PRIVATELY-OWNED health insurers, and especially the profits they make, have long been a source of intense irritation to Prime Minister Robert Fico. A law passed during his first term to ban the firms from distributing profits was later struck down as unconstitutional. Now Fico is taking a different tack: he wants to institute a single, state-run health insurer and in the process push the existing two private providers out of the market. However, the two companies that would be affected, Dôvera and Union, are opposed to the plan and have said that if necessary they are ready to take legal action to attempt to block it.
Fico says he would prefer to reach an agreement with the owners of Dôvera and Union, yet he has openly discussed the possibility of expropriation, arguing that the creation of a single insurer is clearly in the public interest. The basis of his argument is that while the Slovak health-care sector is under-financed, the private health insurance companies are reporting profits. On July 25 the cabinet voted unanimously to return to the single-insurer system that existed before 1995 and indicated that the private insurers would be excluded from the market by 2014.
“This is a political decision by the Slovak cabinet and it means in practice that private health insurers Dôvera and Union should leave the market,” Fico said, as quoted by the TASR newswire.
Fico added that he expects a tough fight, but that the government’s intentions had been made clear.
The cabinet outlined three ways in which a single-insurer system could be re-established in Slovakia, and tasked the Health Ministry with working up a detailed plan by the end of September. Under the first two approaches the government would agree to purchase the insurers’ shares or to ‘rent’ the private insurers’ clients. If this did not turn out to be possible, expropriation with appropriate reimbursement might be used. Fico has refused to speculate on the possible purchase price in this scenario, saying that the job of setting a price would be left to an independent auditor selected via a public tender.
According to public-service broadcaster RTVS, experts estimate the total value of the two insurers at around €1 billion.
Fico admitted that the government does not have the money to purchase the firms. However, the state could raise this amount by the sale of its remaining shares in partly-privatised companies, for example Slovak Telekom.
Private insurers want to stay
Neither of the private insurers wants to leave the market and both say they are prepared to take legal action if necessary.
The private equity group Penta Investments, which is the main shareholder in Dôvera, the bigger of the two insurers, insists that it does not plan to voluntarily depart the health insurance market in Slovakia. However, it has so far issued a cautious response to the government’s plans. Penta spokesman Martin Danko said that the material which the cabinet approved on July 25 is not specific enough to allow it to respond in detail. As long as the exact parameters of a solution are unavailable, Penta said it will not comment on the topic. Danko said he considers talk of the expropriation of private health insurance companies to be premature.
“Nothing of that kind is taking place so far,” Danko told the SITA newswire. “Until now it is merely a statement; I am not aware of any law that would be on the table and deal with expropriation.”
Penta does not prefer any option among the three presented, reiterating that it wants to continue doing business in mandated health insurance. But it says it is aware that when a political will is expressed by parliament Penta will have to adapt to it.
“Which of course does not rule out protecting our interests through legal action, but that is still very premature,” Danko said, as quoted by SITA.
Dutch company Achmea, which owns all the shares in health insurer Union, is not interested in selling either the company or its portfolio of policyholders to the state, according to an official statement provided to TASR on Wednesday, July 25. Achmea confirmed its long-term interest in the Slovak market, in line with its strategy and reflecting what it called its Union’s acknowledged know-how in health insurance.
Achmea expressed regret at the cabinet’s decision to aim for the re-introduction of a unitary system of health insurance in Slovakia. It said it is analysing the cabinet’s decision in depth.
“If necessary, Achmea will take all steps necessary to protect the business interests of Union,” according to its statement.
Slovakia’s Association of Health Insurers (ZZP), of which Dôvera and Union are the only two members, disagreed with Fico’s plan to create a monopoly state insurer. Katarína Kafková, the president of the association, said she believes a single-insurer system would not solve the problem of ineffectively-used funds.
“Only a competitive environment is able to create space for mutual comparison and improvement, for searching for hidden reserves and applying pressure for effective usage of money,” Kafková told TASR, adding that the ZZP believes that the current, plural system, which includes competition, is beneficial for health care in Slovakia.
The ZZP believes that the proposal to create only one insurer does not address the basic need, which is to develop public health and improve the health indicators of Slovakia’s population. It says that the Health Ministry should instead create a long-term strategy to develop the system and secure funds to reach these objectives. It also points out that there has not been an analysis of the advantages and disadvantages of plural and unitary systems. The profit of health insurance companies, which is cited as the main argument, is an unsuitable motive for such a fundamental change of the system, the ZZP stated. Kafková further stressed that the private insurers have reported losses as well as profits in the past.
The Health Policy Institute (HPI) think tank, in an earlier response to Fico’s initial statements that the state might acquire the shares of the private health insurance companies and thus create a single, state-owned health insurer, said it regards the plan as an attempt to divert people’s attention.
“During the current period of time, when the number of insurance companies is not the problem in Slovak health care, we perceive these statements as efforts to divert the attention of the media and people from the real problem,” HPI wrote in a statement dated July 2. “This [problem] is the insufficiency of funds for doctors’ and nurses’ wages, increases in which Smer deputies also voted for.”
Peter Goliaš, an analyst with the INEKO economic think tank, points out that Slovakia does not have people with the skills to manage a single, huge health insurer, as exists in more developed countries.
“Health insurers play a key role in increasing quality as well as the effectiveness of the whole health-care sector because these are operators which decide what they will pay for and how much they will pay providers, i.e. doctors and hospitals,” Goliaš told TV Markíza. “Thus they can motivate doctors and hospitals to improve quality.”
Mandated health insurance in Slovakia
Three insurers currently provide mandated health insurance in Slovakia. The largest, Všeobecná Zdravotná Poisťovňa (VšZP), is state-owned and has almost 3.5 million insured persons. The other two are private. The larger of these two, Dôvera, has 1.4 million insured while Union covers one-half million insured.
Individuals can decide which insurance company will provide coverage. Health insurance premiums are obligatory in Slovakia. Those working, or economically active, pay them via payroll levies. The state pays the health insurance contributions for economically inactive people such as children, pensioners, women on maternity leave, and so on. The insurance companies order services from individual health-care providers and pay for them on behalf of their customers.
Dôvera reported an annual post-tax profit of €39.3 million for 2011, the TASR newswire reported. This represents 4 percent of the insurer’s annual turnover and is equivalent to the sum it pays to health-care providers for two weeks of provided services, on average. The insurer has retained the latest profit within its reserve fund.
Fico pointed out that Dôvera’s profits account for 80 percent of the €50 million in extra public funds that the cabinet recently agreed to disburse to cover increases in medical workers’ wages.
“On one hand we are struggling and searching for reserves and on the other hand somebody is slicing money away from public funds,” Fico said in response to Dôvera’s profit, as quoted by SITA earlier this year. He added that health insurers have administrative funds from which they finance their operations.
Legislation barring private health insurers from distributing profits to their shareholders in the form of dividends was passed by parliament in 2007, but became one of the most criticised laws advanced by the first Fico government. Slovakia’s Constitutional Court ruled in January 2011 that the law, which took effect in 2008, restricted the property rights of the health insurers’ shareholders, interfered in the insurers’ right to do business by preventing them from making autonomous decisions over how to use their profits, and was thus unconstitutional.