Taking cover: Mandatory health insurance in the Gulf explained

On June 30 this year, it became compulsory for all private sector businesses in Dubai to provide health insurance for employees.

The move has been in the planning in the emirate for some time, while in Abu Dhabi it has been mandatory for several years now, and as Nikhil Idnani, principal with Strategy& observes, other GCC countries are following suit.

“All [GCC] countries are at different stages of roll-out and adopting different models of mandatory health insurance in terms of who is targeted, who pays the premium, what services are covered and with which providers,” he explains.

“Saudi Arabia is in the final stages of rolling out mandatory insurance to private sector employees. For other population segments, it is the final design phase. Qatar began its rollout but then suspended it. Both Bahrain and Oman are in the final stages of approving legislation for mandatory insurance.”

In Dubai, the latest deadline has in actual fact been the last phase of a three-stage rollout, says Stephen Maclaren, head of regional sales employee benefit at Al Futtaim Willis.

“The scheme has been in place for a while. Starting in October 2014, the first wave affected larger companies with more than 1,000 employees, while the second wave in July 2015 targeted companies that had between 100 and 999 employees,” he says.

“To date, 75 per cent of Dubai-based expats have been accounted for in the plan. The end of June sweep-up accounts for the remaining 25 per cent of Dubai’s expat business community – those working for small-to-medium enterprises of less than 100 employees.”

The deadline applies to housemaids with the responsibility of insurance cover also on the employer. It stretches to dependents resident in the UAE, though this is the visa holder’s rather than company’s responsibility.

Read: Dubai mandatory health insurance deadline extended

“Each country is defining the minimum schedule of benefits that are required,” says Idnani.

“Employers have the choice to provide additional benefits if they want. For the lower-income population it is likely that the level of health insurance will be the minimum. For middle to higher-income employees, the benefits will exceed that.”

Companies that fail to comply could face fines of up to Dhs500,000.

“There are also consequences for non-compliance beyond just the financial,” says Maclaren.

“The Dubai Health Authority has declared that in extreme cases it reserves the right to call for business licenses to be revoked, as well as potentially bringing forth civil and criminal cases. There will also be issues regarding the hiring and retaining of staff, as proof of compliant health coverage with a local insurer will be required for visa applications and renewal processes.”

Cost versus benefit

The first and most obvious benefit of mandatory cover is the wellbeing of the beneficiaries themselves, potentially leading to a more productive workforce, less sick days and higher morale.

“People are going to be more willing to see a doctor early on when they have a health issue, rather than being too scared to spend an undetermined amount of money as was the case,” argues Michael Mitry, director of The Private Clinic.

“It is all too common a story that the uninsured will leave it too late or let an issue get to a dangerous state without seeing a medical professional. Especially in Dubai where costs aren’t always clear, and many clinics are geared towards the well-off and well-insured, those in less financially secure positions often feel that medical care (in the region) is more than they can afford.

“Of course, there are options for people at all levels of financial security, and there should be more awareness of the excellent government facilities that the DHA provides. At least now, people will be able to see exactly what their new insurance will cover and where they should go for care.”

Dr Michael Bitzer, CEO at health insurance company, Daman, agrees: “Long-term wellbeing requires a sustainable financing system through health insurance, accessibility to healthcare, and crucially a collaborative effort by insurers, regulators and other government agencies to curb lifestyle-borne diseases such as obesity and type 2 diabetes.”

Aside from what might be argued as a moral obligation, how do the cost/benefit numbers work?

Yaser AbuShaban, financial consultant and member of the Chartered Financial Analyst (CFA) Society Emirates, says there should be a sound productivity gain for employers.

“From an economic standpoint it is far more efficient to institute a health insurance scheme that allows participants to share the risks and costs associated with treatment than for each to carry that risk individually,” he says.

“While there is a cost to providing this insurance, the productivity gain should prove sufficient to offset these costs for most employers.

“However, smaller employers with fewer employees may face greater challenges in recouping this cost through productivity gains. Scale does play a role in reducing the costs and improving the benefits associated with providing health insurance. One potential solution is to pool smaller employers together to provide them with the necessary scale that would lower the cost of insurance to the point where they start to see a relatively more significant productivity impact on their business.‘’

Industry implications

Another consideration is the impact on insurance companies themselves. Will business go up across the board, or will competition between insurers mean they will have to offer insurance at lower prices?

“By the time you have deducted administration charges and broker fees, the net premium for primary and secondary care is limited and if claims are higher than anticipated the claims ratio could be very severe,” comments Mark Adams, founder and CEO of Anglo Arabian Healthcare.

“While gross revenue will go up, there is a strong likelihood of claims exceeding 120 per cent of the premium and clearly this is not sustainable. It is not helped that with (around) 55 insurance companies or third party administrators in the market, insurance is generally sold on price rather than value.”

While he feels that the health insurance sector will grow significantly as a result of mandatory coverage, Abdul Azeez, general manager and head of insurance for the GCC at Aster DM Healthcare, concedes that premium rates are also nose-diving, and that cost versus premium may be unsustainable.

“This scenario will bring in measures from insurance companies geared towards the stringent use of insurance policies by patients and providers,” he believes.

This will have its own impact on healthcare providers, he adds.

“Healthcare service providers will be subject to enhanced scrutiny to deliver only the services needed, rather than bill exorbitantly with high-end medicines and unnecessary tests.”

In addition, Akbar Moideen Thumbay, vice president of the healthcare division at Thumbay Group, says: “[With] the demand for insurance increasing in the region, TPAs are playing an increasingly important role – not only cutting insurance companies’ administrative costs, but also simplifying processes and making things easy for customers.”

