International comparison of complementary health coverage

In his letter dated October 3, 2008, the Prime Minister asked the Secretary of State for Long-Term Planning, Public Policy Evaluation and Development of the Digital Economy to undertake an international comparison of complementary health insurance coverage.
The aim of this report is to assess the quality of the information on complementary health coverage that is available to individuals and, in the case of group contracts, to companies and social partners. It must also examine how policyholders view their risk of having to pay excess expenses for medical care and goods after compulsory health insurance coverage has been exhausted. Finally, it must analyze the conditions under which individuals and companies choose between the many contracts offered by the various complementary insurance organizations.

1. BY INTERNATIONAL STANDARDS, FRANCE HAS A UNIQUE COMPLEMENTARY HEALTH COVERAGE SYSTEM

1.1. A large number of policyholders have complementary health coverage, which is a determining factor in the consumption of certain medical goods and care.

Nearly 93% of the French population has insurance coverage, either through individual contracts, company or industry collective agreements, or complementary universal health insurance coverage (CMU-C). This rate has been on the rise since 2002 (90.5%). Young adults, once they cease being beneficiaries under their parent’s insurance coverage, the elderly and jobseekers are those with the lowest rates of insurance coverage.

Complementary health insurance organizations finance approximately 13.5% of all medical care and goods that are consumed. They cover a significant percentage of community healthcare and health product costs: €8.7 billion for outpatient care (€3.7 billion of which is spent on doctors' fees and €3.1 billion on dentists), €6 billion for drugs and €2.7 billion for other medical goods from the list of products and services (LPP), with this last category showing the strongest growth.

1.2. This coverage, which is encouraged by the public authorities, comes in various forms and is offered by a number of different actors.

There are three types of complementary health insurance organizations: mutual groups, insurance companies and providential funds (PF). According to data from the CMU Fund, the revenue generated by complementary health insurance organizations (measured by total premiums received) was €29 billion in 2008. Between 2001 and 2008, it grew by 7.4% on average each year. Accounting for 55% of all premiums, which equate to €16.4 billion, the 748 mutual groups are the key players in the complementary health insurance market, while the 36 providential funds represent 17.7% of this market and the 92 insurance companies, which are experiencing growth, hold a 25.6% share.

In 2006, half of the population was covered by an individual contract (excluding CMU-C) and one third was covered by a group contract. Lastly, 7% of the population have CMU-C. Those with individual contracts are mainly civil servants, people not in employment (especially students and pensioners) and people working in small companies that do not offer or require group coverage. Group contracts may be optional or compulsory, with the latter having been strongly encouraged by the public authorities.

The purpose of the law passed on December 31, 1989, known as the “Evin Act”, was to set out social protection guarantees and ensure greater protection for policyholders. The principles it sets out provide a strong framework for the activities of complementary health insurance organizations with regard to medical screening, information and continuation of insurance coverage. In addition, it has helped people who leave a company for a reason beyond their control to maintain their health insurance policy.

A lack of complementary health insurance coverage is the main reason for failing to seek treatment. This observation is the motivation behind an ambitious public policy to encourage the development of complementary social protection, through CMU-C, support to help people obtain complementary health coverage (ACS), and tax exemptions or social exemptions linked to contracts. Certain requirements must be met in order to qualify for this support, particularly in the context of “responsible contracts”.

However, the levels of coverage and prices vary greatly. Generally speaking, the contracts provide good coverage of the policyholder’s contributions for outpatient care and health products, as well as the main expenses associated with hospitalization (especially the fixed daily charge). Nevertheless, the offers vary greatly when it comes to the core components of complementary health insurance: eye care and dental care. In addition, there is even less consistency when it comes to covering surcharges (these charges are only covered, in full or in part, in one third of cases and surcharges outside the scope of coverage are only covered 20% of the time).

Group contracts generally offer better coverage, which is only natural considering that the employer pays contributions (which is not a feature of individual contracts). According to the Directorate for Research, Studies, Evaluation and Statistics (DREES), the average monthly premium per beneficiary in 2006 was €38 for all modal contracts and all financers combined. This amount very much depends on the age of the beneficiary and, to a lesser extent, the level of coverage offered. Some groups of people are still excluded from complementary coverage for financial reasons. In addition, there are still major differences in terms of both contributions and the benefits paid out, and these differences are made even more pronounced by a system of costly public subsidies that some might argue are not targeted at the right people.

