Health Insurance Tomorrow: A View from Marrakech

By: Dr. Finn Göldner

finn.goldner@gmail.com

This past week, the insurance industry in the Arab world convened in Marrakech to discuss the state of their industry.

Having just returned from Morocco after having had the chance to talk to leading executives about the state of the health insurance industry in particular, I wanted to give my personal reflection on some of these discussions as they relate to some very fundamental questions about the value of private health insurance.

Health insurance has been a real growth business in the region

Take the Gulf states as an example: rapid economic development and the introduction of mandatory schemes such as those in Saudi Arabia, Abu Dhabi and soon in Qatar and Dubai all have fueled this growth in health premiums.

On the other hand, strong competition in a crowded market, price conscious buyers of insurance (largely employers) and the industry’s past ability to cross-subsidize with other lines of business oftentimes led to poor underwriting discipline.

Self-sustained profitability going forward is a must, but how to do it

Industry leaders all agree that this is not sustainable any longer. With health insurance being such a strategic and integral part of anyones overall insurance portfolio, self-sustained profitability for health business on a stand-alone basis is a must (not only for preparing yourself for the discussion with your re-insurer).

Justifiably, industry leaders are worried about how to do this in the face of the following challenges:

  1. Employers in some places are still suffering from the downturn a few years back and if anything are more price conscious than before. In contrast to individuals, corporate clients also in general show less loyalty to their insurers
  2. While premiums have risen over the last years, provider prices have the unfortunate tendency to follow premium increases (not only the other way around)
  3. Risk exclusion — while of little value from a system financing perspective anyhow — has been severely curtailed by the introduction of mandatory schemes. The lack of accurate data on claims history with other insurers leads to ill-performing groups just being handed around rather than being properly priced

Think beyond underwriting

While there is ample discussion on underwriting, there is surprisingly little discourse on how to actively manage the risk once you have taken it onto your books.

In my view the key prerequisite for a transition in mind-set from a pure risk-taker to a risk-manager is better data:

  • Electronic claims data will help you to shift the discussion with your provider once and for all (why pay one better than the other) and for the first time allow for a rational sharing of risk with the provider as soon as you can calculate more bundled forms of payment (e.g., DRGs, capitated payments)
  • As a side effect, auto-adjudication through rule-based software engines not only allows for better mechanisms of control against fraud and abuse but also lowers administrative cost ratios and thus can increase profitability
  • Most importantly though, individualized data will enable insurers to start an intelligent interaction with their beneficiaries as a partner in their health to create customer loyalty in health insurance

Help in arguing for the social benefits of private health insurance

Having successfully made the transition from risk-taker to risk-manager, private health insurance also will have an easier time pleading their case on the social benefits of private health insurance and open up new models of business in the Public-Private-Partnership arena.

Given the large role that social insurance models in the French Caisse Maladie tradition still play in the Maghreb (but increasingly also in the administration of insurance programs for the local populations in the GCC countries) and given the want of governments to harvest private sector techniques of management, this might be an interesting reason all by itself.

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