Wael Al Sharif, CEO of Takaful Emarat, adds: “Pricing will obviously be a major selling point, but given the similarity in pricing points, the competitive advantage will lie in additional benefits and services, or any means of facilitating the consumer experience and providing added convenience.”

Meeting demand

With so many more people expected to take advantage of their health insurance, how will health establishments themselves deal with the additional burden of demand?

“Certainly there will be pressure, but there is a good outcome,” feels Dr Bitzer.

“If a business is doing so well that it needs to hire more staff, then this is a unique advantage. Experience tells us in any case that such pressure is short-term as governments, through regulators, would support any effort to bridge gaps in capacity.

“In addition, our experience in Abu Dhabi 10 years ago shows that while many people received coverage, the awareness of how to make use of their health insurance, benefits and eligibility for services was low, meaning only small numbers flocked to healthcare providers to take advantage of such benefits and services.”

Abdul Azeez from Aster DM Healthcare agrees that healthcare providers will most likely have ample time to adjust.

“Healthcare providers have some room to negotiate access levels for individuals. For example, smaller clinics can negotiate accepting members from a higher tier of health insurance coverage to avoid any pressure,” he says.

“The introduction of mandatory health insurance will definitely increase the utilisation of public and private facilities, which in turn will attract investment. The DHA has monitored an increase in the expenditure for healthcare services over the last two years. The plans to spend extensively on upgrades of the current public hospital network will provide more beds and wider facilities to cater for the increased demand.”

Wael Al Sharif, CEO of Takaful Emarat, adds that while overcapacity might become a reality, GCC countries are equipped to manage.

He says: “This scenario might reign true for hospitals and clinics that fall within the basic coverage network and cater to low income residents – especially in that many of these residents opted to stay away from medical examinations and regular check-ups due to the lack of health insurance coverage in the past. However, the UAE in particular is heavily investing in medical tourism, and we strongly believe they are well equipped to deal with high patient numbers.”

A healthier population?

Dr Mitry of The Private Clinic considers mandatory insurance as a good halfway point between the previous lack of coverage and a system such as the National Health Service in the UK, where free government healthcare is provided to its citizens and where additional health insurance is considered more of a luxury option than necessity.

On the other hand, he remarks, “we must be aware that while on the one side we have the government saying employers need to provide insurance – and many will look to give their employees the best they can – there are also many employers that will choose the least expensive method of doing so that. While better than nothing, this will leave the insured employee with a very little amount of choice. It will be a while before good intentions and those looking to maximise profit find a balance.”

Stephen Maclaren from Al Futtaim Willis agrees.

“We have to stay realistic with respect to costs, so that we are in a position to prepare accordingly,” he says.

“The minimum level of coverage is just that – an absolute minimum. This cannot be used as our target because these levels could possibly prove to be insufficient when it comes to any sort of serious illness or medical emergency.

“The minimum level of cover is a good start and the DHA should be applauded in its efforts to date, but we will have to maintain flexibility on this front.”

At the same time, active public-private partnerships are needed to accommodate certain measures, believes Abdul Azeez from Aster DM Healthcare. He cites continued preventive measures such as early detection, immunisation and education on decreasing chronic and lifestyle diseases; the initiation of compulsory preventive health checks; and increased measures in raising the early awareness of disease within schools.

Read: Why the UAE’s healthcare model is actually a ‘sick care’ model

“The roll-out of mandatory insurance is the cornerstone of the process,” concludes Takaful Emarat’s Wael Al Sharif.

“Once that has been met, government efforts should continue to educate the public and initiate awareness campaigns aimed at general wellbeing and health, in conjunction with making sure that every Dubai resident knows what their basic coverage entails.”

Five lessons learned from unrolling mandatory health insurance within the region
Source: Nikhil Idnani, Principal with Strategy&

1. Ensure that health insurance includes a co-pay/contribution so the member is accountable for his/her healthcare costs. This is to avoid a member consuming unnecessary amounts of healthcare as someone else is paying the bill. Abu Dhabi did this.
2. Gradually roll out the health insurance in phases to different segments of the population, to pilot test it and derive lessons before full roll-out. This mitigates any major risk of failure. Dubai has done this.
3. Build strong regulatory capabilities to oversee the market and control issues such as fraud and abuse. Saudi created a dedicated regulatory entity for health insurance.
4. Enable the health insurance market with a solid health information exchange (IT system) that all policies and claims pass through. This enables regulation and provides a wealth of data. Saudi is currently doing this.
5. Ensure there is adequate capacity within the provision system (hospital/clinics) to accommodate the increased demand for care.

Stephen Maclaren, head of regional sales employee benefit at Al Futtaim Willis, outlines Dubai’s new mandatory minimal level of health cover, as stipulated by Dubai Health Authority

An annual limit of Dhs 150,000 per person on all claims per year
Pre-existing and chronic conditions covered in full, subject to a six-month waiting period during which the insured has not had any previous medical coverage of the condition in the UAE
Inpatient treatment covered, with a 20 per cent excess up to a maximum of Dhs 500 per encounter and a maximum of Dhs1,000 per year
Outpatient treatment covered with a 20 per cent excess
Cost of medicine capped at Dhs1,500 per person
Maternity services covered with a 10 per cent excess. Eight outpatient visits. Inpatient treatment covered up to Dhs7,000 for normal delivery, and up to Dhs10,000 for medically-necessary C-section and other complications.