In the closing weeks of 2013 the Dubai Health Authority (DHA) announced the details of a long-anticipated new health insurance mandate. Based on an employer-provided benefit model, the new regulation stipulates that by October 2014 companies that have more than 1000 employees will be required to provide health insurance to their staff.
The implementation of the law will continue in two more phases, ending in 2016, when even small enterprises will fall under the mandate. While it is still too early to know what the economic impact of the law will be, according to early estimates from Dubai-based Arqaam Capital, medical claims in the emirate could grow to Dh4.8bn ($1.3bn) annually by 2016, up from Dh1.3bn ($353.9m) currently.
A Major Boost
The law will address what had been increasingly seen as a major issue within the emirate, which according to public officials has an estimated 2m uninsured residents, or approximately two-thirds of the population. The sector will rely on the private sector heavily to do address this.
In a statement released following the announcement of the new regulations, Essa Al Maidoor, the director-general of the DHA, said, “The health insurance mandate will provide a significant boost to the health insurance industry, it will attract investment in the health care sector and will generate healthy competition between providers as well as health facilities. This only means further improvement in the quality of health services as well as more health care options and competitive premium prices. The mandate will benefit all the stakeholders concerned – this includes insurance providers, health care facilities and most importantly, patients.”
While much of the focus on the new law has been what the impact on employers and foreign staff will be, the regulations will affect Emiratis and foreign nationals alike. For expatriates currently living and working in the country, employers will be expected to provide insurance either in the first phase in 2014 or during the new two phases through 2016, depending on the size of the business. From early 2014, a new travel health insurance charge is being added to visa costs for foreign visitors, and will cover emergency health services up to Dh150,000 ($40,830). Emiratis will see their DHA health card replaced by an insurance card, though all costs for their care will still be covered by the state.
Also included in the law were guidelines outlining what the most basic insurance plans must include. Visits to general practitioners (GP), referrals to specialists, surgical procedures, diagnostic tests, maternity care and emergency services must all be provided, while the annual limit of the coverage can be no lower than Dh150,000 ($40,830). Anything beyond these parameters will be the responsibility of the individual, either through optional additions to the existing coverage or through separate plans provided by other private insurers. The cost for these plans will be required to be between Dh500 ($136) and Dh700 ($191) per year.
In addition, the DHA has warned employers that they will not be allowed to reduce salaries to pay for their employees’ insurance and will face legal action if they are caught doing so. Immediate family members will be covered by employers only if it was included in the employment contract, otherwise the employee will be required to purchase a plan for their spouse, children and any other person they have sponsored to enter the emirate along with them. Coverage levels and costs will be the same for sponsored family members.
While there are many similarities between Dubai’s mandate and the programme in Abu Dhabi, the insurance landscape is different in the two emirates, so the legislations are somewhat dissimilar in how they regulate the industry. While there are relatively few insurers in Abu Dhabi, there are dozens of active companies in Dubai, and regulators have had to work hard to make the plan work within the current structure. To ensure that the sudden increase in business within the insurance industry does not impact the quality of the services provided, the DHA has written new regulations for insurers as well.
Al Maidoor explained the new controls placed on insurers, telling local media, “In order to ensure we have the very best insurance companies on board, the DHA has laid out a set of criteria that all insurance companies need to adhere to, so that they are eligible to receive a health insurance permit, which is mandatory for companies that want to provide health coverage to anyone in Dubai.”
Details and Requirements
The DHA began working with insurance providers in October 2013 to determine the details of the policies, and a full list of approved companies is expected in early 2014.
In a separate but related move, the government announced new capital requirements for insurance brokers and foreign companies. Paid-up capital for local brokers was raised to Dh3m ($816,600) from Dh1m ($272,200), while foreign brokerages need to have a capital base of Dh10m ($2.72m). At the same time, the bank guarantee has also been revised upwards, and is now set at Dh3m ($816,600) for local brokers and Dh5m ($1.4m) for overseas companies. Applicable to all insurance types, this should limit any predatory or fraudulent sales of health insurance to companies or individuals looking to comply with the new law.
Taken together, the different parts of the new regulation should go a long way to bridging the divide between access to health care that now exists between those on high and low incomes. Following the announcement of the new law, Dr Gulam Naroo, senior specialist in emergency treatment at Rashid Hospital’s trauma centre, told The National that, “This is very, very important, especially in providing care to the lower-paid members of society who cannot afford health care,” adding, “Many, many times I have had patients come in with an emergency and they ask to be stabilised, but then they do not come back for treatment because they cannot afford follow-up care and treatment.”
