Structure and experience of German opt-out system of statutory health insurance (GKV)

Transcription

1 Structure and experience of German opt-out system of statutory health insurance (GKV) Markus Schneider 1 March 2003 Health, Nutrition and Population (HNP) Human Development Sector Unit Europe and Central Asia Region Document of the World Bank 1 Dr. Markus Schneider, BASYS, Reisingerstr. 25, D Augsburg, ms@basys.de.

2 Content 1 Regulations Membership Voluntary Membership in the Statutory Health Insurance System (GKV) Family Insurance (GKV) Membership in Private health insurance (PKV) Funding Contributions of voluntarily insured members in GKV Premiums in private health insurance (PKV) Benefits Voluntary Statutory Health Insurance (GKV) Comprehensive Private Health Insurance (PKV) Private Supplementary Health Insurance (PKV) Freedom of choice Risk-equalization Effects Utilization of opting out Effects on access, quality, and cost Effects on contributions and premiums Contributions Private premiums Competition Funds Supplementary insurance Policy initiatives Past European regulation Risk equalization

3 1 Regulations 1.1 Membership Voluntary Membership in the Statutory Health Insurance System (GKV) In Germany, the freedom to opt out from statutory sickness funds 2 was limited from the beginning to persons, who were able to care by themselves from public viewpoint. Until today, this ability of selfcare or subsidiarity is measured by payroll. The level of payroll defines not only the border to opt out to private insurance, but also the amount of contribution. In 2003, the contribution cut-off limit is a payroll of EUR 3,825 a month in all German states, that is 75 per cent of the contribution threshold for the pension fund. The threshold rises annually in line with the wage level. Furthermore, if the payroll of an obligatory subscriber of social sickness funds has passed this threshold then her or his status can change from obligatory to voluntary, that means that the insured person has the right to opt into voluntary insurance of statutory sickness funds or to opt out into private insurance. You can join a state health insurance scheme voluntarily: If you have been a compulsory member as an employee for a minimum length of time in the past and your membership was terminated because your income exceeded the limit. If you are an employee and your income in your first job exceeds the limit, as long as you apply for membership within three months of starting work. If you are severely disabled (subject to certain other requirements). If you have been insured through a parent for a specific minimum period and this insurance has expired. As a consequence as an employee you are compulsorily insured if your regular income before deductions remains below the income limit for compulsory membership of statutory health insurance. The following persons are also compulsory members of the state health insurance schemes: Students at state and state-approved universities People on work experience or in second-chance education Old-age pensioners who have been in a statutory health insurance scheme for a substantial length of time in the past Disabled people employed at an approved workshop or on employment promotion schemes Unemployed people receiving benefits from Federal Employment Services Farmers Members of farming families who are primarily employed on the farm and are at least 15 years old or are in training Retired farmers (Altenteiler). 2 GKV refers to Gesetzliche Krankenversicherung. Statutory health insurance is the oldest part of the German social insurance system. The relevant law is set out in various acts: Volume V of the Social Code, The Farmers Health Insurance Act, The Reich Insurance Code. 3

