Sample Healthcare Paper on Drivers of Transient Advantage and Performance of Private Health Insurance Sector


1.1 Background of the Study

Health is not merely the absence of disease or infirmity but a state of complete physical, mental and social wellbeing (WHO, 2012) Health is among the most essential requirements that add value to human life (Watt, 2015). The health status of nation’s citizens greatly determines the wealth of that nation. World development indicators show that over 50% of economic growth differential between first and second world nations are ascribed to poor health and low life expectancy (World Bank, 2017).

Indeed three out of the eight Millennium Development Goals (MDGs) pertain to health. The MDGs are inter-dependent; all the MDG influence health, and health influences all the MDGs. For example, better health enables children to learn and adults to earn. Gender equality is essential to the achievement of better health. Reducing poverty, hunger and environmental degradation positively influences, but also depends on, better health. Healthcare is one of the most essential human requirements, and its disbursement should be addressed with the requisite sensitivity to prevent loss of life and decrease in human capital (WHO, 2012).

Quality healthcare is one of the most important factors in how individuals perceive their quality of life. In most countries, alongside the economy, it is the major political issue. In some countries, the healthcare delivery organization is a part of the national identity. The economic significance of the health care industry transcends the direct benefits of added value and employment. The health care sector contributes to better health state of its population. It creates further added value because it is also the source of strength for the economy’s productivity. Examining the health sector as an economic factor does not mean that the real importance of the health for people and their quality of life is neither ignored nor given low attention, as it may seem. On the contrary, these are two ways of looking at the issue in which connections between each are seen. A comprehensive, demand-oriented, and efficient health care system is an indispensable element of a social system. Also, most of the people in a society including the politicians give high importance to the health issue which is one of the main driving forces for the growth of the health sector. Health economists define health as a cross-sectoral issue that should be handled by these sectors as an overall social goal (Yaman, 2013)

The health care industry plays an important role not only in providing access to medicines and quality care for citizens of a country, but also in expanding economic opportunities in these countries. Whereas the primary objective of the health care industry is to provide access to health services and medicines, they are also instrumental in the expansion of economic opportunities through job creation, training, capacity building and shaping of public policy. Insurance companies and hospital chains are some of the companies in the health care sector that offer the potential to create large-scale economic opportunities. These companies often employ large number of local citizens at different positions including health care professionals, managers and other support staff with varying degrees of training and skills. Their day to day operations also contribute to creating clusters of economic activities formed around various supporting industries, such as information technology, financial services, catering, medical equipment supplies, transport industry. They also provide revenue for governments and therefore the economic potential of these companies is very high (Tulenko, 2016).

The goal of a good health care system is to prevent diseases, injury, and disability. It aims to protect people from environmental health hazards, promote healthy behavior and assure availability of quality health services (Donev, Kovacic, & Laaser, 2013). Countries with a heavy burden of disease due to insufficient spending on health tend to experience multiple impediments to economic growth. Improving the health care system is actualy a means for achieving growth in the economy and reduction of poverty. Most developed countries regard health as a basic right for all their citizens and substantial financial resources are allocated to the health sectors in addition to financing from health insurance schemes (WHO, 2012)

Globally, all health economies are facing similar challenges. The advent of new consumer technology is introducing even more challenges, or bringing older ones to the fore. This disruptive technology promotes greater patient power. The most agile and forward-thinking health economies have the opportunity to revolutionize the way care is delivered, and in doing so, to transform their societies (CGI, 2014). Spending on healthcare almost invariably grows faster than GDP. Moreover, spending and economic recession are closely linked.

Macroeconomic factors like aging populations or insufficient public funding are challenging both receivers and providers of healthcare. Adoption and penetration rates of clinical information systems vary greatly. In fact, the number (and size) of buyers varies from country to country, and is not necessarily dependent on the size of the country but rather on the structure of the healthcare system. Additionally, purchasing behaviour is shifting towards more coordinated, joint purchasing (CGI, 2014).

