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State health insurers might merge

JUST several months ago Slovakia’s Health Ministry brushed aside the idea of merging Slovakia’s two state-owned health insurers into a single giant institution as being far too complicated, but the global economic crisis has turned the concept into something that the ministry is now advocating.

Minister Richard Raši expects a merger will cut costs. (Source: SME)

JUST several months ago Slovakia’s Health Ministry brushed aside the idea of merging Slovakia’s two state-owned health insurers into a single giant institution as being far too complicated, but the global economic crisis has turned the concept into something that the ministry is now advocating.

In order to merge Všeobecná Zdravotná Poisťovňa (VšZP) and Spoločná Zdravotná Poisťovňa (ZSP) the ministry, led by Richard Raši, is knocking on the door of the state treasury for funds so that VšZP can link the information systems of the two insurers.

This aspect of the plan, which is now undergoing an inter-departmental review, has not won the sympathy of the Finance Ministry which has a long list of objections but has basically said that stuffing money into the successor insurer would go against the budgetary rules of the public administration.

VšZP is currently the largest health insurer in the country, with about 2.9 million policyholders out of a total population of around 5.4 million. The main shareholders of ZSP are three Slovak government ministries: the Defence Ministry, the Interior Ministry and the Ministry of Transportation, Posts and Telecommunications. The Slovak health insurance market is also served by three private insurers: Dôvera, Union and Apollo.

One of the impacts the global economic crisis is having on the health insurance sector is a fall in the receipts from insurance premiums, the Health Ministry wrote in its document that is undergoing inter-departmental review. The ministry said that the main reasons for the drop-off in premium payments have been the increase in the number of unemployed policyholders and a decrease in the level of premiums from economically-active policyholders due to a slowdown in the growth of their nominal monthly wages.

The growing level of unemployment is also linked to an increase in the average time of temporary sick leave, suggested the ministry, saying that the use of temporary sick leave in Slovakia reached a five-year high in March 2009 and this then gets reflected directly in higher costs for providing urgent health care.

“The priority, however, is to maintain the strong social character of health insurance in the public’s interest through a single state health insurer while preserving plurality in the provision of public health care,” reads the document.

The Slovak Cabinet indeed approved the merger on July 15. Raši’s two immediate predecessors, Rudolf Zajac, who served in the government of Mikuláš Dzurinda, and Ivan Valentovič who was Prime Minister Robert Fico’s first health minister, had also proposed to merge the two insurers but it was never done.

The Association of Health Insurers (ZPP) does not consider the merger of VšZP and ZSP a systemic solution to the problems of VšZP, Eduard Kováč, president of the association told The Slovak Spectator.

But a health policy think-tank, the Health Policy Institute (HPI), sees the merger as a logical move in times of economic difficulty and envisions a single company gaining savings, mainly in administrative costs. HPI believes the merger could also lead to unification of purchasing.

“It would be a very daring thing to say that the [health ministry’s] proposal solves all the problems,” said Tomáš Szalay of HPI. “I would say that it eases the impacts of the crisis.”

Szalay explained that there is a mechanism called risk adjustment between Slovakia’s health insurers, meaning that some insurers receive compensation from others based on the risk structure of their policyholders. Insurers with younger and healthier policyholders are in fact compensating those insurers who have older clients with more severe health problems and this mechanism has been in place for the past 10 to 15 years, Szalay added.

“Most of the transfers have happened in a way that Všeobecná Zdravotná Poisťovňa is the receiver of the funds,” Szalay said. “The largest payer is Spoločná Zdravotná Poisťovňa. So the transfer occurs mostly between these two state institutions. It shows that risk is not evenly distributed and the private insurers are not getting the advantage from having young and healthy clients, but rather the state insurer is.”

Szalay said he does not see any reason why there should be two firms on the market with the same owner. “I see no reason why the state should own two mutually competing organisations.”


He also said that the process of merging the insurers should not be complicated if the state simply transfers the portfolio of clients from one insurer to the other instead of trying to fuse the two firms.

“It would be enough to proceed in the same way as happened with Európska Zdravotná Poisťovňa, when its portfolio of clients was transferred to a different insurer,” said Szalay. “The information system of Všeobecná Zdravotná Poisťovňa should be able to handle it and then Spoločná Zdravotná Poisťovňa could just go into liquidation. In fact, this appears to me to be the cheapest solution.”

The daily Sme newspaper reported that Všeobecná Zdravotná Poisťovňa, even though it is the largest health insurer, has already requested pharmacies to increase the time limit for them to receive payment on their invoices to 45 days. The Slovak Chamber of Pharmacies said in early March that there have been delays in payments from VšZP. In mid-April the insurer estimated that its revenues may lag behind its €2.07 billion planned income by over €63 million in 2009.

VšZP ended 2008 with a positive balance of €30,000 on total revenues of €2.199 billion, the SITA newswire wrote. Throughout the entire year its adequacy of reserves did not decrease below the level set by law at 3 percent, with average reserves in 2008 of 3.33 percent.


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