Private Medical Insurance Reform: An Effort to Make It Easy to Compare Policies

A revolution is in the offing in the future of private medical insurance in Israel. Draft regulations published this week will require the companies to provide uniform coverage for surgery, for procedures that take the place of surgery and for consultations with physician specialists. The terms of the policies will be set by the government, and the private insurance firms will therefore be left mainly competing over the prices they charge.

All Israelis are covered by the public health system, provided by the country’s four health maintenance organizations (Clalit, Maccabi, Leumit and Meuhedet). The range of care offered by the public system includes hospitalization and basic prescription coverage, as set by the government as well as diagnostic procedures and office visits to general practitioners and specialists. The HMOs have been allowed to generate additional income by charging for extended coverage beyond what the government requires and most Israelis have opted by buy the coverage through their HMOs.

Increasingly, however, they have also been purchasing coverage from private insurance companies. The policies generally provide coverage for surgery at a private hospital performed by a surgeon chosen by the patient, unlike public hospitals, where patients cannot formally be assured of a choice of surgeon. (When patients opt for private surgery, the HMOs own supplemental coverage may also cover a portion of the cost too).

Spending on private insurance has more than tripled in a decade, from 1.8 billion shekels ($462 million) to 6.5 billion shekels. Officials at the finance and health ministries have said that the basic purpose of the reform and the uniform terms that private insurers will have to offer, particularly with regard to surgery coverage is to make it easier for members of the public to compare prices, to increase consumers’ bargaining power and to encourage competition on price and service. The officials expect the reform to lower insurance premiums by 30%.

The reform is also part of a larger effort to strengthen the public health care system in the face of increasing reliance by Israelis on private care. A public panel headed by Health Minister Yael German also recommended steps to curb the rise of the use of Israel’s medical facilities by foreigners who come to the country for medical treatment for a fee. The phenomenon has resulted in substantial income for some public hospitals but has also raised concerns over whether waiting times for Israelis have increased, too.

The new draft regulations, which were released on Tuesday by the Finance Ministry, will revolutionize the burgeoning commercial medical insurance sector. Once they are put into place, privately insured Israelis will be required to choose from a list of doctors for private medical visits. The private policies will provide for four physician consultations a year from the list that the insurance company issues. The provision is designed to curb the rapid rise in the fees that surgeons have been able to command, which in turn have been accompanied by increases in the premiums for private insurance.

The one exception to the limitation is that insurance companies with less than a 6% market share will be able to offer coverage that is unlimited in the choice of doctor. That’s an attempt to break the current domination of the private medical insurance market by five companies: Harel, Phoenix, Clal Health, Migdal and Menora, which together have a 96% share of the business.

The draft regulations provide for a deductible for a consultation with a specialist on a private basis of 200 shekels – the portion that the patient pays. When it comes to surgery, the deductible will be roughly 10% on the cost of surgery, and it will include all related expenses like surgeon’s and anesthesiologist’s fees, the hospital fee and medical equipment.

Another major change will be a prohibition against insurers’ charging a set annual premium for the patient’s lifetime. Government regulators will be authorized to adjust premium prices and coverage terms every few years in keeping with changes in the cost of medical equipment and medical salaries. This will undermine the current arrangement in which insurance companies charge high premiums and offer limited coverage on the claim that it is lifetime coverage that incorporates the lifetime risk of coverage the patient. On the other hand, the insurance companies will no longer be committed to a lifetime of coverage.

The initial recommendation of the panel headed by German would have also required the four HMOs’ supplemental coverage, for example Clalit Mushlam and Maccabi Zahav, to contain uniform terms, but that will require Knesset legislation.

Under the new regulations the private insurance companies will be able to screen potential customers based on age and their state of health. The HMOs, on the other hand, are required to cover anyone who seeks to be insured. This has engendered concern among the HMOs that the private insurers will skim off the fat with a young, healthy clientele, which could hurt the HMOs’ own supplemental plans and maybe even increase premiums.