4 1.1.2 Family Insurance (GKV) For compulsorily as for voluntarily insured people the statutory health insurance schemes also insure the family (husband or wife and, up to a certain age, children) at no extra charge, provided that their collective income does not exceed EUR 335 a month and they do not have their own insurance (figures for 2002) Membership in Private health insurance (PKV) 3 Employees whose earnings are initially below the threshold of EUR 3,825 a month, but then exceed the limit as a result of an increase in wages or salaries, are no longer subject to compulsory insurance. They may then either remain members of the statutory health insurance scheme as voluntary insured member, or choose to take out private health insurance. In this case, they have officially to cancel their membership in statutory insurance and apply for private insurance. Since the Health Care Reform Act came into force on 1 January 1989, civil servants and the self-employed have automatically been assigned to private health insurance and can take out private health insurance, regardless of their income. Voluntary statutory health insurance is only open to them if they have previously been insured in the statutory health insurance system for a specific length of time. There are special tariffs for civil servants in private health insurance, supplementing the cover provided by the Public Support Fund in the civil service (Beihilfe). Almost all civil servants have private health insurance. Newly established civil servants can thus be accepted in private health insurance without exception. Any risk loading is limited to a maximum of 30 percent of the premium. 1.2 Funding Contributions of voluntarily insured members in GKV The state health insurance schemes are funded from contributions. You pay half of the insurance contributions as an employee, and your employer pays the other half. If you are a salaried employee and are voluntarily insured because you exceed the income limit of EUR 3,450, your employer will pay a supplement towards your contributions. The amount of your insurance contributions depends on your income. On 1 July 2002,the average general health insurance contribution rate was about 13.9 per cent of the non-exempt part of employees income. Employers and employees each pay half of the contributions. As mentioned above contributions are subject to a contribution limit Premiums in private health insurance (PKV) In the private health insurance market, premiums vary with age, sex and medical history at the time of underwriting. Unlike in statutory health insurance schemes, separate premiums have to be paid for spouses and children making private health 3 In Germany, the conditions of private insurance are regulated in the Insurance Contract Law, Insurance Supervision Law, and the Civil Code. There is no special Law on Private Health Insurance. PKV refers to Private Krankenversicherung. 4

5 insurance especially attractive for single people or double-income couples. Since premiums rise often steeply with age, and (re)entry of privately insured people into statutory sickness funds is not permitted in ordinary circumstances, private insurers are obliged to offer an insurance policy with the same benefits as in the GKV at a premium that is not higher than the average maximum contribution in the sickness funds. Up until now, however, this option is hardly ever chosen. 1.3 Benefits Voluntary Statutory Health Insurance (GKV) Within statutory health insurance, there is no difference in the benefit catalog between compulsorily and voluntarily insured persons. Therefore, there are also no separate accounts for voluntary insurance in the framework of GKV Comprehensive Private Health Insurance (PKV) Fully privately insured patients usually enjoy benefits equal to or better than those covered by statutory health insurance. This depends, however, on the insurance package chosen; e.g. it is possible not to cover dental care. The privately insured may choose between policies refunding health care costs in full and those which cover only certain elements or a fixed percentage of medical expenses. Insured persons may also choose a deductible; costs exceeding that amount are then reimbursed in full. Table 1: Payment methods for different benefits, Compulsory and voluntary insured GKV PKV Benefits Fund Patient Fund Patient Micro level Macro level Fee-for-service no co-payment Fee-for-service (EBM) (GOÄ) Ambulatory medical services Dental services Denture Drugs Hospital inpatient services Source: BASYS Fee-for-service (BEMA) Mark-up price regulation for retail and wholesaler price. Reference price system for 60% of expenditures, negative list Payments per case, per diem, special rates (G-DRG) Global budgets except preventive services Global budget for dental services exempt prophylactic services, orthodontics Discount between 6-10% Global budget for hospital services no co-payment for dental services, dentures: 50%, with bonus 40% coinsurance 4, 4.50, and 5 depending on price; difference to the reference price co-payment 9 per day Fee-for-service (GOZ) Mark-up price regulation for retail and wholesaler price. Non-medical services: per case, per diem, special rates; (G-DRG); Medical services (GOÄ) Cost-sharing depends on tariff Cost-sharing depends on tariff Cost-sharing depends on tariff Cost-sharing depends on tariff 5

