All PMI systems are not created equal. Around the globe, there are almost as many different healthcare systems as there are nations, with each having its own good and bad points. And each spawns its own brand of PMI.
A look at a handful of countries and their healthcare systems shows that what is considered conventional PMI in the UK would be quite unconventional in many places. And an understanding of how each system dovetails with cover provided on international PMI ensures that customers receive the right type of treatment, through the most appropriate avenue.
Argentina Argentina has a three-tier system. At the foundation is state provision through public hospitals, which is used mainly by low-income and unemployed people. Above it is a social security health benefit system, which provides mandatory health insurance to workers and their families through health insurance funds, or obras sociales, most of which are operated by trade unions.
These collect three per cent of employees’ income and six per cent from the employer. About two thirds of Argentineans are in the second-tier. Following a minimal deregulation in 1998, they were for the first time allowed to choose the obras sociale which insured them. For high income earners, fortunate employees, and others who care to pay the price – about one quarter of employees in total – pre-paid health service suppliers, called prepagas, offer additional cover. They collect dues and provide health care services as needed.
Luis Parodi, head of group life insurance at Alico Compania de Seguros, in Buenos Aires, explains that the system has evolved to allow little need for conventional health insurers and PMI products. Prepegas, which are mostly quasi-mutual organisations, dominate the third tier.
“The leader is OSDE, which began as a sort of free-association of top executives, but grew and grew. Next is the Exxel Group, a private fund owned by institutional investors, which has acquired three private healthcare companies in the last two years. With three other prepegas, Qualitas, Medicus, and Omint, it dominates the market. So we don’t have private insurance companies.”
Nor is change likely: a new income tax rate for higher-earners is likely to discourage new buyers of health cover, the major target group for new health insurers, Parodi adds.
Germany Germans earning more than DM6,450 monthly (£2,054) (DM5,325 (£1,677) in eastern Germany), about 10 per cent of the population, are ineligible for public care, and account for about 7.2m PMI policies. Another 7.6m have subscribed to one or more supplementary PMI schemes, which add a range of benefits. All told, the PMI market in Germany was worth about DM37.8bn (£11.91bn) in 1997.
While the state system is funded through premiums based on earnings, and thus the young subsidise the old, private insurers have a different approach. Premiums are calculated based on age, state of health, sex, and benefits. “Private insurers use an age-related contingency payment procedure, which makes provision for an old-age reserve,” explains Barbara Wolf of Vereinte Krankenversiche-rung, Germany’s third-largest health insurer. “The insured pays toward the cost of his own future old-age healthcare out of current premiums.” Recent legislation has strengthened the system by stabilising the premiums paid into private schemes in old age.
Under the German system, private insurance makes a disproportionately high contribution per head towards funding the health system. “In this way the private health sector is indirectly supporting the state ‘solidarity’ system,” Wolf says.
United States The US healthcare system is built around private insurance funded by employers. Cover is provided by a confusing array of groups, most of which fall into the categories of health management organisations (HMOs), which cover nearly half the insured population, or preferred provider organisations (PPOs). They are administered by specialist health insurers. Indemnity insurers still have a small share of the market, but the trend towards managed care, where costs are reduced through control and limitation of treatment, is cutting this.
According to a study by William Mercer, the employee benefits company, about two thirds of Americans are insured by an employee-sponsored programme covering 70 per cent to 90 per cent of medical expenses, at a cost of 9.6 per cent of payroll. State provision is used only by the elderly and the long-term disabled. But the system is creaking: Americans are used to high and rising premiums, continuously changing benefit packages, and the collapse of health insurance bodies.
HMOs often use owned networks of healthcare providers to supply services and control costs, and have “gatekeeper” physicians who approve all treatments. However, HMOs have been criticised for being too restrictive, and are losing popularity. Gaining market share are PPO insurance plans, which allow employees to use care providers inside or outside the organisations network, and are generally more lenient in terms of choices. The trade-off tends to be higher premiums. Mercer says 83 per cent of PPOs and HMOs charge users a flat coinsurance fee, usually $10 (£6.25), when they use a network care provider.
Japan For many years Japan’s public health insurance system left little room for PMI, but times may be changing. In 1997 the cash-strapped government dropped to 80 per cent the share of medical expenses which the state’s extremely comprehensive basic insurance covers, and there is much discussion about raising the consumer’s co-insurance portion again, to 30 per cent.
The system is administered by hundreds of health insurance societies, many of which are run by large employers, and which collect premiums directly from salaries. Others are administered by local government. The average deduction, matched by the employer, is about 8.5 per cent, but it varies from society to society. A portion of that premium is paid into a national pool to cover the medical expenses of the elderly.
But all is not well. By most accounts, many of the health insurance societies are in the red, and as a whole they have suffered pre-tax losses for many years in a row. Although state provision is comprehensive, it has been criticised for its failure to offer some therapies which are commonplace in the US. Compounding the problems, the population is ageing, so more money will have to be drawn from the premiums of working people to fund the healthcare of the aged. Japan’s public health system, like its private counterpart in the US, is creaking.
At present nothing akin to PMI is offered in Japan. The only similar products are hospital cash schemes, which offer a fixed daily benefit during hospital stays, and tend to be sold as add-ons to life insurance policies. However, change is in the wind, and new opportunities could soon appear for private insurers. The increase in co-insurance payments to 20 per cent, and possibly to 30 per cent, may be seen by Japanese people as a potential burden they wish to identify. “Cost increases may open opportunities, but so far there hasn’t been a need perceived,” says Jenny Sparks, country manager, (life & health) Japan, ERC Frankona Reassurance. But the seeds are planted, she adds. “We have a model: a significant number of insurers offer long term care cover.”
The Gulf States The countries of the Gulf Co-operation Council (GCC), particularly Kuwait, Saudi Arabia and United Arab Emirates, are currently attracting much attention from health insurers as they abandon their old medical care policy and begin the process of adopting a new formula of private provision.
The oil-rich states began from a unique position: everybody, foreign expatriates included, was entitled to as much free healthcare as they desired. There was no insurance; people simply went to hospitals or clinics and were treated. But faced with mounting costs and a powerful reluctance to introduce national health insurance premiums, or even income taxes, the three GCC countries are each in the process of overhauling their health insurance regimes. “They are proposing that everyone buys PMI, and that the private sector takes care of the benefits and funding,” says Clem Groot, head of international at ERC Frankona Reassurance.
The Gulf States are building systems from the ground up which will require employers to fund health insurance for their employees and their families. Unfortunately the process is at present very fluid, and it is unclear who will cover who, and how. Yet international health insurers are watching keenly.
“Everyone is very much aware of the potential for business,” Groot says, “but what needs to be found out first is where the profits lie. Governments haven’t finalised the structures.” Kuwait, for example, is presently setting up a single national medical insurer, but it is likely to provide only default cover, leaving the door open for private insurers to offer PMI to those who want superior coverage. “The Gulf is experiencing a compacted version of the evolution of all the different healthcare markets, and it will happen quickly,” he adds.
Providing healthcare is complex, and different nations have certainly taken different approaches to creating solutions. Fortunately for the patient abroad, international PMI policies help to remove the confusion from these different systems. The insurers have already examined how different countries operate their healthcare systems to ensure customers receive appropriate care, but with almost every approach having something to recommend it, politicians may benefit from taking a global view.