Making the Business Case for Local National Investment
At Allegiant, we believe healthcare is a human right. But achieving benefit parity for global populations is an uphill battle we’ve been waging for years.
Nowhere is benefit inequity more apparent than in global organizations employing Local Nationals (aka employees hired in their own country). Local Nationals have historically been exempt from some of the benefits other employees receive, like specialist care, emergency transportation, or mental health resources. This means an INGO in America can provide fewer benefits to a Kenyan employee hired to work in Kenya than to an employee in an equivalent position in the U.S.
A combination of precedent, cost, and complexity is the culprit for this disparity in duty of care across employee populations. Since global organizations are not legally bound to offer Local Nationals the same benefits, doing so comes at an added cost. Factor in the operational and cultural complexities of insuring international populations, and Local National benefit equity becomes even more difficult. Ultimately, many stakeholders decide that doing what’s right just doesn’t justify the cost or challenge — but we’re here to make the business case for benefit equity.
Insurance investment inequity in global organizations with Local National employees
When the topic of Local National benefit equity first comes up, cost is almost always one of the early concerns. The multi-million dollar investment is rarely well-received — but a simple comparison of the per person cost for benefit solutions reveals international populations are far cheaper to cover than Americans.
Data from our portfolio shows the average per person cost for health insurance can be as low as just $800/year in Africa, while in the U.S. the average cost per person per year is $21,000. This cavernous difference certainly makes it difficult for global organizations to deny Local Nationals equitable benefits on the grounds of expense.
The average cost of benefit solutions by region.
Why benefit equity is good for business
Beyond being the right thing to do, taking a stand for equitable benefits is a smart business decision for several reasons:
Retention costs less than recruitment. Retaining existing talent is almost always more affordable than recruiting new talent. Data from Indeed reveals “most companies can expect to pay between $4,000 and $20,000 to hire a new employee” — which means it’s probably more cost-effective to keep your Local National employees happy with a robust benefits package than it is to replace them. Cigna backs this up, reporting “healthy work cultures reduce employee turnover, which lowers costs for recruitment, onboarding, and training. The research predicts $20.3 billion in ROI from improved retention in 2022 and $24.3 billion in 2026.”
Improved business standards. Locally-sourced health plans are often subject to mid-policy changes, impacting operations and introducing unwanted distractions. But globally-sourced health insurance plans have the benefit of being consistent and flexible, improving employee well-being and business standards.
Reputation matters. Nothing undermines a mission-driven organization’s credibility faster than hypocrisy. By ensuring insurance coverage does not limit or exclude certain employee populations, you can bolster your organization’s reputation.
The challenges of delivering equitable benefits to Local Nationals
Justifying cost can be a hurdle, but for many employers, implementing more equitable benefits poses an even bigger challenge. Differing policies, customs, and cultures can all have a significant impact on covering Local Nationals. To illustrate this point, let’s explore a hypothetical scenario based on real experience:
Balancing insurance coverage and employee access
An INGO is trying to deliver equitable benefits to its Local National population in Africa. They are presented with two options for coverage: Option A and Option B.
Option A offers comprehensive coverage, including full maternity, specialist care, vaccinations, etc. However, Option A requires employees to pay out of pocket and submit for reimbursement.
Option B doesn’t offer half as much coverage as Option A, but routine care for basic ailments is completely covered and requires no upfront payment.
The problem with Option B is that if an employee experiences a serious health issue, it’s unlikely the policy will cover them. It’s equally unlikely the employee can afford an expensive bill for cancer treatment or emergency evacuation. This leaves the employer with two options: do nothing and show your employees how little your organization cares for them; or pick up the tab, incur the unexpected cost, and set an untenable precedent for future emergencies.
The unexpected expense of inequitable employee benefit.
Since Option A provides more robust coverage, it may seem like the obvious choice — but Option A has an accessibility issue. For many Local Nationals, the reimbursement model is prohibitive; the United Nations reports “just 34% of adults have traditional bank accounts” in Africa. If an employee doesn’t have access to the upfront payment Option A requires, they cannot access the benefits.
Working to improve benefit equity with cashless solutions
As our team grappled with the scarcity of traditional financial systems in Africa, we came to realize familiarity with cashless payment systems is widespread and growing; McKinsey reveals revenue from “Africa’s domestic e-payments market” is expected to increase 20% per year, far out-performing the projected global increase of just 7%. The popularity of e-payments in Africa presented a potential solution for the prohibitive out-of-pocket costs associated with full-coverage plans like Option A — and thus, Allegiant’s live digital payment platform was born.
First launched in Kenya, our bespoke digital payment platform handles the entire payment/reimbursement process, allowing Local Nationals to access their benefits without having to pay up-front. Our plan is to build on the success of this e-payment platform with more digital products in the near future.
Actionable advice for insuring a global workforce
A digital payment platform is just one solution for one specific problem. The challenges of securing equitable benefits for Local National employees are variable and require careful consideration instead of a one-size-fits-all approach. However, we do have some general best practices for employers working to meet their global duty of care:
Look to the future, don’t wait for proven ROI. Global benefit parity is still a relatively new concept that hasn’t been widely adopted. If you’re looking for evidence of ROI before taking the plunge, you probably won’t find it (yet). However, we believe it is the responsibility of all mission-driven organizations — especially those with a global presence — to invest in benefit equity regardless of whether the ROI justifies the expense.
Pick a path and own it. It’s easy to question your decisions or feel buyer’s remorse when you’re in the middle of navigating a complicated transition like switching insurance plans. Change can be unsettling, even painful, but the faster you accept these feelings are inevitable and temporary, the easier it is to overcome them. It’s also important to manage expectations for your stakeholders and employees so they are equally equipped to weather the storms of change.
Find a broker with demonstrated experience. When in doubt, bring in the professionals — just make sure the broker you choose has on-the-ground experience (and vendor relationships) in the regions where your organization operates.