New turnover tax for private insurers

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

Featured in half-yearly report: Health Policy Developments 12

Abstract

The government asked private complementary health insurance funds to pay about 1.1 billion Euros in 2009 to reduce the public health insurance budget deficit that is estimated to reach 4.1 billion € in 2008, and 7.6 billion in 2009. As compensation, complementary insurance funds are offered a place in collective bargaining over fees for health professionals.

Purpose of health policy or idea

In order to reduce the budget deficit of the compulsory health insurance fund, the French government has introduced a new turnover tax for private complementary health insurance funds. The budget deficit of public health insurance is estimated to reach 4.1 billion Euros in 2008, and was projected to reach 7.6 billion Euros in 2009 in the absence of the new tax. The Government's aim is to balance its books by 2012.

The main arguments of the government to justify this tax are the following:

• Over the past four years, the private complementary insurance firms have increased their contribution rates or premiums by 30% and their profits by 25%. Over the same period, the deficit of the public health insurance fund was ranged between 5 to 10 billion Euros.
• During the same period, the number of people with 100 % coverage (without any co-payment) by the public health insurance for long and costly diseases has increased significantly (mainly the elderly, whose share is regularly rising in the population). This has resulted in increased cost transfers from complementary insurance to compulsory public health insurance. The amount of these transfers was estimated to reach 600 million Euros a year by the High Council on the Future of Sickness Insurance;
• The compulsory public health insurance fund has been engaged in several actions to control the rise in health expenditure, for instance by encouraging the use of generic drugs or limiting inappropriate prescriptions. Complementary insurance funds also benefited from these measures as they had less co-payments to reimburse;
• Introducing another patient co-payment is seen as politically unacceptable as this would increase the existing inequalities in health care use: 8% of the population, mostly the poor, do not own any complementary insurance and directly bear the co-payments which can be quite important for specialist and certain type of hospital care.  

Moreover, this type of contribution is considered as less "painful" for the population than increasing for example the general income tax, and less unfavourable for the economy than increasing social contributions and consequently gross wages.

Main points

Main objectives

 The objective is to reduce the budget deficit of public health insurance. 

Type of incentives

Incentives are rather symbolic: private insurance funds will now participate in the collective bargaining process between the national sickness fund and healthcare providers and they will have a word on the decisions concerning the limits of physicians fees and extra billings (which are mostly covered by complementary insurance) and on disease management programmes.

Degree of Innovation	traditional		innovative
Degree of Controversy	consensual		highly controversial
Structural or Systemic Impact	marginal		fundamental
Public Visibility	very low		very high
Transferability	strongly system-dependent		system-neutral

Political and economic background

The financial situation of public health insurance is a permanent concern: after a declining budget deficit in 2005 and 2006, health expenditures took off in 2007 to such an extent that a recovery package had to be implemented during the last summer (2008). The initial package of measures aimed at reducing the percentage of treatment costs reimbursed to patients. The government has already introduced a number of new co-payments this year in the form of deductibles (cf. HPM report (10) 2007). But, Mr. Van Rockeghem, head of the social insurance fund (CNAM), had triggered a political outburst in July, when he proposed that a number of costly drugs should no longer be covered 100% for the chronically ill.

Against the attacks from all parties, the government quickly produced a new recovery package announcing the new tax on the turnover of the private complementary insurance funds. The budget Minister assured that the rationale is to reduce the public health deficit "without penalizing households and introducing new taxes on firms". The main lines of the package were announced in July and confirmed in the social security budget project in October. After a 2008 budget mainly characterized by the extension of patient co-payments, the 2009 budget looks for new contributions, the most obvious being the profits of complementary insurance firms.

Purpose and process analysis

Current Process Stages

	Idea	Pilot	Policy Paper	Legislation	Implementation	Evaluation	Change
Implemented in this survey?

Origins of health policy idea

The idea of taxing the complementary insurance funds to support the public health budget is not new: they already partly finance the complementary universal health insurance fund (CMUC), created in 2000 for the poorest part of the population (CMU tax). Technically, the new tax consists of increasing the rate of this "CMU" tax, from 2.5% to 5.9% of their "health care" turnover.

This actually provides an argument in favour of this new contribution which could also be seen as a transfer from those having a private complementary insurance to the poorest to benefit from a free health insurance, or to subsidize the complementary insurance for low income people (see "Health Insurance Vouchers Plan". Health Policy Monitor, October 2004. Available at http://www.hpm.org/survey/fr/a4/4).