Given that the emirate relies heavily on foreign nationals as a vital part of the workforce at all levels, this law represents a significant step in the government’s commitment to expatriates and should help draw people from across the socioeconomic spectrum to work and live in Dubai.
In addition to the social impact, the regulations will bring with it a significant increase in the health care market that should benefit both insurers and health care providers. Beyond the roughly 2m that will be getting insurance for the first time, there are others still that currently get by on plans that only cover minimal services. With the new expanded coverage, this cohort, too, will be more likely to utilise health care services.
David Hedley, the CEO of Mediclinic Middle East, gave his support for the new law, telling local media that the legislation “is a giant leap forward for Dubai as everyone will have access to affordable and quality health care. I congratulate the government on its bold step and I am confident the insurance system will be implemented successfully.”
While all types of private health care facilities stand to gain as the roll-out of the law takes place over the next three years, clinics and GP facilities that focus on preventive care will most likely enjoy the greatest increase in patients at first. This is due to the fact that even under the old system, hospitals’ emergency rooms (ER) have been required to treat anyone experiencing a medical emergency, regardless of their ability to pay. Further, while someone without insurance may forgo their annual check-up or seeing a doctor for a minor illness, monetary concerns are usually pushed aside during an issue that requires a trip to the hospital.
In the long term, however, the insurance mandate may provide needed stability and assurance of profitability, and could encourage investors to build new facilities and allow private hospitals to take on a larger role in all types of care. Currently, there are 1.8 hospital beds for every 1000 residents, which sits well below the global average of 3.0 as well as the 5.5 average in developed countries. Arqaam Capital has pointed to this fact as evidence that there is still significant room for growth within the industry. Beyond just adding beds, the mandate could also shift ER and hospital services further into the private sector. Because of the aforementioned law requiring every facility in the emirate to treat a person experiencing an emergency, ER care is almost entirely a public service, while 61% of hospital beds are in government-run facilities despite accounting for just six of the 28 hospitals in Dubai. Now that it is guaranteed that nearly every person will be insured and able to pay for any necessary treatment, providing emergency care could become a viable option for private health care providers. The DHA sees this as a positive development, and in fact has a goal to reduce its direct role in hospital care over the coming years.
Of course, for any of the long-term changes to take place, the insurance market must first adapt and thrive within the new system. The government has made it clear that its interests and those of the insurance companies are complementary, and that the successful implementation of the law should be beneficial to the industry. The DHA also revealed that roughly 64% of the approved insurers are registered to participate in the new scheme and it estimates that the health insurance industry could grow by as much as 50%.
Private industry leaders seem to agree that the law will be a boon for the sector. Michael Bitzer, the CEO of Daman, the UAE’s largest health insurer, pointed towards the impact of a similar law passed in Abu Dhabi as reason for confidence. “From an economic perspective, the law will catalyse private investment to the health care sector which in turn provides a greater option of health facilities and new specialised treatment centres – examples of which are evident in Abu Dhabi since the introduction of the law here in 2005,” he told Arabian Business.
Meanwhile, Sam Instone, the CEO of financial services company AES International, told media, “This is really great news for insurance intermediaries such as AES,” adding, “I am sure there will be a three-year stampede of companies trying to find the best health insurance policies to suit their specific needs.”
Impact On Prices
While there is no doubt that the new law will have a positive impact for many individuals and the health sector within the emirate, questions remain as to what effect the law will have on the price and availability of health care.
Ayham Refaat, the managing director of insurance consultancy Accumed PM, offered his take on the law’s impact, telling local media, “Mandatory coverage will mean greater, even over-utilisation of health care services as more people will go to a doctor. It remains to be seen if hospitals and clinics will increase their charges and if insurance companies will push up their prices and premiums.”
There are, however, some indicators that would seem to suggest that prices will not skyrocket and that that these concerns have been overblown. First and foremost, health insurance is one of the most competitive lines of coverage in the UAE, and returns on premiums over claims are modest and estimated to be between 5% and 16%. In addition, by mandating that insurance companies offer the basic package of services not at a single price but rather within a specific range, it will allow for further controlled and positive competition.
The full impact of the mandate will only become clear over the coming years as individuals, employers, health care providers and insurers all react to the market created by the new legislation. And while there will most certainly be some teething problems and changes as the law takes effect, it is clear that a large injection of capital is on its way and that there will be significant investment opportunities.
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