There is increasing demand on the healthcare delivery organizations, and this is happening in every country. People live longer thanks to advances in understanding of the causes of diseases, and consequent improvements in diagnostic techniques and treatments. The average life expectancy in OECD countries has now reached 80 years and continues to lengthen. However, not only are people living longer, but increasingly people are living longer with chronic disease (CGI, 2014).

As a society, we are changing rapidly, and this is apparent in the relationship between care providers and the citizen. Patients are increasingly becoming stakeholders in their own care journeys; they demand transparency in access and information about their care and importantly, about the quality of service provided. Citizens are now demanding access on their terms. They want to schedule appointments when and where it suits them, not the provider. They want the latest drugs or clinical trials; and of course, an end to surgical waiting lists. Or they want to be given the option to ‘go private’ without incurring a personal cost. The Internet is changing citizen behavior. This means the way governments interact with their citizens has to change too. Municipalities are providing more services to the citizen using technology. We will see healthcare providers adopt technological solutions to streamline processes such as setting up virtual appointments with doctors or looking up lab results online. Healthcare is the last of the major supply driven industries. It will not be so for long. It will be the citizen that demands the transition to an industry that answers their needs, fears and aspirations (CGI, 2014). Moreover Patients are becoming more and more involved in their healthcare, with a higher stake in the journey than before.

Patients are simply better informed than ever before. Information about medical conditions and treatments are now easily available on the Internet. This has to some extent, shifted the focus of the patient-provider relationship towards the patient. The advent of social media is also driving healthcare interactions in new ways. Patients are exploiting these resources to discuss treatments, procedures and even individual practitioners (CGI, 2014).

The health sector is responsible for the protection, remedy and preservation of health. It produces and markets products that are responsible for the attainment of this objective. According to Roland Berger the global health sector is growing 6% each year and by 2030 the worldwide turnover of the health sector will be nearly 20 trillion US dollars (Yaman, 2013). Although there are reports of global economic growth more than 65% of the world’s population is still living on the equivalent of less than 4 dollars per person per day. Most of the world’s population is therefore, either severely strained or completely lacking the opportunity to do better for themselves (Yaman, 2013).

According to the IFC (2016) 11% of the world’s population lives in sub-Saharan Africa yet the region is burdened by 24% of the world’s diseases with less than 1% of global health expenditure and only 3% of the worlds health workers. A major proportion of health care has been financed by general tax revenues. A reducing tax base and less capacity to collect taxes have however posed a great challenge causing insufficiency in public financing of health care. There is also a severe shortage of trained professionals in the area with less than 3% of the world health workers. Despite billions of dollars in donor funding being funneled into the region there is widespread lack of infrastructure and facilities necessary to deliver health services and products. The region also has a severe shortage of trained personnel. With improvement of economic performance in the region the demand for healthcare is poised to increase considerably (IFC, 2016).

Governments, healthcare agencies and non-governmental organizations have collegial and tremendous opportunity and have addressed quality healthcare in a bid to transform the sector for enhanced efficiency and sustainability. However, Kenya has had numerous problems that have maimed and compromised the quality of health care service delivery process, availability, accessibility and affordability (Kimathi, 2017). The amount of money incurred by the centralized government in terms of compensating and paying hospital bills for its citizens have been immense, mainly due to lack of insurance by most of the citizens. Cost sharing has been introduced as a way to ease the government’s burden on health care. The introduction of these fees has however proved to be regressive and inequitable in that the poorer members of the society end up paying a greater proportion of their incomes out-of-pocket for health care services. It is therefore important to put in place effective exemptions to protect the portion of citizens who are not well off and to simultaneously improve the quality of health care.

Spreading the risk of illness and health care financing is the key to achieving greater health coverage. Alternative mechanisms for health financing, like health insurance, can solve the inadequacy of relying on taxation and medical fees. There are no proper policies to address the issues related with insurance, or acquisition of any form of medical cover to cater for medical related bills. Affordability is therefore limited to the affluent few, with the majority, and especially in the rural areas being left at the mercies of well-wishers and in worst situations, succumb to illnesses due to lack of medical attention. According to Turin (2013), lack of proper policies to sensitize communities on issues of medical cover is also instigated by ignorance, with many individuals in Kenya being semi-illiterate.