1.3. Policyholders' satisfaction with their complementary health insurance must be moderated by their relative short-sightedness regarding the way in which complementary health insurance organizations work and their duties.

While individuals and companies have objective difficulty in making decisions about the cost of contracts and the coverage offered, they have a positive opinion of the organization they choose. This favorable view exists in a situation in which almost everyone considers it important to have complementary health insurance. The French have a great deal of confidence in their complementary health insurance and the vast majority of complementary health insurance organizations appear to strive to offer their policyholders the best value for money and fair conditions. There are several aspects to satisfaction (time taken to be reimbursed, amounts reimbursed, etc.), with the satisfaction rate for all of these exceeding 90%.

In fact, households seem to be quite content to remain with their current complementary health insurance provider, especially when their professional or family situation is stable. The percentage of people who change contract from one year to the next is quite small. A survey carried out by Irdes estimates this rate to be around 12%, without providing any breakdown for the different types of complementary health insurance contracts. People tend to change their complementary health insurance coverage during specific periods of disruption in their lives, particularly changes in socio-economic status and, more specifically, the transition to retirement. The market is therefore still far from being shaped by the behavior patterns of rational health insurance consumers who put pressure on supply by changing contracts.

Lastly, policyholders’ attachment to their complementary health insurance contract is reflected in their low price elasticity. In the event of a 10% increase in premiums, 74% of the policyholders surveyed would stick with the same provider, most of whom (68%) would retain the same coverage and thus pay the increase. The increase in premiums would need to be at least 20% for policyholders to make more substantial changes to their contract, or even their insurance provider.

Companies are hugely satisfied with their complementary health insurance (96%), regardless of their size or line of business: they see it as a human resources management tool, a useful perk that helps them to attract and retain employees. It is also the subject of consensus-based social dialogue within the company. The turnover rate for group contracts is not significantly higher than for individual contracts. Nevertheless, changes of contract that are not accompanied by changes of provider indicate greater pressure on prices.

This satisfaction masks a lack of knowledge about healthcare spending and the risks of outstanding expenses. In particular, the French underestimate the share of spending covered by basic health insurance schemes and overestimate that of complementary schemes. A large number of people feel that they are poorly informed about the cost of care and the coverage provided. This means that few people carry out a comparative analysis of the different offers. The offers are so varied that making comparisons based on commercial documents is difficult, if not impossible, especially as complementary health insurance providers’ offers use vocabulary that is not very accessible and sometimes not very clear. A real comparison must be based on detailed contracts and details of the expenses and reimbursements that would apply in specific example cases. Due to the wide range of offers, this is an almost impossible task for a single person, especially since, besides the comparisons regularly published by consumer associations, there are few tools available to help them choose.

Use of complementary coverage is therefore to some extent irrational and the current coverage rate is not based on any kind of economic logic. Many consumer associations highlight this paradox in their comparative analyses.

2. ELEMENTS OF THE INTERNATIONAL COMPARISON

The mission studied twelve OECD countries: Australia, Canada, Germany, Ireland, Italy, Japan, Netherlands, Spain, Sweden, Switzerland, United Kingdom, United States. While each country has its own unique characteristics, there are clearly common issues, particularly in terms of regulation of supply, market transparency and the information provided to policyholders.

2.1. Similar problems can be found in the private health insurance markets of the twelve countries studied.

The financial clout of the private health insurance market is growing and there is a clear trend towards a reduced number of actors and market concentration. In most countries, the market is segmented into group contracts and individual contracts and the range of health insurance products on offer is diversified and innovative. As is the case in France, policyholders are very attached to their provider and do not change provider very often; once again, as can be seen in France, policyholders do not seem to be at all well informed about the product they have purchased or about the market. It therefore appears that policyholders lack a robust understanding of the system, but mainly that the benefits of switching insurer are underestimated, while the transaction costs involved in doing so are overestimated.

