Policy provider: Health coverage is set to become a profitable area under a new public-private partnership

The Kuwait Health Assurance Company (KHAC), a public-private partnership, is set to transform the health care system and create business opportunities for investors. The KHAC was established in 2010 under Ministerial Resolution 586, and the people of Kuwait, the government and a strategic private investor will hold stakes of 50%, 24% and 26% respectively. The Kuwait Investment Authority has begun a public auction for the strategic partner’s share.

MANDATE: The company’s mandate is to provide health insurance for a predefined group. In this case, the primary target market is the resident expatriate population, excluding public sector employees, domestic workers, dependents of Kuwaiti nationals, persons employed in agriculture and fisheries, and stateless individuals. According to official figures, there were 2.43m expatriates living in Kuwait in 2010, of which 1.5m are eligible for KHAC coverage.

The new KHAC policy will be mandatory, and qualifying expatriates must obtain coverage from KHAC or other officially recognised insurance providers to receive a residence permit. When the KHAC becomes operational in 2015, coverage will cost KD130 ($469) per person per year. This price ceiling will increase to KD150 ($541) in 2017, and to KD190 ($685) by 2023.

The successful investor will be the company’s managing partner, and will oversee the construction and management of three new hospitals and 15 health centres across the country’s three geographic regions. These facilities will hold an aggregate total of 1300 beds, and will create high-skilled jobs for 1400 doctors and 4000 nurses and technicians.

OBJECTIVES: By establishing the KHAC, and by requiring expatriates to buy either its health policy or one from recognised private insurers, the government hopes to achieve several objectives. First among these is to streamline the national health care system. At present, the vast majority of expatriates obtain their mandatory coverage from the Ministry of Health. This has led to overcrowding in public hospitals, causing many nationals to complain that they are unable to use their government benefits.

Meanwhile, the health care budget is already straining under rising costs. Over the past decade, the average cost of health care per capita per month in Kuwait doubled, jumping from KD56 ($202) in 2002 to KD112 ($404) in 2009, according to local reports. “Current government spending on health is simply unsustainable,” Mishari Al Musallam, an investment analyst on the KHAC establishing committee, told OBG. “By mandating that expatriates use the KHAC’s private network, the new policy will reduce public sector costs while ensuring that all residents receive quality care.”

Another objective of the KHAC is to promote health care and insurance privatisation. “The private sector today provides around 10% of health care, which is a small market share,” Mohammad Al Munaifi, the KHAC chairman, told reporters. There are, however, questions about the ability of the KHAC scheme to create a healthy private insurance market. According to the regulations, from 2015 expatriates will be able to purchase KHAC coverage or buy insurance from providers offering 900 beds or above. However, there are no companies that currently satisfy this requirement.

PROFITABILITY: The managing partner of the KHAC will take over an immediately profitable enterprise, given that, from day one, the company will have a customer base of some 1.5m individuals. Growth is inevitable given that the expatriate population is projected to rise by 2.5-3.5% per year from 2015 to 2025 and that nationals can also become KHAC clients.

According to estimates from official auction documents, the KHAC will generate net profits of KD2.8m ($10.1m) in 2015, a number that is expected to hit KD70m ($252m) by 2024. Despite its positive outlook, the KHAC may face challenges. As noted in the National Bank of Kuwait’s report on the project, as a sharia-compliant institution, the KHAC will rely on funding from non-traditional sources, which may not always offer the lowest lending rates, thus raising costs.