1.1.1 Health Insurance

Health Insurance is a form of health financing, a function of a health system that involves itself in mobilization, accumulation and allocation of money to cover the health needs of the people either individually or collective (WHO, 2014). It involves the pooling of resources and allocation of the resources in an equitable way. Health insurance is a financing mechanism that helps people (households) and private individuals to set aside financial resources to meet the costs of health care when an illness happens. It is premised on the principle of pooling funds and entrusting management of such funds to a third party that pays for healthcare costs of members who contribute to the pool. The government (through taxes), employers (through funds set aside) or insurance companies can act as the third parties who manage the funds. In health insurance, every member of the insurance scheme pays the premiums irrespective of whether he or she gets sick. Pooling the risks of large healthcare expenditure of a big number of people can make healthcare affordable to all (WHO, 2014).

The purpose of health insurance is to reduce the financial burden of accessing health care through risk sharing of unexpected health events. Insurance plans cover the cost of accessing health care by pooling financial contributions from many people. Without such plans many people have to incur debts for hospital bills. Medical insurance therefore facilitates for health care in advance enabling households and individuals to obtain treatment regardless of their economic status. This promotes equity and eliminates social exclusion of the less privileged which is associated with out-of-pocket medical fees. Institutions that promote the spread of medical insurance require public investment to enhance efficiency and equity in health care provision. The large revenues generated by insurance mechanisms are therefore the only practical instrument through which governments can get out of the heavy burden of subsidies for health care and release funds for other services that benefit the poor (Mwangangi, 2014).

Universal Health Coverage (UHC) is presently one of the major concerns of the global policy agenda. Many Low-and-Middle-Income countries are considering reviewing their health financing systems to meet the principles of Universal Health Coverage (UHC). Governments and policy makers are concerned about reviewing their health financing systems to make progress and achieve Universal Health Care (Abuya, Maina & Chuma, 2015). The 58th World Health Assembly urged member states to ensure that “health-financing systems introduce prepayment mechanisms for the health sector, with a view to sharing risk, avoid catastrophic health-care expenditure and impoverishment of individuals as a result of seeking care”. The 2012 World Health Report identified the important role of health financing in achieving universal health coverage (UHC) (WHO, 2012), while the 2013 WHO report was dedicated to universal health coverage. This was one of goals of the health system highlighted in the millennium development goals which were supposed to come to an end after 2015.

One financing mechanism, which has dominated universal health coverage reforms, is the development of health insurance schemes (Abuya, Maina & Chuma, 2015). There are three interrelated functions in Health care financing namely: revenue collection, pooling and purchasing. Revenue collection is the process by which health systems receive money from households and organizations. Pooling is the accumulation and management of revenues to ensure that the risk of paying for health care is borne by all the members of the pool and not by individual contributor. Purchasing is the process by which pooled funds are paid to providers in order to deliver a set of health interventions on behalf of the population for which the funds are pooled. Recent policy discussions have focused on how to restructure these functions to ensure that health systems in Low-and-Middle-Income Countries are primarily funded through prepayment mechanisms that allow for risk pooling and income cross-subsidization (Abuya, Maina & Chuma, 2015).

Health systems in many Low-and-Middle-Income Countries have been primarily funded through out-of-pocket (OOP) payments. OOP payments are a major barrier to access; they promote inequities and contribute towards household poverty (Chuma & Maina, 2012). Because of these concerns there has been a shift in policy debates advocating for movement away from OOP payments as the main sources of health care funds, towards prepayment mechanisms, including tax funding and/or health insurance contributions (Spaan, Mathijssen, Tromp, McBain ten Have & Baltussen, 2012). Health insurance has become a more popular way of meeting the cost of health than tax funding, particularly in Africa because tax driven health systems in developing countries face challenges of a small formal sector, low institutional capacity to collect taxes and a lack of tax compliance (Abuya et al, 2015). Health insurance schemes, it is argued, have fewer difficulties in identifying their members, in collecting their contributions and their benefits and are said to be more visible and linked to contributions. Health insurance protects individuals incurring high costs at the time of illness, thereby promoting access to health care, particularly in settings where the government subsidizes premiums for the poorest population. Consequently, health insurance is potentially being viewed as a mechanism for overcoming existing structural inequities in Africa.

