Since implementation of the National Health Insurance Law in 1995, policymakers in Israel have been grappling with the need to balance the advantages and disadvantages of integrating private insurance into the health system. This report is the third in a series examining Israel’s private (supplemental and commercial) health insurance market.
The study integrated insurance theory and empirical findings to analyze the actual private health insurance market in light of questions arising from the theory. The issues discussed are related to the size of the private health insurance market and the problem of overlapping insurance; a comparison of the size of the supplemental in surance market and that of the commercial insurance market, and the fairness of premiums; the profitability and financial stability of supplemental and commercial insurance; adverse selection, moral hazard, and cream skimming in the private health insurance market; the access to services in the basic basket and satisfaction of supplemental insurance owners; and arrangements for private long-term care insurance.
The following were among the study’s principal findings:
Supplemental insurance is social (collective) in nature , and is based on community rating. In contrast, commercial insurance is individual in nature, such that each individual pays according to his risk of becoming ill.
In 2001, a significant proportion (64%) of Israel’s adult population owned supplemental insurance, and 26% of it owned commercial insurance. Between 1999 and 2001, the proportion of people who owned both types of insurance increased – from 14% to 20%.
Over time, there has been an increase in the rates of ownership of supplemental insurance by weak populations. In contrast, between 1999 and 200, there was an increase in ownership of commercial insurance among strong populations.
Between 1999 and 2001, there was an increase in the proportion of chronically ill people who purchase supplemental insurance.
Fifty one percent of supplemental insurance holders reported in 2001 that they used at least one supplemental insurance service. This rate is 1.5 times higher than the utilization rate in 1997. The profitability of supplemental insurance also declined between these years.
Although the proportion of supplemental insurance holders is 2.5 times larger than that of commercial insurance holders, the size of the supplemental insurance market (total gross revenue) was somewhat smaller than that of the commercial insurance market (gross insurance payments of the illness and hospitalization branch): NIS 891 million and NIS one billion, respectively.
Israel’s long-term care insurance market is broad, relative to that in other countries, and getting broader: 25% of the adult population over age 22 own (individual or collective) private long-term care insurance.
The findings highlight the need to regulate several features of the collective health and long-term care insurance markets, including the following: continuity, underwriting, fairness of premium/benefit ratio, stability, ensuring the value of insurance return over time, and information dissemination. For individual health and long-term care insurance, regulations have been established in law.
The findings of the study were presented to the Minister of Health and senior policymakers in the health system, and have been used in discussions about supplemental insurance at the Ministries of Health and Finance, and at the National Institute for Health Policy and Health Services Research (the Dead Sea Conference). The findings were also presented at the National Council for Geriatrics, and will be used in examining the issue of financing institutional long-term care.
This report was written as part of the joint Health Policy Research Program of the government of Israeland the JDC-Brookdale Institute.
Citations in the professional and academic literature
Paolucci, F., Schut, E., Beck, K., GRE, S., Van de Voorde, C., & Zmora, I. (2007). Supplementary health insurance as a tool for risk-selection in mandatory basic health insurance markets. Health Economics, Policy and Law, 2(2), 173-192.
Paolucci, F. (2010). Health care financing and insurance: options for design (Vol. 10). Springer Science & Business Media.
Paolucci, F. (2007). The design of basic and supplementary health care fi nancing schemes: Implications for effi ciency and affordability.
Paolucci, F. (2011). Risk-Selection via Supplementary Health Insurance in Universal Mandatory Health Insurance for Basic Services. In Health Care Financing and Insurance (pp. 79-92). Springer, Berlin, Heidelberg.
Frech, H. E., & Zweifel, P. (Eds.). (2013). Developments in Health Economics and Public Policy. Springer.