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An independent regulator could be the answer

An independent regulator, free of political pressures, is one of the prescriptions the health insurance market needs the most, says Tomáš Szalay of the Health Policy Institute think tank.

Tomáš Szalay (Source: Courtesy of Tomáš Szalay )

An independent regulator, free of political pressures, is one of the prescriptions the health insurance market needs the most, says Tomáš Szalay of the Health Policy Institute think tank.

The Slovak Spectator spoke to Szalay about challenges that the health insurance market faces in Slovakia and also about a recent proposal to merge the country’s two state-run health insurers, Spoločná Zdravotná Poisťovňa and Všeobecná Zdravotná Poisťovňa.

The Slovak Spectator (TSS): What are the most serious challenges that the Slovak health insurance market is facing today?

Tomáš Szalay (TSz): Though the economic crisis is a strong enough reason for carrying out fundamental changes, due to the approaching parliamentary elections it is highly unlikely that any fundamental changes will take place.

However, every country faces the issue of long-term financing of its health-care system and is influenced among others by demography: today’s system is tuned on the basis of a naïve belief that there will always be enough young people willing to pay. At this point however, the system is already in need of solutions. The state might decide to increase the health insurance transfers that clients pay, or the system could be modified by inserting a new element, for example a saving accounts – a kind of second pillar for the health-care system. Or the payroll taxes could be calculated on a different basis compared to today. If no change is made, then deficits will be unavoidable.

TSS: What do you think could be done straight away to improve the system?

TSz: A kind of prompt solution would be to return supervision of health-care services to the hands of an independent regulator, which should be the Health Care Supervision Office. This office, which should be entirely politically independent, currently issues licences to health insurers and at the same time controls their operation. However, the current government, in late 2006/early 2007 terminated the independence of the office. Originally, it was not possible to recall the chairman of the office once he or she was elected for a period of five years. However the government modified the rules in a way that the chairman can be removed without any reason being given for doing so. This move places Damocles’ sword over your head if you are the chairman of the institution, forcing you to operate under constant political pressure. Then there is also a risk that such a regulator would act differently towards the state-managed insurers while a different approach might be applied towards the private ones. The regulator must be independent from political power and the legislation should change in this area so that the chairman of the office cannot be recalled at any time. An independent regulator will make sure that all the insurers keep to the rules and thus it would not be necessary to make changes inside the insurers.

TSS: Could you give an example of how clearer rules could help the system?

TSz: Of course the definition of rules is not as much a role for insurers as it is for the regulator and the ministry, which must impose clear and enforceable rules on the market. For example the health insurers are obliged to record waiting lists of patients who are waiting for non-urgent health procedures. Here clear rules are a must so that no one can trade and tamper with these waiting lists and move up certain patients in return for payment. We at HPI have been calling for transparent waiting lists so that this information can be accessed and controlled. For example there could be a map of Slovakia made with the information on where and how long patients wait for certain procedures, while creating a certain state culture defined by a regulation issued by the ministry. Then the regulator could use the ministry’s regulation to control the operation of the insurer. To date, there is no such regulation. Patients do not have that safety net and they do not have a chance to argue that ‘I have been waiting for a hip-joint replacement for more than a year and a half and the regulation says I should not’.

TSS: Has the economic downturn contributed to the problems that the Slovak health insurance segment faces today?

TSz: The crisis has only made the problems more visible and urgent. In principle, the situation is not necessarily that the system has serious faults. As I said, it might well be that we simply need clear rules that will work and an independent regulator to enforce those rules; but none of that is there. It has nothing to do with the economic crisis.

TSS: How do you view the plans of merging Spoločná Zdravotná Poisťovňa and Všeobecná Zdravotná Poisťovňa? Will it solve any problems?

TSz: It would be a very daring thing to say that the proposal solves the problems. I would say that it eases the impacts. I see no reason why the state should own two mutually competing organisations.

Secondly, there is a strong economic argument. Between the insurers there is a mechanism called risk adjustment, meaning that some insurers receive compensation for the risk structure of their policy holders. Insurers with younger and healthier policy holders are in fact paying for those who have older clients with severer health problems. This is a system which has been in operation in Slovakia over the past 10 to 15 years. Most of the transfers have happen in a way that Všeobecná Zdravotná Poisťovňa is the receiver of the funds. The largest payer is Spoločná Zdravotná Poisťovňa. So the transfer mostly occurs between these two state institutions. It shows that risk is not evenly distributed and the private insurers are not taking advantage from having young and healthy clients, but rather the state insurer is.

I do not see much reason why there should be two firms on the market with the state as the same owner. This, too, is not a situation which has been created by the economic crisis. The proposal for the merger is not a new one. The health minister, Richard Raši’s argument for not carrying it out was that the merger was a demanding process and that with the given capacities the expenses would have been far too high.

But the process of merging the insurers should not be so complicated if the process happens by transferring the portfolio of clients from one insurer to the other. Here you do not have to fuse two firms while trying to unite company cultures. It would be enough to proceed in the same way as happened with Europska Zdravotná Poisťovňa, when its portfolio of clients was transferred to a different insurer. The information system of the Všeobecná Zdravotná Poisťovňa should be able handle it, and then the Spoločná Zdravotná Poisťovňa could just go into liquidation. In fact this appears to me to be the cheapest solution.

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