6 To manage increasing health care cost as a consequence of aging, a standard tariff has been introduced uniformly within the class for individuals who have completed their 65 th year and who have a previous insurance period of at least 10 years of private health insurance. This tariff provides for benefits, which match the benefits of statutory health insurance and guarantees that premiums shall not exceed the average maximum premium of statutory health insurance. Unlike GKV, privately insured people generally have to pay ambulatory providers directly and are reimbursed by their insurer. In inpatient care, hospitals demand for a guarantee to take over the reimbursement from the private insurance companies. Physicians usually charge the fees by a factor of 1.7 or 2.3 or even more from a feefor-service list for privately delivered medical services (GOÄ), which is issued as an ordinance by the Federal Ministry for Health Private Supplementary Health Insurance (PKV) The second market for private health insurers is supplementary insurance, e.g. to cover extra amenities like hospital rooms with two beds or treatment by the head-ofservice. Since sickness funds are legally not allowed to offer these extra policies, people must obtain insurance from private health insurers. Presently, around 8 million people have some kind of supplementary insurance. This figure had risen considerably from 1996 due to the introduction of the new insurance segment to cover crowns and dentures which were excluded from the benefits package for people born after 1978 (but which subsequently were reintroduced). 1.4 Freedom of choice Only voluntary white-collar members and since 1989 voluntary blue-collar members could choose among several funds, with the right to cancel their membership with two months notice. Other white-collar workers (and certain bluecollar workers) were able to choose when becoming a member or changing jobs. Since this group grew substantially over the decades, around 50 per cent of the population had at least a partial choice in the early 1990s. Traditionally the majority of members had no choice over their sickness fund and were assigned to the relevant fund based on geographical and/or job characteristics. This mandatory distribution of fund members led to greatly varying contribution rates In 2001 it was decided to abolish the once-a-year date for changing in favour of a continuous right but an obligation to then remain in the new fund for 18 months. 1.5 Risk-equalization The contribution rates differ among sickness funds, as Germany has delegated to the individual funds the power to decide contribution rates. Changes in the contribution rates are, however, subject to approval by the Länder government in the case of funds operating regionally, and by the Federal Insurance Office in the case of country-wide 4 The maximum level for reimbursement by the government and by most private health insurers for technical services is 2.3 and for personal services is

7 funds. In order to reduce the variation of contribution rates, to motivate the management of sickness funds in cost-containment, and finally to provide all sickness funds with an equal starting position for future competition, prospective risk-equalization among statutory sickness funds was implemented as part of wide ranging reforms which came into effect in January 1993 under the Health Care Reform Act where it is explicitly mentioned in paragraphs 266 and 267 Social Code Book V. Its technical details are based on the Federal Risk-Adjustment Decree (RSAV) and were be phased in over a number of years and first started in January Risk-adjustment is administered by the Federal Insurance Office, which is located in Berlin. 5 The Federal Insurance Office, together with the Ministry of Health, has already supervised those sickness funds that operate within more than one of the German Länder. Figure 1: Main elements of the German risks equalization scheme among sickness funds Revenues of sickness funds after equalization Financial need of sickness fund Financial power of sickness fund GKV Health expenditure profiles per insured Structure of insured persons of sickness fund Actual income of sickness fund members Equalization contribution rate The main elements of the equalization formula are presented in figure 1. The amount that a sickness fund has to pay or will receive is computed according the following formula: Equalisation payment = Financial power - Financial need. 5 The Federal Insurance Office only administers risk-adjustment. Payments are made by the Federal Insurance Agency for the White Collar Employees which is also located in Berlin, and which has fulfilled such a 'central bank' function for the equalisation scheme for pensioners in health insurance for a number of years now. 7

8 The financial power is computed from the income of the members of sickness funds with a standardized contribution rate (equalization contribution rate). The financial need of each sickness fund is compiled by using standardised expenditure profiles for sickness fund members depending on sex, age, invalidity and family members, and multiplying each cells with the respective number of insured. Particular services, which are not statutory and in the decision of each sickness fund, are not included in the risk-equalization scheme. Also, private health insurance is not taking part in this equalization mechanism. 2 Effects 2.1 Utilization of opting out In Germany, the decision to opt out is principally a life long decision. Return is only possible under certain circumstances. Opted out insured are under the regulation of private insurance. It is worth noting that of the insured people who qualify freedom to choose either private insurance or statutory sickness funds, the majority chooses the latter. There is a simple reason for this. In most cases, for married couples and families with children, the premiums of private insurance companies are higher than the contributions for the sickness funds. As a consequence, there is risk selection between sickness funds and private insurance companies. Single persons with incomes above the compulsory-insurance income ceiling prefer private insurance companies. Families more frequently choose to be insured by social sickness funds. Figure 2: Public/private Insurance Coverage in Germany, 2001 Population 82 million Others 4 million Public coverage RKV Pensioner Insurance 15.6 million GKV 70.3 milion AKV Active Populution 54.7 million PKV 7.7 million (15.3 incl. Suppl. PKV) Supplement Insurance 7.6 million Compulsory Insurance 43 million Voluntary Insurance 11.7 million Comprehensiv Insurance 7.7 million Competition between GKV and PKV 8

