Will insurance companies be removed from management of state health insurance programs?!
On February 28, 2013 the government enacted a universal state health insurance program designed to provide insurance to all those citizens in Georgia currently without it. This initiative will help make health care accessible across the country, and is thereby undeniably a positive step.
However, in order for these programs to be successful, it is important that they are managed effectively. Nowadays the government is managing only the recently initiated universal health care program but in the near future will take over other health insurance programs management which were previously outsourced to private companies.
It must be noted that the former system had some negative as well as positive aspects. On the downside, insurance companies enjoyed unprecedented profit margins on the health insurance which in 2008-2010 exceeded 50%, due to the lack of supervision over the funds. Furthermore have there been several reported cases of the violation of patient rights, by insurers unjustly refusing treatments to patients where the state would fail to intervene. The benefits of the outsourcing are that it costs the government less human and financial resources compared to managing the programs themselves.
The current plans to totally exclude the private insurance companies from the management of all the programs can lead to serious problems. First, it is not sure whether or not the respective agencies/departments of the Ministry of Healthcare will be capable to implement and monitor the programs, as well as quickly and adequately react to citizens’ appeals. Along with the resources available to the Ministry, other important issues should also be taken into consideration while making this decision. Namely:
In case management for all state insurance programs is switched to the government, these changes would gravely affect the insurance sector and as a result, there is a likely possibility that the prices for medical services will increase, ending up on the government’s account.
Currently, 75% of the whole insurance market consists of state funded insurance. This means that insurance companies’ largest source of income is actually the state sponsored insurance programs. When this source disappears, insurance companies will struggle to survive and will therefore be forced to increase the prices of all types of insurance, such as car insurance, life insurance and private health insurance. This may also lead to staff layoffs for insurance companies.
It is possible that the insurance companies, who own hospitals, will try to increase shares of profit gained from the hospitals after their state contracts are annulled. As a result, prices for services will increase, which means significant additional expenditures for the government.
We think that the management of insurance services will be a serious challenge for the government, especially since the government lacks the valuable market experience which the insurance companies have acquired over the years. TI Georgia proposes that this system be reconsidered and offers the following recommendations:
Keep the management of the new insurance program in the private sector, but strictly regulate the profit margin over these funds.
Increase the resources of the Health Insurance Meditation service, giving them the possibility to monitor the situation in hospitals on a broad basis.
We believe that the current plan to place the management of the universal health insurance into state hands will inevitably have serious consequences. Not only will it demand significant amount of additional resources form the government but, perhaps more importantly, it might also be the final blow to the Georgian insurance industry, causing the society to pay a much higher price in the long run.