It has been more than a decade since Bahrain’s Shura Council, the state’s main legislative body, first granted its approval for a compulsory health insurance system. The proposal came at a time when governments across the region were attempting to shift the increasingly costly burden of health care provision towards the private sector. After its 2005 acceptance by the council, the government’s plan was redrafted into a legal document and dispatched to a parliamentary subcommittee for discussion and review.

DETERRENTS: By 2007 it seemed that the introduction of the new scheme was imminent – a completed draft of the health insurance law was in the hands of the Shura Council and the Ministry of Health was able to announce that it was simply waiting for the law’s approval by Parliament and the Cabinet. However, the parliamentary term ended without final approval being given, and the global economic crisis which followed in 2008 meant that it would be some time before the issue was approached again.

Ironically, the crisis only served to underline the need for the government to reduce its outlay on health care and encourage more private sector participation. In 2008, as inward investment slowed and the kingdom faced a deteriorating fiscal scenario, government spending on subsidising health care services exceeded BD20m ($53.1m), or around 6% of GDP.

However, the economic and political risk associated with rolling out a compulsory scheme that would add to the overheads of employers or compel them to pass on increased costs to consumers at a time of rising inflation was enough to deter the government from proceeding with its plan. The onset of the Arab Spring in 2011 reinforced this dilemma: Bahrain’s economic situation demanded reform, yet the process of that reform would not be borne lightly by a struggling business sector. The pattern was repeated across the region: while aggregate data for health care spending in the GCC is scarce, a 2016 report by Alpen Capital estimates that over a period of five years to 2013 health care expenditure in the region expanded at a compound annual growth rate of 10.3% to $49.5bn.

REGIONAL PHENOMENON: In most cases, GCC states were able to take advantage of the high oil prices to fund the bulk of this spending: in 2013 GCC governments funded 70.3% of the aggregate health care, compared to a global average of 60% and 49% in the US. Within the GCC, Bahrain had the highest health care spending of all as a percentage of GDP, at 4.9%, while Qatar had the lowest. The health care spending challenge, then, is a regional phenomenon, but one that is particularly acute in Bahrain. The steep decline of oil prices in the second half of 2014 only added to the urgency of the situation, and by early 2015 it appeared that the Bahraini government was prepared to act.

FIRST STEP: Bahrain’s opening move, however, was not the introduction of the long-awaited health insurance law, but a raise in the modest per-employee charge that companies pay towards health cover to the government. In 2014 this rate stood at BD5 ($13.3) per expatriate and BD1.5 ($4) per Bahraini employee.

In January 2015 the government proposed a new payment framework, by which employers in the private sector would pay a significantly higher contribution for their employees. According to the plan, each private company would be required to pay BD72 ($191) per expatriate worker when renewing their work permit at the Labour Market Regulatory Authority, while the levy for Bahraini employees increased to BD22.50 ($59.7) per year. The changes, however, met with strong opposition, and were rejected by the Shura Council in March 2015 on the grounds of the complexity of its implementation and the fact that the Cabinet was concurrently working on the final stages of the new national health insurance law.

RENEWED MOMENTUM: In 2016 the momentum behind the new health insurance law began to build. In June it was revealed that the Council of Representatives, the lower house of Parliament, was supporting the mandatory health insurance scheme. To date, however, only a broad outline of the scheme has been announced, and the circulation of unverified information regarding its implementation has caused some confusion. “The reform of the health sector will have a significant impact on Bahrain’s insurance market. Motor insurance, the only compulsory line now, currently dominates the market,” Ashraf Bseisu, group chief executive of Bahrain-based insurance group Solidarity, told OBG.

Much of the concern stems from reports in the regional press, quoting unnamed government officials, to the effect that the law will require citizens, residents and visitors to pay monthly contributions. The prospect of monthly levies sparked a social media furore, and prompted a clarification from the government that in the case of Bahraini citizens, the state will pay the contribution on their behalf, while the contribution demanded from expatriates will be met by employers.

CLARITY & QUESTIONS: What is more certain is that the law provides for the establishment of an independent institution to receive all contributions and oversee the purchase of health services for Bahrainis, expatriates and visitors alike. Current plans call for two basic medical packages, one for citizens and the other for residents and visitors. As with other countries in the region where similar schemes have been introduced, insurance companies will be free to offer separate packages of advanced cover prices.

The crucial issue for Bahrain’s insurers, which will be answered between now and the planned implementation date of 2019, is the pricing and provisions of the basic package, and what kind of margin they will be able to secure from it. The industry will also be keen to hear details regarding the mechanism for altering the pricing of the basic package to reflect rising medical costs, as in other markets a lack of one has been the cause of conflict between the regulator and insurance companies. Insurers will, of course, be able to seek profit in the advanced packages they offer, but other questions abound. For example, details have yet to be released about technical issues such as medical coding, by which health care procedures and services are categorised for billing purposes, and which can become contentious issues between insurers and health care providers if not adequately defined.

Pre-authorisation is likely to emerge as another topic for debate. This practice involves insurers requiring a check before they will agree to cover certain medical procedures or medications, and although it is popular in the industry as a cost-saving measure, it has been criticised by some medical practitioners for being time consuming and ultimately less efficient.

The question of the interface between health care providers and insurers is another important issue in the kingdom. Of particular concern for insurers is the matter of dispute resolution, where any inefficiency can be damaging to income. The anti-fraud measures that will be deployed in the new law will also be of interest to all parties, as experience in other jurisdictions has shown this is a universal problem in the industry. The UK’s Health Insurance Counter Fraud Group estimates that fraudulent claims cost the US government up to $175bn per year, while losses in the EU range from around $40bn to $132bn per year.

IMPLICATIONS: Lack of detail around the insurance law makes gauging its effect on the industry difficult. In his opening remarks at the 12th Middle East Insurance Forum, held in Manama in February 2016, Abdul Rahman Al Baker, executive director of financial institutions supervision at the Central Bank of Bahrain, identified compulsory health insurance as one of the two most significant sources of underwriting opportunities in the region. Obligatory health insurance will certainly have a significant impact on the Bahraini market, but for now industry players are waiting to hear the detail of the new law before issuing their verdict.