems they faced as a result of these expenses—indebtedness and the need to sell productive assets. Thus in 1998 GRET to developed SKY[1] health insurance as a complement to micro-credit, in order to directly address one of Cambodian families’ biggest sources of financial vulnerability.
1.2 Where SKY Operates
SKY was first tested on a small scale in 1999 in Takmau Operational District (OD) in Kandal Province[2]. After several years of successful experimentation and product development, SKY entered its scaling up phase in mid-2005. As of 2008 SKY operated in six ODs in four provinces (Takeo, Kandal, Kampong Thom, and Kampot) and in the capital, Phnom Penh. In early 2008, SKY began operations in two new ODs—Koh Thom OD (Kandal Province), Kampot OD (Kampot Province) and expanded into new villages in Kampong Thom OD (Kampong Thom Province), where it was already in operation.
1.3 The Importance of provider quality
In addition to its objective to “secure the assets and incomes of vulnerable Cambodian households by limiting the economic consequences of large health expenditures,” SKY also aims to “facilitate and encourage access for these households to quality health care, both at primary and secondary levels, to prevent severe health risks.”[3] As a result, SKY chooses its partner health facilities carefully and conducts on-going evaluations to ensure that it can provide a certain standard of quality to clients.
Until 2008, SKY conducted private qualitative evaluations of health facilities conducted by independent consultants to determine whether quality service provision was feasible. In 2008, the Cambodian government began a standardized system of evaluation for hospitals and health centers across the country. Soon thereafter, SKY began using this system both for initial facility quality evaluations and for follow-up quality monitoring.
In addition to formal evaluations, SKY regularly monitors facility quality using its own staff. SKY monitors service quality on a nearly daily basis by hiring Member Facilitators (MFs) to be present at facilities and manage client complaints and questions. Based on conversations with Member Facilitators, problems are relatively rare but the most common are dissatisfaction with the speed of service (members sometimes feel entitled to receiving service before others because they have an official membership book to show) and with not being given the quantity or precise types of medicines requested. SKY insurance agents (IAs) also administer occasional small-scale exit surveys of clients.
1.4 SKY Target Population
SKY’s target population is “vulnerable rural households.” These are often not the very poorest members of villages, as the poorest often cannot afford to pay regularly for coverage and are anyway eligible to participate in Health Equity Funds (HEFs), which cover the cost of all public health care, in most of the ODs where SKY operates. In Phnom Penh, SKY also promotes employer-funded coverage and coverage of self-employed workers. In 2008 SKY began covering all civil servants in Kampong Thom as part of a government experiment in social insurance provision for its employees.
1.5 What SKY Offers
SKY is constantly experimenting with new ideas to improve their product; thus, the design of the insurance products offered varies slightly by OD. At the same time, SKY’s offerings are always based on some common themes.
SKY offers “first dollar coverage,” meaning clients are covered from the first dollar spent on care. It covers both primary health care at local health centers and hospital care at public health facilities (OD-level referral hospitals and provincial hospitals). In all cases, care is provided by public facilities with which SKY has agreements. Coverage also includes the following services: 1) free emergency transportation between Health Centers and hospitals, 2) a funeral grant and 3) traditional music for funerals. In most ODs there is no limit to the number of visits or cost of services to which clients have access. The one exception to this design is in Koh Thom OD, where SKY is experimenting with utilization caps for non-preventive, non-emergency adult care.
To be covered by SKY, visits to a hospital require a referral from the member’s Health Center. Coverage is not offered for chronic diseases such as TB and HIV/AIDS[4] (though care and treatment of opportunistic diseases are covered), plastic surgery, dental care and glasses. There are waiting periods of six months for non-urgent surgery and 3 to 6 months for pregnancy and delivery-related care.
1.6 Payment to Public Health Facilities
SKY works in partnership with public health facilities using a “capitation” scheme at Health Centers and OD Referral Hospitals and a third party payment scheme[5] at provincial hospitals. GRET defines the capitation mechanism as follows: “a fixed amount is paid in advance by the health insurance scheme to health providers per insured person for the defined set of health services over the defined period, regardless the actual utilization of any or all of the benefits.”[6] GRET believes the capitation benefits health facilities because it provides a guaranteed, fixed source of income, allowing facilities to better manage their monthly budgets and maintain consistent supplies of medicines.
The amount of money paid to each health facility is determined by the number of expected visits and the average user fee members would have paid. Each year, the capitation paid by SKY is re-negotiated based on data from the previous year. In the first months of operations in new ODs, estimates are based on data from other operational districts and are updated once data exist for that OD. SKY monitors utilization monthly and thus can follow up on improbably high utilization rates to mitigate incentives to over-treat.
1.7 Selling Insurance
SKY uses a variety of promotional tools to encourage people to buy health insurance. The most important mechanisms SKY uses are village meetings, door-to-door promotion by field employees, and word-of-mouth.
Village meetings are conducted in rural areas when SKY first begins operations in the area, and are conducted again sporadically (roughly once per year) as a way to muster new interest in SKY. Meetings are typically conducted by SKY Field Coordinators, who are each in charge of one OD and all insurance agents and Member Facilitators in that OD. Meetings are typically held at a central location (for example, the village chief’s house, the local pagoda or mosque or the public Health Center). The village chief usually announces the meeting in advance. Just prior to the meeting, music and a meeting announcement are blasted over loudspeakers to remind villagers to come.
