Insurance Sector Under Doubled Health-Insurance Burden
06 September, 2012
Insurance Sector Under Doubled Health-Insurance Burden

A new expanded state insurance program covering approximately one million more beneficiaries starting from September 1, 2012 nearly doubles the burden on Georgian insurance sector, which is facing financial troubles due to inadequately managed hospital portfolios. The increased burden on the insurance business that was already in trouble, poises quality risks to the insurance service. 

Starting September 2012, the Expanded Public Insurance Scheme (EPIS) will insure all pensioners, children from infants to 6-year-olds, students, and disabled people - all making around

million. The number of the entire health insurance holders exceeds 2.4 million out of which around 1 775 494 are the state program beneficiaries that means the lion’s share in Georgian health insurance market comes with the state that pays just GEL 14 per package as a monthly payment. Meanwhile the minimum health-insurance package price for corporate clients is GEL 20-25 and much more for individuals.

Now the question is whether or not the insurance sector with financial problems in stock as well as the still underdeveloped hospital and medical sector can handle this million-growth in cheap state health-packages.

Insurance sector faced problems since 2010 when under the state pressure it undertook the double burden to insure about 900 thousand state-beneficiaries and develop hospital sector across the country that took about GEL 180 million of long-term investments. The hospital construction did not fit to the business-plans of most insurance companies as Transparency international Georgia (TI Georgia), non-governmental watchdog, researched and reported in this past July but none of them dares to quit this business.

“Although none of the insurance companies we met said they were pressured into building the hospitals, they did not unequivocally say it was either in their short term or medium term business interests to build and run the hospitals, except IC Group. IC Group said it was in the company’s business interests to both build and run hospitals. However, when asked whether they would have built the hospitals if the government had not taken the initiative, IC Group said they would not have completed the project,” TI Georgia experts say and raise a question:  why would a business do something that is neither in its short term nor medium term business interests unless it were pressured into doing it?

Consequently, some insurance companies went bankrupt by end of 2011, and some merged to avoid difficulties: in May of 2012 one of the biggest and most reputable market players Imedi L sold its 100% to Aldagi BCI, another big fish of Georgian insurance market. Experts say the reason insurance market faced problems was reluctantly imposed hospital portfolios and increased demand for insurance service as far as awareness of health insurance holders [that was very low especially among the state beneficiaries] increased significantly.

Now a new tide of a million-army of the state beneficiaries added to the responsibilities of insurance business requires extra investments to enhance human resources and capacity to handle the demand that as experts believe will increase very much as the new beneficiaries include the most healthy-risky groups comprised of children under 6-years, pensioners [women over 60 and men over-65] and handicapped people.

“Demand will increase for sure at least twice. Only pensioners make about 600 thousand while this is the very group who did not refer to medical service for a decade and more for most of them cannot afford it, and they were waiting for an opportunity. Most probably they will refer to insurance more than once per year, even twice and trice,” Giorgi Gigolashvili, Head of Georgian Insurance Institute, told Georgian Journal.

The increased awareness of insurance beneficiaries will fuel the demand too. This time insurance companies have secured special assistants to meet beneficiaries at the entrance of policlinics starting September 1st to provide with detailed information on available services.

As a result only in three days since the launch of the new program [from September 1st to September 3] more than 4 thousand state beneficiaries appealed for medical assistance.

Gigolashvili hopes that insurance sector is prepared to meet the increased demand for the initiative of government to enhance the state health insurance program was trumpeted early this year and the insurance as well as medical sector had some time to get prepared. He does not rule out that the service conditions and quality may suffer as a result but believes that it was a necessary move to insure all these people who could not afford private health insurance packages.

“We can argue whether or not this health-insurance system undertaken by the state is bad or good, that the hospital sector should not be developed by insurance business and that this is the conflict of interest etc, it is obvious that there was no other way in our reality rather than to provide people who cannot afford insurance by the state insurance,” Gigolashvili said.

On the other hand he recommends pressing on criticism as much as possible so as to make the health insurance system as better as possible gradually.

Levan Kalandadze, an economic analyst, agrees the state had to make this move but not on the expense of business that already faced problems due to unreasonable state obligations. He believes nether insurance nor medical sector is ready to meet the upsurge in demand because there is neither sufficient accommodation, nor properly worked out payment system and reasonable tariffs.

“When the tariff paid for one child to the policlinic is GEL 1.1 one should not expect too much. Moreover, the hospital sector has insufficient capacity for the insurance sector has not completed its construction and rehabilitation as of yet. This demands extra money that the insurance business can only get from gathered premiums that means they would be trying to reject medical treatment claims as much as possible that cuts down quality. Most probably they will keep statistics on the expense of the quality,” Kalandadze elaborated.

Gigolashvili also recommends the state to increase the package price to at least GEL 20 to provide beneficiaries with more diversified and better treatment.

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