The notion of spreading the personal economic risks of injuries and illnesses has been there for some time. Some of the earliest instances of spreading of personal economic risk of ill health include the artisans of imperial Rome, the craft guilds in medieval England, and subsequently the mutual aid systems which developed in Great Britain in the 19th century which came to be known as Friendly Societies or Saturday funds. With the spread of industrialization in Europe, the concept of mutual aid or insurance also spread concurrently. Because participation was purely voluntary it consequently led to low participation which, when coupled with poor administration and low contribution levels, produced ineffective organizations unable to pay adequate benefits (MRM-MGU, 2018).

The first national compulsory health insurance law was passed in Germany in 1883. The compulsory health insurance idea spread slowly from Germany, accelerating after the turn of the 20th century. Today, over 60 nations have some form of compulsory governmental program. The programs vary widely, and some allow private insurance to supplement the governmental program (MRM-MGU, 2018).

Most developed countries around the world have adjusted their health finance systems to reduce out-of-pocket expenditures for health, which is seen to reduce as per capita income rises across countries. These countries are able to attain this through general revenue tax financing in support of national health insurance or subsidies for specific groups (such as the poor or the elderly), payroll taxes to support social health insurance, or, most commonly, some combination of both (Escobar, Griffin & Shaw, 2012).

Developed countries provide prepaid entitlement to health care benefits, reduce vulnerability to the expenses of care at times of illness or injury (financial risk protection), and use copayments and deductibles chiefly to manage demand rather than to raise revenue. Their major concern is to reduce the discontinuity of care so common when people depend on themselves to seek health services and have to pay out of pocket at each point of contact. For the most part, developed countries have also separated financing from the provision of care, depend on a mix of public and private providers that are reimbursed through the insurance system, and rely increasingly on primary care providers as gatekeepers to more expensive higher level services (Escobar, Griffin & Shaw, 2012).

Consequently Low-and-middle-income countries want to mimic these successful and desirable qualities of developed countries sooner rather than later. Donors have historically financed the direct delivery of health services in low-and-middle-income countries with almost no attention paid to helping them build sustainable financial and purchasing institutions that could imitate some of the core successes of developed countries (Escobar, Griffin & Shaw, 2012).

Sharing the risk of health event is important in sub-Saharan Africa as most countries allocate insufficient resources to health care and health services and products are mostly financed out-of-pocket (WHO, 2012). According to WHO (2012) The availability of medicine in the public sector is very low and in the private sector prices are very high and usually paid out-of-pocket. It is therefore important to strengthen health insurance programs in this region so as to improve the availability and affordability of health care.

There has been great potential in Sub-Saharan Africa to the health insurance industry due to its growing economic maturity and favourable demographics promising growth. However, of late, there has been challenges in the region. The region has been experiencing deteroriation in the macroeconomic climate, sharp downturn in commodity prices and critical governance issues in major economies thus affecting the optimism that was there. The influx of mobile technology that encourages microinsurance plans has however improved the prospects for private health insurance carriers (EY, 2018).

South Africa is the largest and most developed market for health insurance in Africa. Peter & Viggo (2012) note that South Africa led the rest of Africa in the development of insurance with the Life insurance penetration levels quite high at 11%. It is expected that the country will continue to roll out universal health care. However private coverage of health insurance is expected to increase. This model is however not able to effectively and equitably serve the poorer members of the South African society (EY, 2018)

The insurance penetration levels in other African countries still lags behind with Nigeria at 0.7%. Competition in Nigeria is moderate however intense in some specific segments including Life risk products, General insurance and Health Insurance (PWC, 2015). High poverty rates and infrastructure issues have complicated efforts to grow private health insurance in Nigeria and West Africa. Governments are also not able to realize their objectives of state provided health care. This has resulted in poor health outcomes for the general population (EY, 2018)

Kenya and the rest of East Africa offer the most exciting commercial developments. It has a growing purchasing power and a booming service sector, fueled by technology, where innovations are increasingly finding ways to provide services to underserved populations. The economic and political environment is very promising. An increase in both infrastructure and information technology investments provides opportunities for both traditional and innovative health insurance schemes to capture more of the growing population of middle class citizens (EY, 2018).

