Saudi Arabia’s insurance sector is set for changes in 2011 with the implementation of a law mandating health insurance for all private sector employees. While just one aspect of the rapid pace of change in the sector, the expansion is likely to create a deeper and wider presence for insurers in the Kingdom.
Insurance activity in Saudi Arabia is governed by the Control of Cooperative Insurance Companies Law, which was passed in 1999 and came into force in November 2003, followed by implementation regulations in April 2004.
The law included requirements for employers to pay for medical insurance for employees, but allowed for implementation in several phases. The employees of large private sector organisations were shifted to the new insurance regime gradually, starting with the largest companies – defined as those with 6000 or more workers – and moving to the smallest ones. This year’s change addresses the rest of the private sector.
Expatriate workers, not including those categorised as domestic help, are already insured under such schemes, thanks to another phased transition process. The idea behind compulsory medical insurance in Saudi Arabia is to both boost the insurance sector as well as to lessen the burden on the government, which has been providing free medical care.
To smooth the transition to a fully realised medical insurance market, the government created the Council of Co-operative Health Insurance (CCHI), an agency tasked with overseeing the changes, including approving the applications of insurance companies seeking to offer medical insurance, and qualifying third-party administrators to help.
Third-party administrators are often a key ingredient of medical insurance policies. They are companies contracted by the insurer in order to manage the policies – a complicated and constant task, given the stream of claims generated every time a policyholder visits a doctor, stays in hospital or buys medicines.
These third-party administrators handle the claims, contract with doctors and hospitals, preferably at preferential rates, and help insurers to negotiate the details of policies, such as coverage rates and caps on payouts.
The CCHI had approved the third-party administrators by the end of 2009, according to its annual report of the year’s activities. It declined the applications of two would-be third-party administrators, citing incomplete documentation – the same reason that three insurers were denied clearance to offer medical insurance to customers. However, 25 of the Kingdom’s insurers – almost all the rest – have been cleared. More than 1750 health care providers have been authorised by the CCHI to participate.
According to CCHI research the implementation of medical insurance for more and more Saudis has the potential to reshape the market for health care in the Kingdom. The Ministry of Health is receiving more requests to build hospitals from communities across the country, and more interest in increased utilisation of existing facilities, Al Sharif, secretary-general of the CCHI, told OBG. In addition, enterprising private companies are seeking to establish relationships with government hospitals and the overall expectation is that training, technology and demand will soon push the sophistication of medical care in the Kingdom to new levels.
“The very promising health insurance sector represents one of the most important and influential factors affecting the method and cost of health care services presented for Saudis working in the private sector and expats,” according to the CCHI’s 2009 annual report.
For the future, the CCHI has hinted at a similar change for domestic workers – maids, cooks, gardeners and other similar household help may get the same treatment as other expatriate workers. Domestic workers in the Gulf are often handled by a different set of laws because their work is done in homes and not in public workplaces.
Other reforms perhaps on the cards in coming years include expanding what is covered at home, insurance schemes for Saudis travelling outside the country, and increased CCHI supervision over medical malpractice insurance policies purchased by doctors.
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