2.2. Various informational and regulatory tools

All the countries in the panel entrust the regulation and monitoring of private health insurance markets to public authorities. These authorities enjoy varying degrees of independence and deal specifically with health insurance to varying extents. In seven out of twelve countries, the regulatory authorities for the insurance market do not deal solely with health insurance. Regulation primarily concerns the solvency and prudential criteria of market participants. In the other five countries studied, however, the unique nature of private health insurance coverage has justified the creation of dedicated public supervisory bodies. In these cases, their work involves more than just the financial supervision of insurance providers and sometimes also concerns regulation of the entire health sector, including healthcare providers (the Netherlands, Ireland and Switzerland in particular).

There are various methods of regulation:

2.2.1. Regulation of reimbursed benefits

This allows the public authorities to ensure that insurance providers grant policyholders minimum levels of benefits and that offers can be more easily compared. In the countries studied, benefits are regulated in one of three ways: insurers may be obliged to provide either identical benefits to all policyholders, minimum benefits or standardized packages of benefits.

2.2.2. Regulation of premium calculation methods and approval of premium costs.

The methods used to calculate private insurance premiums can vary greatly from country to country, particularly when people’s state of health is able to be taken into account or, conversely, when insurers’ freedom to set their own prices can be restricted. The most flexible regulations allow insurers to take policyholders’ state of health into account in order to calculate their premiums. In other countries, premiums may be calculated based on criteria other than state of health, such as age or place of residence. Finally, in rare cases, all policyholders pay identical premiums.

In countries where the prices and benefits offered by insurers are strictly regulated, a risk equalization system is put in place to restore a certain degree of equity between insurers with different risk structures. This process of risk equalization means that the sums collected by insurers with a favorable risk structure (greater share of better risks) are transferred to insurers with a risk structure that is negatively impacted by its large share of high-level risks. By neutralizing the impact of risk structure, the public authorities discourage insurers from implementing risk selection practices. Most of the countries in the panel have a risk compensation system.

2.2.3. Regulating communication between insurers and policyholders

Improving the transparency of market information should allow the public authorities to increase competition within the market to the benefit of policyholders, who will then have the means to compare offers and choose insurance that best meets their needs.

The information given to consumers – whether they are looking to take out insurance or are already insured – covers various areas: general information about how the public and private health systems work, the different types of insurance available and how to make the right choice (policies, prices), consumer protection (option to switch insurer, recourse), responsible use of the health system.
In most countries, except for Ireland, the information provided to consumers is not intended to achieve all of these objectives. The internet is the main source for this information in all countries, but some countries have managed to develop other approaches including communication campaigns in mainstream media (Ireland), the distribution of leaflets (Ireland) or hotlines to ensure that those who might not be frequent internet users are not excluded (Switzerland).

3. PROPOSALS

While the mission letter focuses on households' perceptions of the costs they need to cover themselves and their health needs, as well as measures likely to improve their knowledge of the complementary health insurance market and the types of health insurance it offers, the interviews conducted by the mission consistently touched on matters relating more generally to the objectives and duties assigned to complementary health insurance organizations.
In light of this, the mission wished to clarify the terms of the current debate on the role of complementary health insurance organizations and suggest areas of further study before making more precise recommendations regarding the matters raised in the mission letter.

3.1. Regulatory decisions cannot be made without first reflecting on the intended purpose of complementary health insurance.

There are four matters under discussion.

3.1.1. Would it be advisable to extend complementary health insurance coverage to a greater number of people or even to the population as a whole?

A number of people do not have complementary coverage, particularly due to financial reasons, although the public authorities have strongly encouraged people to take out complementary coverage over the last fifteen years. However, there would be several challenges involved in extending complementary coverage to the general population based on the model used for supplementary pensions. Firstly, introducing systematic complementary coverage without re-examining our system’s basic architecture, especially the separation between mandatory and complementary health insurance and between group and individual contracts, would be nigh on impossible. Furthermore, generalizing coverage in this way would pose legal challenges if it were accompanied by stricter regulation of coverage. Finally, in considering how mandatory health insurance and complementary health insurance are currently financed, the intended impacts of such a decision (extending protection, reducing the number of people who do not seek treatment) could be achieved just as easily, and in a more socially just way, by ensuring that a greater range of healthcare costs are reimbursed under compulsory health insurance.

In reality, if supplementary social protection is not to be extended to the wider population, the public authorities must focus on those groups of people within the population who i) are likely to have high excess expenses, ii) have difficulty accessing healthcare due to their lack of complementary coverage. Complementary health insurance is a suitable system, even if it could be improved; the information provided to young people (students or those entering the labor market), retirees and people in a transitional period must be improved. Other options must be explored, particularly the extension of collective coverage, whether in professional contexts or other contexts which might fall somewhere between individual and collective, through collective contracts for various non-professional groups (retirees, patients, etc.).