Kenya is one of the few African countries that have had a national hospital insurance scheme in existence since the 1960s (Abuya et al, 2015). In Kenya, health financing is mixed and receives funds from taxation which is channelled through NHIF, private health insurance, employer schemes and community based insurance. There are two common types of private health insurance schemes namely risk-rated and employer-based private health insurance. Risk-rated private health insurance is a voluntary private health insurance scheme and is least regulated by the government. It differs from other types of insurance in that premiums are risk rated. This means the higher-risk groups are charged higher premiums or not offered insurance if their health needs are perceived to be too costly. This is different from to the public system, where contributions are related to an individual’s income (PSP4H, 2014). However, risk-based private health insurance schemes do not constitute a large share of overall health expenditure in Africa. Employer-based insurance is purchased by employers, through a contract between the employer and the insurance entity. The premium paid by the employer is usually risk-related at the group level, but the contributions paid by the individuals are usually not risk-related (PSP4H, 2014).

According to GoK (2013) the government of Kenya is intent on promoting and improving the health of all Kenyans by making health services more effective, accessible and affordable. The government aims to develop policies that will ensure quality in health services as well as availability, accessibility and affordability to those in need. Free health care was one of the government’s strategy to improving the welfare and productivity of its citizens. However, due to many constraints, the government was not able to finance increased health care demands. Due to poor management and inappropriate pricing of healthcare products and services, inefficiencies and inequalities have developed in the health care sector. To address these problems and ensure accessibility and affordability of health care services, the government implemented some health care reforms, one of which was the institution of the National Health Insurance Fund (NHIF).

Kenya, like many other African countries has very limited coverage in health insurance. In Kenya just like many other African countries, the first form of insurance was ‘social insurance’ where people would pull resources together to deal with socio-economic problems with ‘premiums’ ranging from material to moral support or payments made in kind. The penetration in the private health insurance has remained low in Kenya in 2017 at 2% (IRA, 2017). Health insurance is offered by insurance companies licensed to offer general insurance. The country has seen organizations like AAR evolve from air rescue organizations to Health Management Organizations (HMO) and finally to fully fledged insurance companies (AAR, 2017).

1.1.2 Private Health Insurance in Kenya

After the 2017 election, the Kenya government pronounced itself through the president on the delivery of four key items christened the ‘Big Four’. The four include expansion of the manufacturing sector, access to affordable and decent housing, food security and nutrition and affordable healthcare for all. The focus areas as stated by the president are in line with the country’s long term strategy document which was launched in 2008 by the then President of Kenya His Excellency Mwai Kibaki. Aptly named ‘Kenya Vision 2030’, it is the national long-term development. blue-print that aims to transform Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment. The Kenya Vision 2030 had three goals/pillars viz Economic, Social and Political pillars. The economic pillar focussed on the sustainable growth of the economy with focus on a the achievement of a gross domestic product growth of above 10% year on year.  The Social Pillar seeks to engender just, cohesive and equitable social development in a clean and secure environment, while the political pillar is around governance through democracy and by a people centred government.

The Vision 2030 was introduced by countries to serve as a roadmap for their development agenda between years 2008 to 2030. Kenya adopted this blue print with the aim of transforming itself into a newly industrializing middle-income country (Vision, 2030). The Vision is based on three “pillars”: the economic, the social and the political.The Social pillar of the Kenya vision 2030 gave focus to housing, youth affairs and sports, gender, children and social development, environment and mineral resources, education, training and health. As specified in the Kenya Vision 2030, one of the important objectives of the government’s health sector strategic plan is accessibility to health care services for the general population. In this plan health insurance is recognized as playing a major role in reducing the cost of health care and thus improving the economic wellbeing of the people.