Initiators of idea/main actors

• Government

• Providers

• Payers

• Patients, Consumers

Approach of idea

The approach of the idea is described as:
renewed:

Stakeholder positions

Generally speaking, complementary insurance companies and insured persons disapprove this new tax, with slight differences. Physician unions are divided on the question.  

Non-profit mutual insurance companies (accounting for 60% of the health insurance market turnover) have the most moderate position: they disapprove the new contribution, but they negotiated with the government an agreement during the summer to obtain their participation in collective bargaining of fees with health professionals. Basically, they agreed not to oppose the government if the principle of three-party negotiation with physicians is finally voted, opening a way for mutual funds to control the evolution of physician fees. Moreover, they announced that they would do their best not to increase the premium rates in 2009 if this tax is not renewed in 2010.  

For-profit insurance companies and non-profit provident institutions, which provide mandatory health and retirement schemes for employees, are strongly opposed to the project. The provident institutions deplore the "total lack of preliminary consultation". They also point out that the cost of health insurance would increase for the general population, which might result in a decrease in the number of people covered by complementary insurance. The federation of French insurance firms also denounces the project as "overtaxing to avoid more structural reforms" and announces that the premiums will rise. The summer agreement between the mutual funds and the government caused some collateral damage, both the federation of 'for-profit insurance companies and provident institutions threat to leave the Union of Voluntary Health Insurers, created in 2004 by law.   

The inclusion of "mutuelles" in the collective bargaining process had mixed reactions from medical professionals. Some fear to be marginalized since now they would be negotiating with two health insurance interlocutors instead of one. Others, on the contrary, see this as an opportunity to negotiate fees with softer budgetary constraints.  

Patient organisations are also against this measure that they see as a new financial burden on people who have complementary insurance, although they appreciate not to face new direct co-payments. They argue that the government does not tackle the structural systemic problems and they ask for measures to better control medical fees.

Actors and positions

Government
Government	very supportive		strongly opposed
Providers
Health care professionals	very supportive		strongly opposed
Payers
Social health insurance fund	very supportive		strongly opposed
Non-profit mutual funds	very supportive		strongly opposed
For-profit insurance companies	very supportive		strongly opposed
Patients, Consumers
Insured	very supportive		strongly opposed

Actors and influence

Government
Government	very strong		none
Providers
Health care professionals	very strong		none
Payers
Social health insurance fund	very strong		none
Non-profit mutual funds	very strong		none
For-profit insurance companies	very strong		none
Patients, Consumers
Insured	very strong		none

Positions and Influences at a glance

Adoption and implementation

The measure will become effective only when the 2009 health insurance budget act is approved by parliament before the end of 2008.  

Monitoring and evaluation

The government and parliament regularly monitor the public health insurance budget. An independent administrative body annually controls the accounting results of the complementary health insurance companies. Moreover, the High Council on the future of sickness insurance will provide an evaluation of its impact in its annual report (see "High Council on the future of sickness insurance". Health Policy Monitor, April 2004. www.hpm.org/survey/fr/a3/3).

Expected outcome

Clearly the new tax will reduce the public health budget deficit in the short term. The potential impacts of this measure in the long term are less evident and depend on if the tax is a one-off measure or will be repeated in subsequent years. If it is renewed in 2010 and after, there is no doubt that insurance premiums will rise and buying a complementary insurance might become too expensive for some people. As the propensity to pay a voluntary health insurance increases with income, this would have a bigger impact on people with lower revenues (apart from the poorest part of the population earning less than 620€/month, benefiting from the universal coverage). Hence, as a source of financing, this measure might rather be seen as "anti-redistributive", compared with for example an increase in income taxes as part of the CSG (generalised social contribution), which is proportional to income. Therefore, inequalities in access to insurance, in the coverage of contracts and in healthcare use might increase in the future.

Impact of this policy

Quality of Health Care Services	marginal		fundamental
Level of Equity	system less equitable		system more equitable
Cost Efficiency	very low		very high

References

Sources of Information

The project of public heath insurance budget : www.sante-jeunesse-sports.gouv.fr/publications-documentations/publications-documentation-sante/rapports/projet-loi-financement-securite-sociale-pour-2008.html

Author/s and/or contributors to this survey

Cases, Chantal and Zeynep Or

Suggested citation for this online article

Cases, Chantal and Zeynep Or. "New turnover tax for private insurers". Health Policy Monitor, October 2008. Available at http://www.hpm.org/survey/fr/a12/3