9 Currently, 86% of Germans population of 82 million is covered by the GKV; 72% are mandatory members and their dependants (including pensioners) while 14% are voluntary members and their dependants. Nine per cent of the population is covered by private health insurance (PKV), 5% by free governmental health care (i.e. police officers, soldiers and those doing the civil alternative to military service, social assistance) while only 0.1% are not insured. Table 2 exhibits the population covered by GKV. In all, the GKV funds had 50.2 million members (excluding family members), with 6.7 million of the persons being insured on a voluntary basis. Including 20.1 million family members, 70.3 million persons (as counted by the funds on 1 July 2001) had statutory health insurance. In general, more family members are related with one voluntary health insured member (1 : 0.76) than with one compulsory health insured member (1 : 0.47). The raltion is higher in Western than in Eastern Länder. Table 2: Insured persons in Statutory Health Insurance (GKV), 2001 Insured persons in million Members in million Family Members in million Total West East Sub-total West East Sub-total West East GKV Insured persons Compulsorily Insured Pensioners Voluntarily insured Per cent Per cent Per cent GKV Insured persons Compulsorily Insured Pensioners Voluntarily insured Source: Ministry of Health, BASYS. Form the members of the working population every fifth person is voluntary insured in GKV in the Western Länder (see table 3). In Eastern Länder, only every tenth is voluntarily insured. 9

10 Table 3: Compulsorily and voluntarily insured members as % of total members (without pensioners) in GKV 1987, 1991, and 2000 GKV (total) VdAK AEV AOK BKK IKK Year West East West East West East West East West East West East Compulsorily insured as % ,9 71,3 85,8 90,9 85,4 89, ,3 94,2 73,5 91,0 84,7 97,9 91,3 95,6 81,8 97,7 90,2 97, ,1 89,3 71,9 84,6 82,7 92,4 88,0 93,8 79,3 88,3 87,9 88,3 Voluntarily insured as % ,1 28,7 14,2 9,1 14,6 10, ,7 5,8 26,5 9,0 15,3 2,1 8,7 4,4 18,2 2,3 9,8 12, ,9 10,7 28,1 15,4 17,3 7,6 12,0 6,2 20,7 11,7 12,1 7,2 Quelle: VdAK/AEV (2002). GKV Statutory Health Insurance, VdAK Substitute Health Insurance (White Collar) AEV Substitute Health Insurance (Blue Collar), AOK Local Sickness Funds BKK Company Sickness Funds, IKK Guild Sickness Funds. While in total 11.7 millions of the population are voluntarily insured in GKV the number with comprehensive private health insurance in PKV was only 7.7 million (9 % of the population). Comprehensive private health insurance consist of three main groups: formerly GKV-insured persons who have opted out once their income reached the level above the threshold (see above); self-employed people who are excluded from GKV unless they have been a member previously (except those who fall under mandatory GKV cover like farmers); active and retired permanent public employees such as teachers, university professors, employees in ministries etc. who are excluded de facto as they are reimbursed by the government for most of their private health care bills (they receive private insurance to cover only the remainder). There is a migration between private health insurance and statutory health insurance. On the one hand, private health insurance gains new insured persons coming from the statutory health insurance system every year. On the other hand, however, there are also persons with private health insurance who become subject to compulsory insurance in the statutory health insurance system, e.g. due to the fact that the contribution ceiling for compulsory insurance rises above their income. Despite major increases in the contribution ceiling for compulsory insurance, which were occasionally higher than the rises in the salaries of the insured persons, a substantial number of voluntary members of the statutory health insurance system have switched to private health insurance every year since Group insurance plays hardly any role in the German private health insurance market. 10