Through making health services more effective, accessible and affordable, the Kenya government aims to improve and promote the health status of all Kenyans. The health policy thus revolves around the delivery of a basic package of quality health services and financing these services so as to guarantee availability, accessibility and affordability to the most needy. Kenya Vision 2030 envisioned that improved access to health care for all will come through a robust infrastructure, improved quality of health service delivery standards and the promotion of partnerships with the private sector. There has been a sustained focus on health by the governement with focus on Universal Health Coverage (UHC). UHC is about ensuring that the populace have access to the healthcare they need without suffering heavy financial hardship. It is key in ending extreme poverty and ensuring equity and increasing shared prosperity (World Bank, 2017)

WHO (2018) notes that UHC embodies three related objectives which are to ensure that those who need services get them and not just those who can afford them. The quality of the service should be good to improve the health of the recipients and finally it embodies financial risk protection by ensuring that those that get care are not put at the risk of financial hardships. Financial risk protection is at the core of health insurance. The lack of financial risk protection (health insurance) leads to out of pocket (OOP) payments and also results into people not seeking services at all. OOP results into financial burden and as such financial risk protection is critical.

In Kenya, provision of healthcare financing (insurance) is through the public health insurance and private health insurance and to some extent community based health insurance organizations/groupings (Muiya, 2013). The private sector consists of Insurance companies  while the public health insurance is through the National Hospital Insurance Fund through which the government has been pushing for universal coverage. NHIF is a state parastatal established in 1966 to provide accessible, affordable, sustainable, equitable and quality social health insurance through optimal utilization of resources. It was originally a department within the Ministry of Health. The fund is governed by the NHIF Act Number 9 of 1998. Membership for is open for all who have attained the age of 18 years and are either in employment or self-employed (Muiya, 2013).  NHIF had member data base of 6.3 million principal members as at the end of 2016 which translates to a coverage of 25 million beneficiaries taking an average family size of four people (NHIF, 2017)

In Kenya, health insurance has been provided through public, private and community based insurance. NHIF has been the key public financier while the community based insurance buoyed by the spirit of ‘harambee’ continue to exist. Munge & Briggs (2014) note that as a result of the failure of the public health insurance schemes, the government called the private sector to help in medical care. This resulted in the formation of Health Management Organizations (HMO’s) which provided health services through third parties like Bupa and Health First international. Examples of the HMO’s included AAR Health Services (later became AAR Insurance), Health Plan Services, Avenue Healthcare Services limited and Resolution Health Insurance (later became Resolution Insurance). HMOs are registered as companies under the companies act. The concept originated from the United States of America where HMOs help the government to provide preventive health services. In Kenya they are instrumental in filling a gap that has been left by the public health insurance scheme. HMOs have rapidly grown in Kenya, especially among employer-provided health plans and are instrumental in containing cost increases (Munge & Briggs, 2014).

General Insurance companies offer private health insurance as one of the insurance classes within their portfolio. Insurance is offered either to corporate bodies or to individual clients. While Life Assurance is long term, the general insurance which also includes medical business is short term in nature and as such is for a period not exceeding one year. The regulator requires the separation of general and life assurance hence companies have had to register separate entities in the event that they want to carry out both lines of business. The companies offer the insurance products only after the approval by the Insurance Regulatory Authority (IRA). IRA is a statutory government authority established under the Insurance Act Cap 487 of the Laws of Kenya to regulate, supervise and develop the insurance industry (IRA, 2018). IRA is also charged with the responsibility of ensuring that the products insurance companies offer do meet the needs they are intended to and as such, they have the sole mandate to approve insurance products offered by insurance companies. IRA is also mandated with ensuring that insurance/reinsurance companies and intermediaries remain operationally viable and solvent. This is done through ensuring that insurance companies file performance reports on a quarterly basis with the regulator.

