Risk equalising schemes for voluntary insurance

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

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Abstract

The Ministry of Health decided to put an end to the open cream-skimming which started after more general insurance companies entered the voluntary health insurance market. Portfolios of these companies developed unevenly, beginning to threaten equity and protection of the vulnerable groups' interests. A change to the Health Care and Health Insurance Act now defines the introduction of risk equalising schemes. Adopted in August 2005 it will come into force in March 2006.

Purpose of health policy or idea

The main objective of this new concept is in equalising the risks citizens incur when opting for voluntary (co-payment) health insurance. In the last years, some insurers introduced ratios between the highest and the lowest age group of 1:10, clearly favoring the very young and putting the elderly into a disadvantaged position. Equalising schemes should reduce the burden of the biggest insurer for voluntary insurance that 'inherited' a lot of the insured elderly from a previously designed system. The legislation change speaks of the public interest for this type of insurance and defines the following principles:

1. equal treatment irrespective of age, sex and health status;
2. all insurers executing voluntary insurance by this act are obliged to enter the risk equalizing scheme;
3. all insurers have to keep accounts of voluntary insurance completely separate from the accounts of any other insurances they provide and provide a separate business report for these accounts;
4. excess funds from this insurance must be used for the continued execution and implementation of voluntary health insurance;
5. increases in premiums have to be approved in writing by the authorised actuary of the insurance, which is bound to additional supervision by the independent actuary appointed by the Agency for insurance inspection;
6. all providers of health care are obliged to business co-operation with all insurances providing voluntary health insurance and have to provide electronic data necessary for the execution of the risk equalizing scheme, per insured and per service.

The expected outcomes are:

1. more uniform voluntary health insurance premiums
2. a more balanced and equitable voluntary health insurance market
3. an end to cream-skimming policies started by some voluntary health insurers

Main points

Main objectives

Risk equalizing schemes are going to be introduced in Slovenia with all insurers for voluntary health insurance having the same right to access the market. As this market is regulated by the MoH, they will have to obtain its approval to enter. They have to accept all those who have standard compulsory health insurance. All insured have to pay the same premium, except for those companies whose administrative costs are lower, in such cases a discount of a maximum 3% can be granted. The only reason for premature cancelation of the contract can be failure to pay rates of premiums.

Type of incentives

Equalization is performed based on the periodic calculations produced by the MoH and grounded in the averages calculated per age group and sex. It does not apply only in those cases where the difference incurred is lower than 1.5 % of the gross premiums increased by the commission obtained.

Groups affected

insured/citizens, voluntary insurance companies, Ministry of Health

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral

This is not an original approach since it has been used in many other countries in similar and different situations. Overall, if implemented correctly, these changes could introduce important changes towards a more equitable system of voluntary health insurance. There are strong and high public expectations from these changes, although they are not clear enough to the average citizen.

Political and economic background

For more than five years there has been a rather uniform opinion, irrespective of the political governmental setting, that risk equalising schemes should be introduced. A couple of years ago, after the entry of a third insurer, a subsidiary of the biggest general insurance company in Slovenia, this subject became even more important. This last insurer launched an overt cream-skimming campaign in which the premiums span was from 1 to 10. Furthermore, there were all sorts of gaming going on between the other two insurers. On the other hand, there was a certain monopoly created through the largest company, having over 1.1 million insured.

While the previous government did not succeed in passing this legislation for controversial issues, these were overcome now and the political will was strong enough for the law to be passed without much delay. Nevertheless, it was a strong priority of the present government to arrange this important area as spending on voluntary health insurance had reached a total of 15% of all health care expenditure.

Complies with

Political committment through a longer period to arrange risk equalizing schemes

Change based on an overall national health policy statement

Strategy of the Ministry of Health for 2005

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Origins of health policy idea

The idea was more openly and clearly generated within the previous health care reform launched in 2003.

There were clear signs of disbalances between different insurers and lack of equity was raised at the same time as voluntary (co-payment) insurance with its flat rates actually contributed to the regression of the system.

When there were also signs of over competition for younger and healthier insured, it seemed obvious that this issue  could not be left to pure competition between unequal providers of voluntary health insurance.

Last but not least, another critical issue was the fact that the biggest provider of voluntary health insurance had inherited a large number of retired senior insured (high risk patients) and could not hope to win in a competition with newer providers.

With the change of government, the topic was brought to the front of the agenda since it had been left behind with all the pending hot topics. In a matter of a few months the proposal was ready, prepared by the Ministry of Health. It was adopted at the beginning of August through a fast track procedure at the Parliament.

It is not an original policy process as it has been quite well established in several other countries. The main actors were the Ministry of Health, voluntary insurance companies and, also, the Consumers' association.

Initiators of idea/main actors

• Regierung: Ministry of health as the main promotor of a changed system

Approach of idea

The approach of the idea is described as:
amended: Ammendment to the Health Care and Health Insurance Act from 1992 (see references)

Stakeholder positions

There was an atmosphere of rather uniform support to the risk equalizing schemes concept, mostly due to the following issues:

1. aim to reach a more equittable situation
2. imbalances on the voluntary health insurance market
3. aim to enable a sort of managed competition, preventing too strong a position of a particular insurer

The Ministry of Health was the main promotor and took leadership in the process, while both the insurance companies on the one hand, as well as patients and/or citizens on the other hand felt supportive of the process.

Actors and positions

Regierung
voluntary health insurance providers	sehr unterstützend		stark dagegen
patients and citizens	sehr unterstützend		stark dagegen

Influences in policy making and legislation

On 5 August 2005 the changes to the Health Care and Health Insurance Act were formally adopted by the national Parliament introducing a full-blown transition to the new system within a period of six months during which the essential preparations should be done and proposals offered to the public.

Definitely there were different pressures involved in the decisionmaking and legislation process. The main idea was to still leave some room for a privileged position of one of the insurers, while on the other side there were ideas that too free a competition should be strictly controlled or even limited. Still, the MoH insisted with its proposal which was eventually adopted in a form which was not that different from the original proposal.

Legislative outcome

success

Actors and influence

Regierung
voluntary health insurance providers	sehr groß		kein
patients and citizens	sehr groß		kein

Positions and Influences at a glance

Expected outcome

It is very likely that the policy objectives will be reached to a large extent. Still, the fight for the insured has not been finished with the adoption of the new act and its amendments. It remains to be seen after the transition period how many insured will change their voluntary health insurer and why and if this process will lead to any kind of important movements of insured at all. The system should become more equitable than today with less financial burden put on the shoulders of some vulnerable categories of the insured.

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch

Impact of this policy will need to be seen after a few years of implementation and evaluated through the outcomes in view of the objectives discussed above.

References

Sources of Information

Health Care and Health Insurance Act. Official Gazette of the Republic of Slovenia 1992; 9:577-590.

Law on changes and ammendments to the Health Care and Health Insurance Act. Official Gazette of the Republic of Slovenia 2005; 76: 8157.

Strategy of the Ministry of Health for 2005. www.gov.si/mz

 

Author/s and/or contributors to this survey

Tit Albreht

Empfohlene Zitierweise für diesen Online-Artikel:

Tit Albreht. "Risk equalising schemes for voluntary insurance". Health Policy Monitor, November 2005. Available at http://www.hpm.org/survey/si/a6/2