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Healthcare - A case for compulsory covers: Compulsory Universal Healthcare: Making it work

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Source: Asia Insurance Review | Mar 2014

Compulsory health and healthcare insurance is seen as a magic political and workable mantra in some parts of the world as governments grapple with the challenge of a fast-ageing population, people living longer, larger number of immigrant workers and the rising cost of healthcare. 
In Asia, compulsory healthcare cover is still new, though it is very advanced in the Middle East. And finding that perfect plan is almost not possible and most need to be supplemented by private insurance as well. So what does the insurance industry make of the region’s progress in this regard? Several market players share their views with us and what ingredients are needed for Asia to be ready for it. 
By Dawn Sit
The word on the ground
AIR: What is your view of compulsory healthcare covers in Asia? Will they take off?
The search for an effective and efficient system continues
“In Asia, we’ve seen ongoing healthcare reforms in different countries. Many nations are searching for a cost-effective healthcare system and developing an efficient healthcare financing model through gradual evolution of their existing approaches, while some of them may adopt successful strategies in other neighbouring countries. 
For example, the Singaporean government implemented its medical savings accounts scheme since 1984 and it is deemed as one of the better models in Asia. The scheme determines different costing models for different treatments that can be purchased from both public and private hospitals. Fees and charges are uniform and transparent. Consumers are clear about the definition of basic health services; but they can pay more if they demand a higher level of service. This allows consumers to make informed choices and determine if they require top up insurance cover for additional requirements. The beauty of the Singaporean health care financing model is that it provides government-sponsored safety net at public hospitals for the poor and needy while also offers citizens the “freedom of choices” to enrol in different specialised programmes according to their affordability and needs. So, this could be a good strategy that other nations might replicate to a larger or lesser extent in consideration of their own different socio-economic characteristics. 
Hundreds of millions of Asians currently pay for the majority of their healthcare out of pocket. There is an increasing need for private health insurance in Asia. For emerging economies such as China, India and Indonesia, it is needed to supplement government programmes which are still relatively small; for mature economies such as Japan and Korea, it is needed to supplement government insurance programmes which are under stress due to higher costs, falling revenues and an ageing society. 
In the longer run, it is attested that there is huge demand for healthcare cover in many Asian countries because of demographic factors, the ageing issue, and public awareness for healthcare coverage as well as the general trend for increasing public spending on national healthcare. Challenges remain very valid in terms of the funding models, legislation and supervision in the implementation of relevant scheme etc. 
We expect there will have massive changes and reforms in different countries in Asia over the next decade and such healthcare coverage schemes would emerge in pluralistic approaches.”
Dr Nirmala Menon 
Head of Designated Markets & Health, Asia, MetLife
Change will take time
“Compulsory covers for the private sector needs to be distinguished from Government Health Care Universal Coverage schemes in order to be effective in this region. For example, in China, there is universal coverage for the local population, albeit at a lower level of cover, thus encouraging the growth of supplemental schemes for employer groups and individuals in the market. 
These supplement schemes will only take off in Asia once the private sector compulsory concepts are clearly defined by law in each country. However, we expect this to take time.”
Mr William Bossany
General Manager and Deputy CEO, Munich Health, China
Cover in the region will develop along different lines, no standard solution
“There is no one-size-fits-all solution to this. Within Asia, there are large differences between healthcare systems and the various governments’ abilities to fund public compulsory health insurance. There are even different political views of the roles that the public/private sectors should play within healthcare. Vast differences in health also mean that there needs to be provision of adequate healthcare to poor rural/urban masses – basic affordable care treatment of communicable diseases; at the same time, there needs to be provision for the affluent that want freedom of choice at high-end hospitals/clinics, and typically need treatment for chronic lifestyle diseases.
Asia will likely develop along different lines. Countries that already have in place compulsory public healthcare systems/insurance such as Japan, Taiwan and South Korea, these will remain public while private health insurance will continue to be confined to providing supplemental/complementary coverage, ie what is not covered by the public system. However, this will likely expand over time as governments will be challenged to continue funding universal healthcare due to ever-increasing healthcare costs and increasing older-age populations.
Other countries will likely end with a more mixed model between public and private; how compulsory that will be, along with whether it will be compulsory-public or compulsory-private, will depend very much on how political discussion regarding healthcare pans out in each country. 
It may also be affected by the insurance industry’s voice within that discussion. Compulsory health insurance offered or managed by insurers is potentially very big business (eg growth of health insurance in Abu Dhabi and Saudi Arabia), but it presents its own challenges, as insurers typically are assuming the trend risk in return for fixed premiums.
Governments also have a tendency to cut prices/expand coverage due to political necessity, rather than on any sound technical/actuarial basis.”
Mr Alan Watts
VP, International Health, RGA Reinsurance Company 
Cover can be designed without much burden of legacy
“Asia is impacted by this challenge like the rest of the word. There is one advantage compared with the Western world: in many parts of Asia, the healthcare industries and their healthcare offers are very young. Therefore, they are not negatively impacted by heavy legacy elements. In this aspect, adequate systems can be designed anew in an optimal way. 
The question is, in my view, not necessarily whether compulsory healthcare covers will take off or not in Asia, but rather, what are the key factors that impact the healthcare service industries in Asia. As in other parts of the world, various stakeholders have potentially conflicting interests, and these economic and/or political interests sometimes prevail over efficient accessibility and affordability of healthcare for majority of the population.”
Ms Margrit Schmid
CEO of Swiss Life Network & Senior Vice President, Swiss Life
Compulsory cover can alleviate vulnerability, but it is not cure-all solution
“Compulsory health insurance should improve overall insurability by expanding the pool of people to be insured and reducing the risk of adverse selection. Making health insurance compulsory can lower the cost of insurance and assist in making health coverage more affordable for a broader population. This can be an effective way to reduce the society’s vulnerability to escalating healthcare costs, as well as to encourage people to take personal responsibility for saving for future health-related expenses. 
Importantly, insurance can be a strong motivator for individuals to take risk mitigating measures, such as adopting healthier lifestyles and minimising risky behaviour. However, compulsory healthcare coverage is not a panacea for all healthcare cost ills, and there are certain issues to consider.”
Ms Marianne Gilchrist
Head of Health Solutions, Asia, Swiss Re
AIR: What are the basic factors that need to be in place for compulsory healthcare covers to succeed? Is Asia ready?