According to IRA (2015), many players and few clients characterize the Kenyan insurance industry. The insurance companies are either licensed to carry on life assurance or general insurance. There are 19 private health insurance providers in the country. The Insurance Institute of Kenya (IIK) is the professional body that deals mainly with training and professional education in insurance. The industry operates under an umbrella body, the Association of Kenya Insurers (AKI), which was established in 1987. Before then, it was called the Insurance Association of Eastern Africa. Membership is open to any registered insurance company and its main objective is to promote prudent business practices, create awareness among the public and accelerate the growth of insurance business in Kenya (AKI, 2017).

Private health insurance refers to the third party (insurer) being a profit organization. Insurance premiums are related to the expected cost of providing services to them. This means that people in high health risk groups (like the elderly) end up paying more than those in low risk groups and cross-subsidy between people in different risk groups is limited. The major concern of private health insurance firms as business enterprises is profits rather than the general health of the public (Munge & Briggs, 2014).

The products in the Kenyan insurance industry have remained largely traditional with little innovation coupled by heavy regulation (Gitau, 2013). Calculated as the ratio of the percentage of total insurance premiums to gross domestic product, insurance penetration has remained low at 3% as at end of 2016 (AKI, 2017). According to Kibicho (2015), the industry had 137 licensed insurance brokers, 21 Medical Insurance Providers (MIP’s) and 3,076 insurance agents who played a key role in distribution by 2009 with modern methods of distribution like technology not properly entrenched.

1.1.3 Performance of Health Sector

Performance in an organization is the extent to which the organization has reached its market and financial goals. Performance implies beginning from a certain status and advancing towards an exact and predetermined goal which may include several goal points. These goal points in an organization may include market share, revenue, employee motivation, customer satisfaction or quality levels (Keleshtery & Ashkiki, 2016). Because of increase in competition and increased change in the organizations environment, every organization is seeking to improve their performance. According to Zlate & Enache (2015) organizational performance is a combination of both intangible perceptions such as knowledge increase and tangible perceptions such as financial results.

Although performance is widely used with meanings varying from robustness to return on investment, Lebas (2015) argued that performance is not only a measure of past achievements, but first and foremost a measure of the potential for future successful implementation of actions in order to reach objectives and targets. Although in general terms, the objectives of performance measurement are setting targets, time frames, and concrete ways to achieve them, translating these steps differs for every industry and type of organization.

In health insurance, key areas are pinpointed as factors of core differentiation for business/profit-oriented companies. The financial services offered by insurance companies are unique and contribute to the growth and development of a countries economy. These financial services include covering of risks that are intrinsic in economic entities and collection of large amounts of funds through premiums for long term investment for insurance companies to be able to continue to cover risks, they must be able to create profits and, at the same time, value for their stakeholders. It is important for every economy to ensure that its insurance industry is well developed and evolved as its good performance provides long term funds for infrastructure development (Charumathi, 2012).

Performance, although defined in explicit goals that must be met, must include a quality study, as it is not just an objective assessment of numbers, but includes judgments of value and quality on the part of the end users of the service the patients. With regard to health insurance performance measures, Berg (2015) distinguished  between  internal  and  external  measures,  depending  on  whom  they  were  important  to. This includes the healthcare unit (internal measures reflecting financial performance, efficiency etc.) or the external public and authorities (external measures, related to the quality of the services provided). Caiado and Neto (2013) proposed, as suitable measures, the numbers of re-admissions  5  days  after  the  end  of  treatment as a proxy  for  quality,  access to services  (area covered and number of first consults), and financial performance. Kalinichenko, Amado, &Santos (2018) used similar measures, which they categorized under labels such as equity of access, efficiency, service effectiveness, and cost effectiveness. Salge and Vera (2012) offered further insight into this issue, by proposing a measurement model for hospital innovativeness.