At the start of the meeting, the SKY team puts on a promotional video telling the story of a family’s life with and without SKY insurance. Once the video is over, both the village chief and the local Health Center director endorse SKY. The Field Coordinator next discusses SKY in more detail for about 20 or 30 minutes and afterward, people are given the opportunity to ask questions. Finally, the “games” part of the meeting begins. First, there is a short trivia session, when people volunteer to answer questions about SKY in exchange for a small reward (a travel-sized bottle of shampoo, for example).
At the end of the meeting, SKY gives out coupons which entitle the bearer to a discount off of the price of insurance. In some villages, coupons are good for 1-month free premium, and are given out to all interested meeting attendees. In other villages, a drawing (“Lucky Draw”) is held for larger-valued coupons.
This Lucky Draw system is the basis of the randomization for the current impact evaluation. In villages that are part of the impact evaluation, 20% of households that attend the meeting, up to a maximum of 12 households per village, win a coupon for 5 months of free insurance in the first 6-month cycle, with the option of 3 extra months free in the second 6-month cycle for those who choose to renew. The remaining households who participate in the Lucky Draw receive a coupon for a 1-month discount on insurance, which SKY always provides to new members. To administer the Lucky Draw, names from the attendance list are called off one by one, in an arbitrary order, and attendees come to the front of the room to draw coupons from a bag. Only one member per family may draw.
Door-to-door promotion is conducted primarily by insurance agents (IAs). An insurance agent has three primary responsibilities: 1) recruit new members, 2) encourage current members to remain members and 3) collect premiums and maintain accurate paperwork on clients. Because they are the primary insurance salespeople, part of insurance agents’ monthly salary comes from a bonus that rewards them for signing up new members. The bonus is augmented for high rates of advance payments and reduced for high client dropout rates, poor payment records and failure to complete all administrative requirements.
Member facilitators are hired on a part-time basis to sit in the waiting area of health facilities. Their primary responsibility is to address SKY members’ complaints and answer member questions. Member Facilitators also recruit new members to SKY. They usually target sick families who show up at health facilities and later conduct house visits to get these families to join.
Finally, word-of-mouth information is thought to be another important promotional tool for SKY. SKY encourages word-of-mouth advertising by offering a small incentive to anyone who refers a family.
1.8 Registration Procedures
Families may join SKY in any month but must join by the 21st in order to receive coverage starting in the following month. When they join, clients must pay three months’ worth of premium up-front (the two extra months of premium act as a “reserve” payment in case families have difficulty paying their premium in later months). Membership is family-based; SKY requires that all family members living in the household be registered, and employs a relatively strict definition of who constitutes a family member.
SKY’s system is based on membership “cycles,” which are usually six months long. New members typically receive one month of free insurance when they first register with SKY. Payment is expected monthly, but families have the option to pay as many months as they’d like in advance and receive bonuses for advance payment (1 free T-shirt or 1 free month per six months paid in advance; smaller amounts of advance payment are encouraged but no bonus is given). Families also sometimes pay IAs in smaller, more frequent increments but payment is officially recorded in monthly increments. Towards the end of each cycle, families may choose whether or not to renew their SKY membership. If they choose to renew they simply continue paying their premiums. Agents make all necessary adjustments to family composition and premiums at the time of renewal (explained in further detail below). If families choose not to renew, they make their last payment to cover Month 4 of the 6-month cycle and use up their two months of reserves in Months 5 and 6 (no cash is ever refunded directly to clients). Although SKY’s system operates under the concept of six-month cycles, conversations with SKY staff suggest that families pay little attention to the cycle system or the penalty of losing one month of reserve.
1.9 Non-Payment/ Dropout Procedures
Families must pay their monthly premiums in full by the 21st of each month. If families are unable or unwilling to pay their monthly premium mid-cycle (i.e., before the end of the six-month cycle), one month of their reserve is used to cover the premium. If families fail to pay a second month, then the family loses coverage, effectively losing their second month’s worth of reserve. The exception to this rule is if the second month of non-payment occurs on the sixth month of the cycle when families choose not to renew, as discussed above. In this case only, the second reserve is used to pay the last month of premium, and the family is still covered through the end of the cycle. but afterwards has officially dropped out of SKY. This is the only way for a family to use both months of their reserves.
1.10 Pricing Structure
Families pay a single monthly premium, which varies according to four family size brackets: 1 member, 2-4 members, 5-7 members, and 8-20 members (as of 2008, no SKY family has ever had more than fifteen members). Premiums in 2008 ranged from 2,000 Riel to 4,000 Riel for one person, from 4,300 to 7,500 Riel for families of 2 to 4 people, from 6,000 to 11,000 Riel for families of 5 to 7 people and 7,300 to to14,000 Riel for families of 8 to 20 people, depending on the OD. (See Table 1 below)
Table 1: SKY Premiums (Riel)
For a sense of the value of these premiums, the riel-dollar exchange rate used in practice in Cambodia is fixed at 4,000 Riel per dollar (as of 2008).[7] In August 2007, paying a premium of 2,000 Riel for a one-person household would be the equivalent of giving up pork for two meals, fish for three meals or giving up 7-8 meals’ worth of rice[8].