3.1.2. Is it advisable for complementary health insurance to serve as a form of social solidarity or mutualization ?

Competition in the group insurance market creates healthy competition in the individual contract market, with providers actively seeking out “good” risks (particularly young professionals) and employing aggressive commercial practices (seeking to discourage potential policyholders who are seen as more risky or even covering premiums for the first few months, loyalty campaigns). The market therefore naturally evolves in such a way that the “bad” risks on the individual contract market no longer benefit from mutualization and, more specifically, older people are no longer able to change their mutual insurance company after reaching a certain age.

There are uncertainties regarding the future of pensioners and the mission was struck by the various actors’ lack of confidence in their individual and collective ability to face up to the challenges of an aging population. Developments in case law on group contracts have only added to the uncertainty. It should be noted that, of the countries in which the prices and benefits offered by insurers are highly regulated, France is the only one that has not introduced a risk equalization system to restore some degree of equity between insurers with different risk structures.

3.1.3. Is it advisable to have complementary health insurance organizations play a part in regulating the health system ?

In addition to their role as co-financers for mandatory health insurance, many organizations play a part in regulating the health system, particularly the sectors for which they cover most of the costs, as this enables them to better control health expenditure and expand the range of services available to their policyholders. Complementary health insurance organizations have promoted the use of health platforms (by telephone and online) and the contracting of healthcare professionals or even the creation of care networks (typically among mutual groups).

The part they play in regulating healthcare services must be strongly encouraged, especially with a view to implementing quality criteria and ensuring compliance with fixed rates (or a cap on excess charges). Greater involvement in bargaining negotiations should help to achieve this. In addition, the preventive element of responsible contracts must be strengthened and greater involvement of complementary health insurance providers in the provision of health education and patient support must be ensured in response to high demand from policyholders.

3.1.4. Is it advisable to increase competition between complementary health insurance providers ?

In order for the consumer to create competition, they must be able to change insurers and therefore choose between different contracts. However, the mission estimates that less than half of the French population is really free to choose their complementary health insurance without any restrictions resulting from the legal framework, their limited resources or the way in which the sector is organized.

In addition, whilst transparency of information, which can be achieved through a certain degree of harmonization or even standardization of coverage, is a prerequisite for better consumer choice, this in itself is not enough. Steps must also be taken to combat the asymmetry of information resulting from the proliferation, diversity and complexity of health insurance offers.

Despite the competitive nature of the complementary health insurance market and the considerable and necessary efforts being made to ensure greater transparency, it is likely that this will not have as great an impact on prices and the quality of contracts as expected, especially since very fierce competition between complementary health insurance providers can lead to “commercial one-upmanship, resulting in the introduction of cover that is unnecessary from a medical standpoint, but greatly valued by the networks of sales staff, agents and brokers”. This can also have a negative impact on the complementary health insurance market, with price increases causing policyholders to choose “low-cost” coverage, resulting in the best contract in terms of healthcare provision regulation being withdrawn.

In the medium term, increased competition between insurers may lead to better regulation of healthcare provision, but in the short term, it is unlikely to have much of an effect, as the compulsory health insurance providers’ efforts will be mainly focused on marketing or even the services offered to policyholders (third-party payment, reimbursement times). It is even possible that there will be an initial scaling back of prevention, healthcare provision regulation and risk management measures, all of which increase management costs. Placing insurers in competition with one another can therefore only bring about social benefits if they effectively engage in risk management strategies by taking measures to manage the demand for and provision of healthcare.

3.2. Progress in the areas of information and communication is achievable and desirable.

3.2.1. Presentation of benefits

The complexity of the way in which benefits are presented is one of the main problems faced by consumers in trying to understand their complementary health insurance. There are three potential changes that could be made.

Firstly, working with stakeholders to set out rules for best practice.
These rules for best practice could be defined either by professionals as part of a collective commitment to making contracts easier to understand (in the form of a best practice charter) or by an external authority, in partnership with insurers and policyholders. In view of the situation in France, a tripartite framework involving policyholders, insurers and the state should be prioritized. The French National Consumer Council (CNC), which has already worked on these issues and laid the groundwork for an agreement in 1998, could examine this issue once again and create a glossary of basic terms and concepts as well as a table summarizing the key points that would enable consumers to compare offers in order to make a decision. These documents should be widely distributed and the professional federations should commit to using them.

