Private health poses new challenges

By WILLIAM MILLER DUBAI

Health care may be free for most Gulf Cooperation Council (GCC) nationals, but local governments are growing weary of paying the price. Now, there are moves underway to at least partially privatize health insurance in the region, particularly for expatriates. But the changes are mostly cosmetic, and may prove too little, too late.
Three years ago, Saudi Arabia and Kuwait made their intention clear to make medical insurance compulsory for all expatriates living within their territory. The UAE also appeared to be on the way to charting a similar course in the near term. Three years later, almost no progress has been in made in any of the three countries.
State subsidies. The logic behind the initiatives was clear - Gulf governments could no longer continue to foot the astronomical bills run up by their state-sponsored health care programs. While higher oil prices took the strain off GCC government budgets during the last two years, the specter of global recession and lower yields from oil now looms large. There's now widespread agreement about the urgent need for the Gulf states to progressively reduce their role as subsidized health care providers. But that does not mean that any action will be taken.
At least twice in the past 18 months, Saudi Arabia has had to extend its target date for new health insurance legislation. The government announced that all expatriates would soon need to have medical cover, but did so before even the most basic insurance laws were in place. More recently, the kingdom has been working on the process and legal requirements to facilitate the passage of the new laws. But there is no guarantee that the status quo will change anytime soon.
"Saudi Arabia does have lots of potential, but insurers will be interested only if the rates are determined by the natural laws of the marketplace. Any intervention by the state to curb premium rates will have a hugely detrimental effect," said an underwriting manager with a London-based insurance company. "There is no way insurers will be enthused by the prospect of charging a minimum premium and offering a full cover. The principle for both the insurer and insured should be: you get what you pay for."
According to conservative industry estimates, the prospective premium income for medical underwriting from a market like Saudi Arabia could well be in the range of 5-10 billion rials ($1.4-2.8 billion) annually. Kuwait, which has made a bit more progress, also has legislation pending which will make it mandatory for all expatriates to have health insurance before seeking work or residency permits.
In the UAE, chaos has reigned since the formation of a 14-member technical committee - comprising representatives of local insurance companies - assigned the task of looking at ways and means of expanding the role of private medical insurance provision and bringing out a uniform tariff card. The committee submitted its recommendations to the government in 1999; since then, no progress, no results.
"The whole process achieved nothing," says a senior manager at a leading UAE-based insurer, who was also a member of the advisory committee. "There was a wide gap between what the government wanted us to do and what we felt we should be doing to make private medical underwriting a profitable enterprise for us in the UAE."
In the cards. For all intents and purposes, the recommendations have been discarded. The UAE seems to have put the entire agenda on the backburner - and that could well be perilous for the country in the long term. An estimated 75 percent of the UAE's health care-related expenditure is met through public spending, mostly from budgetary allocations. A paltry five percent is met by private medical insurance. Last May, for the first time, the UAE introduced fees for expatriates at government-run hospitals and clinics. Earlier, this was absorbed by the state if the expatriate had taken out a health card, which cost just 300 dirhams ($82).
"In these times, lessening the role of the state in health care should indeed be a strategic objective for the government," says a senior manager at Axa, the French insurance major. "But if mandatory health cover for all expatriates is brought in, it would have a debilitating impact on the employers, since they would need to take on the costs in most cases. And insurers will not be interested if the premiums are kept artificially low to suit the interests of the state."
According to one well-placed source at the ministry of health, the UAE has dropped all plans to introduce mandatory medical insurance for expatriates - at least for the time being. "We have gone over the various pros and cons, and feel that now may not be the right time," says the ministry official. "But that's not to say that this will be the case forever."
Cost-conscious. Under the present system, it is up to the discretion of each individual employer to decide whether or not he wants to offer health cover to his staff. While the bigger companies do have such a provision, the majority of the smaller and medium-sized companies do not. Most of the abuses have taken place in the contracting industry, where a laborer is paid a low wage and is not offered any sort of coverage by the employer. Sources suggest that the authorities may not want to burden local employers with additional costs at a time when the economy shows signs of slowing. There is also a feeling that more homework needs to be done to arrive at a consensus with insurers.
"There are a great many misconceptions on all sides as far as medical expenses protection is concerned," says a London-based insurer. "There is a need for greater awareness of health care provisions, particularly in a multicultural marketplace like the UAE, where there is no uniform standard. Medical costs are lower in the Middle East than in Europe and the United States, so many local corporations or individuals could find themselves paying unnecessarily high premiums."
However one looks at it, though, the Gulf states have lost out on a great opportunity at bringing about changes, and getting the insurance sector to play a far bigger role. With premium rates firming up on all classes of risk since the last quarter of 2001, this year may not be the ideal time to make major changes. So governments continue to play the waiting gain, much to the chagrin of private insurance providers. For more than three years, industry analysts have called for change, but governments keep stalling. Every day, the costs keep getting higher.