Study: Rapid Growth of Private Health Insurance Costing Public Sector

The great majority of Israelis, around 81%, buy supplementary insurance (bituah mashlim ) from their health maintenance organization.

Israel's private health insurance market is looking very healthy these days. One out of every four adults has a health insurance policy from a private company. That represents a 21% increase in the last three years and a 300% rise since 1999, according to data compiled by the Myers-JDC Brookdale Institute ahead of the annual conference on health policy sponsored by the National Institute for Health Policy.

The great majority of Israelis, around 81%, buy supplementary insurance (bituah mashlim ) from their health maintenance organization, a rate that has held steady for five years. But the proportion of adults with policies from private insurers has risen sharply, from 32% in 2007 to 43% this year, according to Brookdale.

That adds up to big, fast-growing money for the insurance companies. In 2010, the last year for which figures are available, Israelis spent NIS 7.8 billion on private health insurance, including supplementary, private and nursing coverage, an amount equal to 13% of national health expenditures.

In the 2005-2011 period the insurance companies' combined premium revenue for private health coverage jumped 98%, compared with just 13% for other types of coverage.

Insurers paid out just NIS 4.7 billion in claims, only 60% of what they received in premiums, according to the Brookdale report. But the payback varied considerable. The HMOs' supplementary insurance paid on average claims equivalent to 97% of premiums while private insurers paid out 54%.

Among the private insurers, too, the ratio of claims to premiums varied. For group policies the ratio was 84% while for personal polices it was just 38%.

Officials at the health and finance ministries are concerned about the large number of people who have both supplementary and private insurance policies, which means they are unnecessarily receiving duplicate coverage against which they can only make partial claims for private coverage.

In many case insurance companies in fact encourage their policyholders to make claims on their supplementary insurance in order to reduce their claims on the private policy, the report said. That means the state-subsidized HMOs are, in effect, subsidizing the private insurers at their own expense.

At the same time, the combined deficit of Israel's HMOs is set to reach an estimated NIS 1.9 billion this year and NIS 2.1 billion in 2013 if around NIS 700 million of additional funding, promised months ago, does not arrive.

One measure being considered would bars private insurers from paying out a claim that is covered by the policyholder's supplementary policy. The aim is to discourage people from buying duplicate policies while encouraging those with private insurance to make claims against them rather than their supplementary HMO policies.

Industry sources said it is not clear such a reform will be implemented anytime soon because of opposition from the treasury's insurance commissioner, who is concerned about the industry's financial stability and profitability. There are also legal issues in forcing insurers' to retroactively change the terms of existing policies.

As previously published in TheMarker, the treasury's budget division has other idea for restraining the growth of private insurance and medicine out of concern that the billions of shekels being spent in the private sector is raising national health spending, especially for the public sector.

Among other things, the Finance Ministry is looking into supervising physician salaries and the cost of procedures offered privately. It is also weighing a proposal to limit the extent to which HMOs can make use of private clinics with public funds and to limit the services covered under supplementary insurance policies.

Tomer Neuberg