Secondly, creating standard contracts.
These contracts would either be awarded a “label” by a public authority to set them apart from the various offers available, or, through a more direct process, be drawn up based on specifications defining the basic needs of the people concerned. This idea could be put into practice in particular for those with complementary health insurance, as studies of these groups of people carried out by the CMU Fund show that a significant number of them let their coverage lapse because they do not understand the offers that are available.

Finally, a higher level of intervention would consist in drawing up standard contracts accompanied by a range of healthcare services, as defined by the public authorities, which complementary insurers would be obliged to provide. Consumer associations traditionally favor this type of measure, but it would be difficult to implement as it would contravene EU legislation.

3.2.2. Information provided to policyholders during the contract term.

The current legal framework for providing information on contractual terms (taking out and cancelling a policy) appears satisfactory; however, it is not necessarily well known. A clear and educational information brochure for policyholders, discussing the purpose of complementary health insurance and how it works, and clearly setting out the process for taking out and cancelling a complementary health insurance policy, could be offered to the general public. The system operators (mutual groups, providential funds, insurers) could be made responsible for producing this brochure in consultation with consumer associations. If necessary, it could also be distributed by Assurance Maladie or the National Institute for Health Education and Illness Prevention (INPES) if provided together with more general information on the health system and excess expenses.

Comparison websites for health insurance policies are on the rise, just as they are in other areas. It is undeniable that the internet is a key means of improving the information available to consumers. However, the information available is not always reliable, perhaps even more so when it comes to healthcare. One way to address this could therefore be a public solution, created in partnership with DREES and the CMU Fund.

Empowering policyholders by providing them with information about the costs of healthcare expenditure is crucial to ensuring the sustainability of the health system. By disseminating information on healthcare expenditure, the public authorities can aim to raise awareness of the savings that can be achieved through sensible consumption of healthcare. In addition to the annual statement of health benefits, which should be extended to all basic health insurance schemes, a similar statement should be sent out under complementary health insurance schemes along with the annual policy expiration notice.

While insurers are permitted to advertise their products using all available means, they must also respect the rules governing the form and content of such advertising. Efforts should be made to improve transparency regarding management and marketing fees, as is the case for other types of insurance.

3.2.3. The public system for providing information and creating transparency.

Relevant stakeholders and associations must be encouraged to improve transparency. Improvements in the transparency of information and an increase in competition will to some extent result from changes in the practices of the stakeholders themselves. Complementary health insurance organizations have a particular role to play and many actors in all areas are already amenable to such changes. Such an approach is not without risk of inaction, however, and in order to minimize these risks, we must rely on the consumer movement and patient associations, which often have the power needed to force complementary health insurance providers to adopt fairer practices.

In the current circumstances, the lack of a supervisory authority specific to private health insurance does not appear to be any great impediment to improving the transparency of information. In France, institutions already have some involvement in the complementary health insurance sector. Their respective roles need to be strengthened and ways of harmonizing their regulatory measures examined.

In many OECD countries, control of the insurance sector is entrusted to a general authority, which in most cases deals primarily with the financial supervision of insurance organizations through monitoring of their solvency ratios. In France, this role is fulfilled by the insurance company and mutual group supervisory authority (ACAM). This work to regulate competition in this sector could form the subject of a specific analysis carried out by the competition authority in order to introduce “macro-competitive” supervision to supplement the “micro-prudential” supervision carried out by ACAM.

In addition to regulation of the sector by the public authorities, a great deal must be done to improve the information provided to policyholders on health risks and the risks of incurring excess expenses. This information is key to getting patients to take more responsibility, but more generally to making policyholders behave as rational consumers of complementary health insurance. Comparison with OECD countries shows that there is still significant progress to be made in this area. With regard to the costs incurred, mandatory health insurance has a legitimate role to play in providing information to the general public on how the system for managing healthcare expenditure works. In order to ensure more effective coordination between mandatory and compulsory health insurance, this could also include information on complementary coverage, provided in partnership with the complementary health insurance organizations.

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