11 2.2 Effects on access, quality, and cost As women cause higher benefit claims than men in PKV comprehensive medical insurance, not least due to their substantially higher life expectancy, they have also to pay a larger share of the premium income. This does not constitute unequal treatment of women in PKV, but is based on individual, risk-based premium calculation, a fundamental principle of private personal insurance. However, the result is cream skimming and adverse selection in private insurance. From the persons who can choose both systems, those sick and with children tend to go in private, those healthy, singled or coupled tend to stay public. The cream skimming, however, is counterbalanced by cross-subsidies from private patients to mandatory patients over the higher prices private patients are paying. Precondition for cross-subsidies is that clinics and physicians treat both mandatory and private patients. To sum up, the German system has regulated price discrimination and a part of the population has the possibility to opt into the statutory system or to opt out into the private insurance system. In last two decades, the real fee-for-service reimbursement for privately insured people has led to cost increases which are on average almost two thirds higher than in the GKV and in ambulatory care, where GKV cost-containment was most successful, even twice as high. Furthermore, it should be mention, that quality development in health care is driven by GKV and not PKV, so that, there is no evidence that quality of care is higher in PKV than in GKV, although it might be easier to get faster an appointment for certain types of elective surgery as privately insured person than as member of GKV. With respect to quality assurance it should be also noticed that to some extent the missing quality review in private health insurance is linked to using a reimbursment system without contracts with providers. In contrast, the GKV is using a system of benefits in kind. The system of GKV panel doctors plays a role in claims review and to some extent in quality review in ambulatory care. A committee of representatives of the service providers and health insurance funds decides whether new service methods will be payable by the health insurance funds and fulfil statutory quality assurance regulation with respect to effectiveness and efficiency. While applied with increasing strictness to outpatient medical care, assessment of medical services has also been provided for in the case of in-patient care since the beginning of Recently, the government has announced the establishment of a German Center for Quality in Medicine whose tasks will be the development of quidelines for the treatment of chronic diseases, and assessing the statutory benefit package as well as costeffectiveness of pharmaceuticals. 2.3 Effects on contributions and premiums Contributions There is a statement by private health insurance funds that, in GKV, compulsorily insured members subsidize voluntarily insured members. However, the average contribution of voluntarily insured members in GKV is 33% above that of 11

12 compulsorily insured members. Table 4 exhibits Euro 3,663 annual contributions per voluntary insured contribution payer and Euro 2,085 per insured (including family members). In compulsory health insurance, the contribution per member was Euro 2,765 and Euro 1,878 including family members. Table 4: Contributions of compulsorily and voluntarily insured members (GKV), 2001 Contributions Contributions per insured Euro Contributions per member Euro billion Euro GKV Insured persons 130, Compulsorily Insured 80, Pensioners 25, Voluntarily insured 24, Source: Ministry of Health, BASYS Private premiums In 2001 the substitutive private insurance segment collected Euro 19,9 billion 6 in premiums for 7.7 million people. The average premium therefore amounts to Euro 2,507 annually or Euro 209 monthly. This figure must obviously be treated with caution as it includes people who pay reduced premiums (civil servants, children etc). The Public Support Fund for Civil Servants (Beihilfe) paid for the reimbursement of medical servcies Euro 1,018 additionally per insured person. Therefore, the adjusted average premium per capita was around Euro 3,525 annually, which is roughly twice the amount of Statutory Health Insurance (Euro 3,631, see Table 4). Given the fact that the maximum contribution to Voluntary Health Insurance (GKV) in 2001 was on average 7 Euro 5,441, this, however, does indicate that Private Health Insurance is a worthwhile proposition for single people, particularly, when they are young, but not for families. Health insurance premiums are deductible from taxable income in the same way as expenditure for other types of insurance, whether statutory or private, and within certain specified limits. However, there are two reasons why this may not constitute a real incentive to purchase private supplementary products: As the limit for tax-deductible expenses decreases with rising income, the higher earners who are most likely to be insured under substitutive private health insurance will only be able to offset a small proportion of their premiums. 6 This amount includes medical insurance (14,682 million Euro), loss of income insurance (935.8 million Euro), other stand-alone insurance (2,914 million Euro) and hospital daily allowance insurance (768.5 million Euro); not included is health insurance abroad and compulsory long-term insurance. 7 On July 1, 2001, the average contribution rate was per cent, and the income treshold for the contribution was Euro 40, annually. Contribution rates varied between 8,0 and 15,3 per cent. 12