According to Thomas and Herbert (2018) potential areas where performance in healthcare can be measured are healthcare financial strength through revenue optimization, productivity improvement, streamlining claims processing, waste and cost control, activity-based costing; Healthcare operations and technology through quality and technology management and measurement, collaboration opportunities, agility improvement, working capital and asset management. healthcare  people  development   through   provider  experience  measurement, provider  loyalty  and  the  voice  of  the  provider  analysis, learning  and  growth  measures, innovation, knowledge, culture and intangible value analytics. Patient service and satisfaction through patient   experience, engagement, delight, loyalty and relationship measurement, as   well   as   the most important of all measuring and tracking the voice of the patient. healthcare    marketing   through   measuring   and   developing  the  growing importance of healthcare branding, reputation and trust management, patient/customer segmentation, patient profitability and patient lifetime value.

1.1.4 Dynamic Capabilities

Among the factors that influence a company’s performance are the company’s capabilities. Company’s capabilities can include marketing capabilities, organizational capabilities, management capabilities and quality capabilities (Cruz-Ross & Gonzalez-Cruz, 2015). Marketing capabilities help a company to adapt to its market conditions through collection of knowledge, skills and requirements for performance improvement in the market. Organizational capabilities are ability to perform basic functional activities. Management capabilities involve the knowledge, values and attitudes required to perform duties and make decisions. Quality capabilities are access to processes that can provide rapid, reliable and secure services.

The dynamic capabilities view is largely an attempt by business researchers and analysts to understand the complex problem of sustainable competitive advantage in a dynamic environment. It is assumed that firms which are able to identify and take advantage of new opportunities and the direct their resources and capabilities to conform to the opportunities and dynamic environment can create and sustain competitive advantage (Teece, 2012). As the average period within which firms are able to maintain competitive advantage has been decreasing with time, the issue of sustainable competitive advantage has become a major concern for researchers and business professionals. Research indicates that dynamism in the environment is an important driver of dynamic capabilities and the these capabilities significantly and positively affect competitive advantage (Li & Liu, 2014).

According to literature, there are six capabilities that are attributed to a firm’s competitive advantage. Managerial capability is one of the basic capabilities that contribute to a firm’s competitive advantage and ability to survive in an increasingly dynamic business environment (Helfat & Martin, 2014). Management has a dominant role in developing dynamic capabilities and reconfiguring resources. Another major source of competitive advantage is Marketing capability. The ability to generate, release and integrate market knowledge so as to successfully overcome changes in the business environment is very essential when determining customer needs (Barrales-Molina, Martinez-Lopez and Gazques-Abad, 2014). Research and Development (R & D) is another core capability which generates innovation potential and is the ability to recognize and exploit knowledge. Technological capability is another dynamic capability and is closely linked to R&D capability. It is particularly essential for technological firms. Innovation capability is another most essential capability which requires a firm to constantly search, identify and implement new opportunities both internally and externally. Finally there is human resource capability which is one of the most widely studied sources of competitive advantage (Barrales-Molina et al, 2014).

Dynamic capabilities can be disintegrated into the sensing, seizing and reconfiguring capabilities of a firm (Breznik & Lahovnik, 2016). Sensing capability enable a firm to constantly scan their environment for opportunities that are constantly opening up both within and outside the firm. Scanning for new investors, exploring market needs, creation of new knowledge and understanding technological transformation are some of the activities that comprise a firms sensing capability. When opportunities have been sensed they need to be seized in order to recognize their value and potential. Reconfiguring involves the ability to recombine and reconfigure the resource base so as to address changes and capitalize on opportunities in the business environment.

Dynamic capabilities can enable an organization to upgrade its ordinary capabilities and direct them towards highly paying endeavors. This requires orchestrating the resources of the organization to address or even direct changes in the market place (Teece, 2018). An organization’s dynamic capabilities determine the speed degree and cost of aligning the organization’s resources with customer needs and aspirations. To match the organizations resources with customer needs and aspirations and achieve competitive advantage in a dynamic business environment, organizations need to be able to continually sense and seize opportunities and to regularly transform aspects of the organization and culture so as to be able to address new threats and opportunities as they arise (Teece, 2018).