Health Ministry seeks uniform top-up policies

Insurance firms would lose revenue by having to offer identical policies to health funds.

The health funds and insurance companies will be required to offer basic, uniform, and identical health insurance policies, including coverage for choosing a surgeon and second opinions. Insurance companies will not be allowed to perform "medical underwriting" in such policies or exclude people with preexisting conditions, nor will they be allowed to issue any other insurance product that includes the choice of surgeon, except through the uniform policy. These are recommendations by the health insurance subcommittee of the German Committee on public healthcare, chaired by Minister of Health Yael German.

The recommendations are very significant, because medical underwriting is the bread and butter for insurance companies' individual healthcare policies, although they do not appear in group policies offered through employers. The regulator has never intervened in the healthcare market in this way. The recommendations are acceptable in principle by the Ministry of Finance's Capital Markets, Insurance, and Savings Supervision Division, which participated in the subcommittee - an achievement in and of itself. Until now, the division stubbornly opposed initiatives in healthcare insurance that the Ministry of Health and the Ministry of Finance's Budget Division had agreed upon. Supervisor of the Capital Markets, Insurance, and Savings Dorit Salinger personally approved the recommendations, winning praise from health officials, who say that her consent is a big step forward that will benefit the public.

Market sources believe that such a move if implemented could hit revenue at all insurance companies and especially the largest firms: Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS).

Current healthcare policyholders will not be harmed, and there are no plans to change the terms of their policies, but German Committee sources believe that the new competition will cause policyholders to switch policies of their own accord.

The creation of uniform policies with the choice of surgeon and a second opinion is intended to lower health insurance costs, because these are the two biggest items. Until now, supplemental health policies included other services that raised their monthly premiums. The choice of surgeon item accounts for 42% of supplemental health policies' medical costs (NIS 1.2 billion a year), and the second opinion item accounts for 13% (NIS 362 million a year). The German Committee's rationale is that most policyholders buy supplementary health insurance to obtain critical services that are not included in the healthcare basket of services, but they pay high monthly premiums because of ostensible marketing gimmicks that are enfolded within the policy, such as personal fitness trainers.

Following media reports in the past few weeks, the health funds feared that insurance companies could offer lower prices for a basic policy than for a health fund's supplementary policy because they could exclude individuals. This is why the subcommittee recommends banning the medical underwriting of the basic policy in order to create equal competition between the health funds and the insurance companies.

The German Committee believes that implementing the health policy recommendations will lower the salary cost in the health insurance market, because lower premiums will force insurers to cut costs. It believes that restricting private healthcare practice is an integral part of strengthening public healthcare.

Sources inform ''Globes'' that the German Committee dropped the idea of requiring the insurance companies from showing a high rate of users, because the companies currently spend very little on healthcare services, but reap huge profits, whereas the health funds' supplementary healthcare policies return at least 80% of policyholders money. A committee source said that cancelling medical underwriting for uniform policies and the competition that this creates renders the need of requiring insurance to increase uses unnecessary.

The committee recommends that the uniform policy should include a qualification period (the period during which medical services cannot be obtained), which will be defined later. It also recommends allowing policyholders to switch insurers, including supplementary insurance for a private company, while keeping accumulated seniority and rights.

Published by Globes [online], Israel business news - www.globes-online.com - on April 17, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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