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TWO STATE-OWNED AND TWO PRIVATE HEALTH INSURERS ARE TO MERGE

And then there were three

SLOVAKIA’S two state health insurers will merge into a state-owned mammoth and two of the present three private health insurers are to fuse into a private giant, cutting the number of health insurers operating on the Slovak market from five to three. The Slovak cabinet has already given the nod to the merger of Všeobecná Zdravotná Poisťovňa (VšZP) and Spoločná Zdravotná Poisťovňa (SZP), hoping to see the insurers save 9 percent of their operational costs.

VsŽP director Zuzana Zvolenská (Source: SITA)

SLOVAKIA’S two state health insurers will merge into a state-owned mammoth and two of the present three private health insurers are to fuse into a private giant, cutting the number of health insurers operating on the Slovak market from five to three. The Slovak cabinet has already given the nod to the merger of Všeobecná Zdravotná Poisťovňa (VšZP) and Spoločná Zdravotná Poisťovňa (SZP), hoping to see the insurers save 9 percent of their operational costs.

Though the merger itself has attracted some criticism, it is the state’s plan to inject €65.1 million into VšZP, and thus increase its share capital, that has prompted the opposition’s indignation. Robert Fico’s cabinet approved the move on September 30.

Health Minister Richard Raši has argued that the merger is the ideal prescription to cure VšZP’s financial ills by, he said, eliminating the impacts of the financial crisis and preserving the financing of health care at its current levels. The opposition has warned that boosting the insurer’s share capital will hardly solve its problems, but some observers say the merger itself seems a logical move in times of economic difficulty.

VšZP is currently Slovakia’s largest health insurer, with about 2.9 million policyholders out of a total population of around 5.4 million. The main shareholders in SZP are three Slovak government ministries: the Defence Ministry, the Interior Ministry and the Ministry of Transportation.

It currently has about 650,000 policyholders.

The state will be the sole shareholder in VšZP after its merger with SZP. The private insurers planning to merge are Dôvera and Apollo, who will then share the market with Union.

After 2010 the merged state insurer will have a market share of 67 percent of all policyholders. Along with the €65.1 million hike in its share capital, VšZP will also assume €38 million from the basic capital of SZP, according to the website of the Health Policy Institute (HPI), a health sector watchdog.

The Slovak Democratic and Christian Union (SDKÚ), the largest opposition party, said that the fundamental problem with the move is the ineffective management of VšZP, adding that the merger of the state-owned insurers will only camouflage the real problems of the health-care sector.

As for the impact that the merger might have on the health insurance market, one should await the related decisions of the Antitrust Office and the health-care oversight authority, the president of the Association of Private Health Insurers, Eduard Kováč, told The Slovak Spectator.

Nevertheless, VšZP general director Zuzana Zvolenská is already confident that the merger will bring benefits to both policyholders and health-care providers. She said that a strong state insurer will emerge to serve as a guarantor of stability, the SITA newswire reported. According to Zvolenská, the merger will stabilise the whole system of health insurance.

All the savings that the insurers make through reduced operating costs – an estimated 9 percent in 2010, and 14 percent in subsequent years – would be channelled back to health care, Minister Raši said.

However, the largest state insurer has said very little about eventual layoffs related to the closure of branches.

Financial injection – thorn in the flesh



Under certain circumstances the move could be defined as unfair state assistance, Kováč told the Slovak Spectator in response to the state’s plans to pour €65.1 million into VšZP.

Viliam Novotný of the SDKÚ said that the financial injection was a hot candidate to make it onto the ukradli.sk website, where his party publishes what it considers cases of non-transparent use or waste of public funds.

The Finance Ministry, which had originally said that stuffing money into the successor insurer would go against the public sector budgetary rules, no longer regards the financial injection as a waste.

“The investment of the state is not lost at all,” Finance Minister Jan Počiatek told the public broadcaster Slovak Radio on October 1. “Quite the contrary: this value will in the future most probably grow.”

But according to Peter Pažitný of the HPI, these aren’t funds that the insurers need for the merger itself but rather to cover their deficits.

Raši’s two immediate predecessors, Rudolf Zajac, who served in the government of Mikuláš Dzurinda, and Ivan Valentovič, who was current Prime Minister Robert Fico’s first health minister, also proposed merging the two state insurers but it was never done.



Private insurers come together



Penta financial group, which has a controlling interest in both of the two largest private health insurers operating in Slovakia, Dôvera and Apollo, plans to merge them in order to create an insurer able to compete with the new state-owned health insurer. The new private giant should start its operations in 2010 too.

“For us, as the investor in both these insurers, the reason to merge them was the fact that [they] have very similar values and their activities tend to complement each other – so there is no sense in them acting as competitors,” Penta spokesperson Martin Danko told The Slovak Spectator earlier this year. “We are also convinced that an insurer with 1.5 million policyholders will have a great potential to be a real alternative to the state health insurers.”

The merger should mean that the insurers will save on operating costs and allow for more effective operations.

Private equity group Penta controls 100 percent of Dôvera and 49 percent of Apollo via its Dutch affiliate Hicee, the Trend weekly reported. Earlier in August, the Health Care Supervision Office (ÚDZS) approved the sale of a 51-percent stake in Apollo by the Agel company to a Cyprus-based company, Prefto Holdings Limited, which is reportedly close to Penta.

At the beginning of 2009, Dôvera reported about 860,000 policyholders and Apollo had about 500,000 clients.


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