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Risk equalizing schemes - the next chapter
Country: Slovenia
Partner Institute: Institute of Public Health of the Republic of Slovenia, Ljubljana Survey no: (7)2006
Author(s): Tit Albreht
Health Policy Issues: Role Private Sector, Political Context, Funding / Pooling, Benefit Basket, Others Current Process Stages
Featured in half-yearly report: Health Policy Developments 7/8
1. Abstract
Slovenia decided to introduce risk equalizing schemes for the supplementary health insurance after explicit cream-skimming approaches by some insurers in the field through existing law changes. The insured were free to opt again for their insurer of choice. The process lasted for 3 months in 2005 and resulted in about 300,000 (20%) insured changing their insurer. To prevent a significant outflow of insured the largest company decided it would transform itself into a shareholding company.
2. Purpose of health policy or idea
Main objectives
The main objective was to introduce means for preventing cream-skimming on the market of voluntary health
insurance in Slovenia. Legislation is to introduce risk equalizing schemes, which would balance out differences in the structure of the population of the insured with different companies offering voluntary (co-payment) insurance in Slovenia. The main regulator of the system will be the Ministry of Health.
There is another important objective of the change, namely introduction of other insurance options, some of which will not be linked to compulsory health insurance.
The insurance schemes offered are:
supplementary health insurance, which is insurance against co-payments introduced by Art. 23 of the Law on Health Care and Health Insurance,
substitution health insurance covering the rights identical with the basic package of compulsory health insurance for persons who cannot be insured under compulsory health insurance in Slovenia,
additional health insurance, which introduces coverage for services and aids that are not and cannot be part of compulsory, supplementary or substitution health insurance
parallel health insurance which introduces coverage for services otherwise reimbursed under compulsory health insurance, but the insured opts for different requirements and conditions from the latter.
1. 2. 3. 4. Type of incentives risk equalization
additional insurance schemes market regulation
regulation of the funds formed based on the supplementary health insurance premiums
Groups affected
insured in the supplementary health insurance schemes, insurance companies and other insurers providing supplementary health insurance
3. Characteristics of this policy
The proposed changes are significant in a system where an important segment of the population has supplementary insurance to cover an important share of health expenditures through reimbursement of providers. For national health system concepts, this idea is meaningless.
However, in the social health insurance systems with stratified insurance schemes, such an intervention makes sense in preventing cream-skimming and offering more competition on services.
4. Political and economic background
The problem of risk equalization schemes implementation has been present for several years but previously no concrete action was taken to proceed to legislative changes. Imbalances in the market of supplementary health insurance (co-payment insurance) were the main trigger and cause for the implemented change.
The legislative change also opened the possibility of an immediate change of insurer. It was expected that this would stimulate more insured to reconsider their insurance schemes. This change, however, was of concern to the biggest insurance company, which was worried of the potential losses due to outflows of the insured.
Complies with
Other - Need to prevent overt cream-skimming and regulate the market of supplementary health insurance
Change based on an overall national health policy statement
Comsistent with the present government's goals and coalition contract.
Degree of Innovation traditional innovative
Degree of Controversy consensual highly controversial
Structural or Systemic Impact marginal fundamental
Public Visibility very low very high
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5. Purpose and process analysis
Origins of health policy idea
The idea was generated and developed by the government following criticism both from the public as well as from the insurance companies, some of which were handicapped under the previous regulation.
The main purpose was in preventing cream-skimming and in developing a more dynamic market for supplementary and other types of additional (out of compulsory) health insurance. The idea is implemented through changes to the existing Law on Health Care and Health Insurance. The main tool will be in preventing risk selection of the insured and thus, differences in the structures of supplementary health insurance providers, based solely on their capacity of attracting less or more risky categories of insured.
Risk equalization schemes had been proposed several years ago for the first time but were not implemented before the end of 2005. The main actor in this process was the Ministry of Health.
Initiators of idea/main actors
Government
Approach of idea
The approach of the idea is described as: renewed: It is an idea that was first voiced several years ago but it was fully implemented by end of 2005.
Stakeholder positions
The main stakeholders were in favor of the changes proposed by the new legislation. Still, different insurance companies saw risk equalization differently.
Vzajemna, the supplementary insurance company with the biggest number of insured was looking forward to the
risk equalization concept as it had a less favourable structure than the other two companies, but it was concerned because of the possibility of losing insured through other benefits offered by the competition. In view of that, they proposed a restructuring of their company in transforming it from a pure mutual health insurance company with a specific business registration into a shareholding company. Each insured was issued with an ownership certificate which should represent his/her share of the company. Through this process they tried to attract more insured to stay with their company.
The Agency for Insurance Supervision Agency found them to be in breech of the insurance legislation and that such a transformation would not be in the interest of all the insurance and found it of no legal value. The issued certificates were also found illegal and Vzajemna was asked to revoke them, which they eventually did only in April 2006.
The leadership was held by the Ministry of Health which eventually succeeded in having the law passed by the
National Assembly and its validity started by the end of 2005. Actors and positions
Description of actors and their positions
Influences in policy making and legislation
Changes to the Law on Health Care and Health Insurance were adopted in 2005 and came in force at the beginning of 2006, leaving the last three months of 2005 for the insured to consider moving to another insurer.
Legislative outcome success
Actors and influence
Description of actors and their influence
Positions and Influences at a glance
Adoption and implementation Government
Supplementary health insurance providers
very supportive strongly opposed
Ministry of Health very supportive strongly opposed
Consumer Association very supportive strongly opposed
Government
Supplementary health insurance providers
very strong none
Ministry of Health very strong none
The Ministry of Health, assisted by the decision of the Insurance Supervision Agency, together with the National Assembly were responsible for bringing the idea to the final implementation. Insurance companies eventually co-operated as they saw their benefits in the process. Given the relative shortness of time for the implementation to be effective, it is interesting that 25% of all the insured changed their supplementary insurance company.
As the incentives were to provide a more diversified and quality service to the insured, the two smaller health insurers, who belong to large general insurance companies, were able to offer different benefits from Vzajemna whose services are limited exclusively to health insurances. The main incentive for the insurance companies in general remained the possibility to attract new insured through the process of rethinking, which could increase the number of the insured even in the biggest insurance company.
6. Expected outcome
The policy implemented and enacted in the legislative changes has already achieved significant results in reshuffling the health insurance market for supplementary health insurance and opening room for a more diversified and quality-driven offer of different insurance made legal by the changes to the law.
It is likely that the change will have some marginal influence on the premiums in short term, keeping them relatively stable and comparatively lower, especially for the older insured. This should make the new situation also more
equitable.
Still, the combination of health insurance with other insurances provided by some insurance companies has little
effect on the quality or delivery of health care services.
7. References
Sources of Information
Changes to the Law on Health Care and Health Insurance. Official Gazette of the 2. Decision of the Insurance Supervision Agency regarding the transformation of the Vzajemna, mutual health insurance company.
Author/s and/or contributors to this survey
Tit Albreht
Suggested citation for this online article
Tit Albreht. "Risk equalizing schemes - the next chapter". Health Policy Monitor, April 2006. Available at http://www.hpm.org/survey/si/a7/3
Quality of Health Care Services marginal fundamental
Level of Equity system less equitable system more equitable
