As the only one of the UAE’s seven emirates to implement a mandatory health insurance system, Abu Dhabi’s health insurance sector has been keenly observed by both the rest of the country as well as its GCC neighbours who are contemplating one of their own. A less successful attempt by Kuwait to introduce a national insurance system some years ago demonstrated the difficulties a country faces when moving from a model in which the government plays the role of both provider and payer to one in which numerous health care providers and insurance companies interact to provide coverage. Thus, Abu Dhabi’s success to date has provided an example to the region of how such a transformation might be carried out. In 2012 the framework of the system is almost entirely in place, and attention has turned to the fine-tuning of some of the inevitable dissonances that arise during such structural shifts.
PHASE ONE: One of the principal factors underlying the successful implementation of Abu Dhabi’s new health insurance system is the incremental manner in which it was transformed from theory to practice. The process began as early as 2005, with the promulgation of the Abu Dhabi Health Insurance Law No. 23 of that year. The new law provided the legal framework by which the market participants – insurers, insurance intermediaries, health care providers and third-party administrators – are governed. Next came two years of preparation work before the implementation of the strategy’s first phase in 2007. This saw the application of the law to all expatriates and their dependents living or residing in the emirate, as well as the commencement of the Health Authority – Abu Dhabi’s (HAAD) oversight role, which is still ongoing.
The basic package determined by HAAD offers coverage at a government-subsidised price of Dh600 ($163.32) per year and is administered by Daman, the government-owned specialised health insurance company that began operations in 2006. Daman quickly became the region’s largest health insurer. At the same time, both Daman and private sector insurers are able to offer “Enhanced” packages to customers, which would provide them with additional coverage, but at premiums determined by the market.
PHASE TWO: A second phase of development came with the introduction of the Thiqa system in 2008, which was directed towards UAE nationals. All citizens are required to enrol in the programme, which provides comprehensive coverage at no cost. The Thiqa system is administered by Daman, which services the transactions between the payer (the Ministry of Finance) and providers (the health care facilities). Daman also provides UAE nationals with the Thiqa cards that have replaced the old health cards.
Daman enjoyed a number of privileges during this first phase of implementation, which have been gradually rescinded. Until 2008, for example, government-run entities were compelled to use Daman for their employees’ insurance packages, and until January 2010 the company had an exclusive right to direct billing within the Abu Dhabi Health Services Company’s facilities, so that patients insured by other companies were asked to pay for services in cash. Now that these privileges have been removed, the market has been fully opened to the private sector, and there are now more than 30 insurers offering health coverage instruments to the Abu Dhabi market. These include large multinationals such as AXA, as well as domestic giants including the Abu Dhabi National Insurance Company (ADNIC) and Al Dhafra, all of which are now able to offer their customers direct billing.
The introduction of mandatory health coverage for expatriates in Abu Dhabi has considerably altered the structure of the wider UAE insurance and health care provider market. Data from the UAE Insurance Authority show that medical insurance premiums accounted for just 12.2% of the sector total in 2006, at a value of just over Dh1bn ($272.2m). By 2010, the most recent year for which data is available, its share of the market had risen to 27.5%, bringing in a premium of Dh4.97bn ($1.4bn). Encouragingly for the domestic players, 82.9% of this figure was claimed by national companies. “Private sector interest in the emirate’s health sector continues to grow,” Michael Bitzer, the CEO of Daman, told OBG. “We have seen more and more private operators enter the market; this will increase competition, which is beneficial for the patients.”
FINE TUNING: With the framework in place, Abu Dhabi’s health insurance system has been undergoing a process of gradual adjustment over the past two years. In 2010, HAAD introduced a new Diagnosis Related Groups (DRG) claiming system to replace the fee-for-service model, by which the health care provider was simply paid the requested amount. Under the DRG protocol, insurers pay providers an average amount per procedure, which allows for greater flexibility and encourages efficiency. The new system is in part a response to rising health care inflation, which the old fee-for-service model was failing to control. Rising health care costs have emerged as a significant challenge to the insurance industry: in late 2011, Sven Rohte, the chief commercial officer of Daman, told the local press that outpatient costs rose 25% each year from 2007, and are followed by surgery, inpatient and day care as the biggest cost drivers in the system.
The extent to which the implementation of DRGs can ameliorate this issue is as yet unclear. While both public and private hospitals have been required to use it when submitting claims for patients covered by the basic plan since August 2010, it has not yet been fully implemented across the health care insurance universe.
Insurance companies and health care providers were given a deadline of December 2011 to implement DRG-based reimbursement for all inpatient claims, and throughout 2011 HAAD staged a number of workshops in order to assist market participants.
Providers, which had already adopted DRGs for patients covered by the basic plan, found the transition process easier than insurance companies, many of which were unable to meet the deadline. The authority therefore granted extensions on a request basis.
ISSUES TO SETTLE: In the meantime, HAAD is turning its attention to some other issues that have arisen since the new health insurance framework was established. A new law, currently in draft form, aims to address timing discrepancies between patients, health care providers and insurers, leading to some complaints that payments for treatment have been delayed. Under its provisions insurers will be given a 45-day period to settle outstanding amounts, while patients and health care providers will be granted recourse to a complaints system if their policy entitlements are not met.
Such an alteration to the legal framework carries implications for the industry, and the detail of the proposal will be of great interest to local insurers. “The Ministry of Finance and representatives from insurance companies are currently in discussions to address the problems being faced due to this issue…once talks are complete, the new law will balance the needs of the health insurance companies, patients and health care providers,” said Fatima Mohammed Ishaq Al Awadi, the deputy director-general of the Insurance Authority.
Insurers, too, would like to see some issues addressed, particularly with regard to the increasing instances of fraudulent health insurance claims. In 2011 the HAAD recorded more than 900 complaints from the industry concerning unethical practices such as the scheduling of unnecessary surgeries, treatment procedures, prescription forgery and claims for unperformed medical services. A total of 34 of these cases were referred to the public prosecutors, and six went to the courts. Combined with administrative errors that have resulted in the filing of duplicate invoices, such instances have helped fuel the inflation of health care costs that has begun to trouble the industry, thereby becoming a matter of increasing concern.
PROBLEM-SOLVING: HAAD has taken a number of steps to combat the problem: as well as showing a readiness to prosecute cases of fraud, it has produced a set of more stringent guidelines regarding prohibited practices and bolstered its medical investigation and audit team with further resources. Insurers have also invested in medical investigation operations.
“The implementation of DRGs will help cut down on medical fraud within the system,” said Daman’s Bitzer. “Additionally, DRGs are easier to monitor than itemised bills, but still require their own monitoring system in order to ensure accuracy.”
The issues being addressed by HAAD and the industry today are common to all health insurance markets and do not represent a long-term challenge. The medium term will likely see more adjustment of this nature, as the HAAD attempts to establish the best regulatory fit for all market participants. The question of longer-term reform brings more interesting implications: Dubai’s intention to adopt a similar scheme by 2013 raises the possibility of a federal insurance system. In 2012 a draft law was introduced outlining such a federal model, proposing a national health insurance authority that would work with local authorities within each emirate. How the new legislation would interact with the current law in Abu Dhabi, however, is as yet unclear.
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