As some of the factors shared by the respondents overlap, we have grouped their replies accordingly. 

Infrastructure and expertise
“Asia is in the process of transition in the next decade in developing healthcare coverage. The factors making the development of healthcare insurance more or less feasible and appropriate are complex. 
Some structural factors like the regional economic development, the socio-economic features of each individual countries, the funding model, the transparency of the scheme, the appropriate regulatory framework, the medical care infrastructure, the availability of best value service providers, as well as quality medical services and options are all success factors in the development of a national healthcare framework.”
Dr Nirmala Menon
“Provider infrastructure needs to be in place/built, ideally with a strong primary care emphasis – and whether it will be public/private or a mix. Also, if insurers are to be involved, they must have strong technical expertise/systems, people, and processes/operational excellence in place to manage a massive growth in number of lives 
Mr Alan Watts
RGA Reinsurance Company 
Funding, scope of cover, and cost control
“Aclear definition of what is being covered and at what price, as well as clear rules of how price increases based on actual experience. Second, complete transparency around the actual funding and clear definition of what is the funding model – the model has to be financially sustainable.”
Mr Alan Watts
RGA Reinsurance Company
“One important factor is the rising healthcare costs. It is key to be able to influence cost control and cost containment independent of whether healthcare covers are compulsory or not. Success of healthcare cost containment depends heavily on the influence on pricing of healthcare services (eg price of medical services, prices for drugs) and the controlling the abuse of healthcare services. 
Pricing control can be achieved either by strict laws and regulations for healthcare services, or by the negotiation between medical networks and healthcare. As more and more global networks become active in Asia, an optimal outcome could be expected when basic regulations for healthcare pricing at the country level are combined with strong pricing negotiation by medical networks. At the same time, imposing a minimum co-payment for healthcare services can be a very efficient way to influence reasonable usage of healthcare services.
The better the cost control and cost containment for healthcare covers, the broader the access for populations can be ensured. An optimal healthcare cover system will most probably be a combination of a minimum mandatory programme which can be topped up by private additional covers. It can already be observed today that in certain countries in the Middle East and in Asia, governments get support and insights from the Western world or from experienced global healthcare player.”
Ms Margrit Schmid
Swiss Life
Transparency and public-private partnerships
“When it comes to execution, the fundamentals lie in the relationship between Payer (which might be government or private), Consumers, as well as Service Providers (which might be public or private). While these three play important roles in the smooth and successful implementation of a national health insurance programme, service providers are most significant in terms of offering sufficient information such as charges/fees and quality of institutions/doctors based on the accreditation etc. 
With high transparency, consumers are able to make informed choices on providers according to the price, quality and benefits of the services they desire. Governments and policymakers need to open up the markets for accredited service providers including insurers and medical institutions, and to standardise the criteria for ensuring well-designed schemes with both the basic coverage of most common illnesses within a range of fixed fees, as well as the flexibility for consumers to top up their protection if they like.”
Dr Nirmala Menon
“The basic factor of success of a compulsory scheme is to have strong government and private sector cooperation in defining the concept of the scheme and then strong implementation of such. It works better in markets without universal health coverage. For example, in the UAE, compulsory schemes are very well received by employees who can get cover under the employee plan knowing they will get a minimum set of benefits and most likely more comprehensive benefits under a compulsory concept. The insurers like the idea because there is a stable and growing pool of insureds coming into these schemes as the economy expands.”
Mr William Bossany
“Some segments of the society will not be able to afford the premiums, which will necessitate either cross-subsidisation from other income/age groups, or government support. This will represent a long-term fiscal burden on public finances. Secondly, mechanisms will need to be in place to prevent over-use of medical services where universal coverage is enforced. For example, co-insurance and the use of deductibles are common practices to reduce over-use. Thirdly, it is important that consumer choice is not curtailed by compulsory health insurance. A viable commercial market should be available to those who opt for additional coverage. Ultimately, health insurance needs to be delivered along with medical services that meet the expectations of the insured. The quality of medical services is often the core determinant of success of compulsory schemes. 
Asian markets vary significantly in terms of both their respective stage of economic development, availability and affordability of quality medical services. As such, there are different factors to take into consideration in each market before deciding on the viability of compulsory health insurance.”
Ms Marianne Gilchrist
Swiss Re
Education and expanding microinsurance covers
“Other elements to ensure the success of healthcare covers for broad populations in Asia are education and effective distribution of such healthcare cover. Today in some Asian countries certain population are still not part of the official labour force. 
I would propose two main axes for distribution for Asia: On one hand, via employers as part of their employee benefit packages. This will also contribute to the attraction and retention of human capital, which in turn benefits the companies long-term. On the other hand, further development and expansion of micro insurance for healthcare cover might also contribute to the accessibility to healthcare cover for majority of the population.”
Ms Margrit Schmid
Swiss Life


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