13 People interested in purchasing complementary/supplemental products may already have exceeded the limit for tax-deductible expenses through their statutory contributions. 2.4 Competition Funds The market of the around 19 million persons who are able to opt out of Statutory health insurance is dominated by some large substitute funds and around 50 companies involved in private health insurance which were members of the Association pf private health insurance. There were 20 mutual insurance societies30 joint stock societies. But, in addition to the companies belonging to the Association, there were approximately 40 small and very small health insurance societies in Federal or Länder authorities supervise these private funds which usually only offer supplementary insurance benefits. They often cover specific occupations and almost all are of only regional importance. Their share of the premium income of the health insurance class as a whole is just 0.01 percent. The number of statutory health insurance funds system totaled 507 throughout Germany in December Of the voluntary members of the statutory health insurance system, 55 per cent were members of the substitute funds, followed by the local health insurance funds with 20 per cent. The company health insurance funds accounted for a share of nearly 20 percent and the guild health insurance funds for 5 percent Supplementary insurance Comprehensive medical insurance is the main type of insurance in private health insurance. In terms of premiums, the full-cover segment is more than four times as large as the supplementary insurance segment. 3 Policy initiatives 3.1 Past Following a considerable loss of private health insurance policyholders, resulting from legislation in the early 1970s, the cost-containment in the statutory insurance system has led to a gradual re-establishment of the position of the private health insurance sector. That position was confirmed in an impressive fashion in the past years by various legal reforms (1989 Health Care System Reform, 1993 Law on the Structure of the Health Care System) and by the Law on Compulsory Long-term Care Insurance which came into force in European regulation Since certain population groups may take out health insurance solely on a private basis for which the term "substitutional health insurance" has become generally 13

14 accepted in Europe there is a range of measures designed to provide the maximum possible protection for insured persons. Although, in principle, the State is no longer obliged to approve insurance conditions and tariffs as part of the process for completing the EU internal market for private insurance products under the Third Non-Life Directive of 18 June 1992, the general policy conditions for substitutional health insurance must be submitted to the Federal Office for Insurance Supervision before they are first implemented and every time there is an amendment, in accordance with European Law. The German supervisory authority checks that the conditions comply with the minimum standard laid down in the German Insurance Contract Law and other regulations, which concern the general interest for this insurance class. The obligation to submit insurance conditions applies equally to insurance undertakings registered in Germany and foreign undertakings wishing to offer private substitutional health insurance in Germany. 3.3 Risk equalization One issue is a reform of the risk compensation mechanism by basing it on individual morbidity profiles (rather than average expenditures) to lower opportunities for cream-skimming by sickness funds. In 2001, a high-risk pool was introduced to cover 60 per cent of that portion of an insured s expenditure exceeding 40,000 per year. Extra compensation was brought in for people enrolled in disease management programs, and it was decided to move to a morbidity-based compensation mechanism from However, in practice, the complexitiy of design of the contractual arragenments for disease management programmes in the four selected areas: diabetes, coronary heart disease, asthma, and breast cancer has led to problems in the implementation. Until March 2003, not one single disease management programme was accredited by the Federal Insurance Office. There are not only questions about which indications qualify for disease management programmes, which quality measures programmes need to fulfil, and who decides which patients may be enrolled, but also what is the additional financial burden to those sickness funds who are payer in the present risk-equalization scheme. In this context also a major discussion point is the right to selectively contract providers. Another issue in the reform of the risk compensation mechanism by basing it on individual morbidity profiles (rather than average expenditures) is the choice of the appropriate Grouper to classify insured persons. Presently, tests are running based on a sample of expenditure data. 14