Higher co-payments bite into UAE residents’ health bills

With 20-30 per cent co-payments, residents are turning circumspect on their need to consult a doctor

12:30 April 20, 2017
 insurance claims

Dubai: UAE residents better be cautious how often they use their medical insurance cards. With co-payment requirements becoming the norm, visits to the hospital or pharmacy will end up costing much more than they were used to.

In the past, many companies were willing to underwrite the entire health insurance cover for their employees in their annual contracts with insurers. Even if co-payments existed, it would be a small percentage and not the 20-30 per cent that is the norm now. For budget-conscious residents, those additional expenses are a headache they need to bear. (As per regulations, co-payments have an upper ceiling of 30 per cent.) More so for those who have to dip into their own pockets to take health insurance for family members with Dubai requiring all expats to be under medical cover for visa renewals. The cut-off date was March 31 — there are quite stiff penalties for non-compliance.

Definitely, access to health care and the cost of doing so is changing for Dubai’s residents. Much of the change has already happened in Abu Dhabi, which was the first to bring in universal coverage earlier in the decade.

But for local insurers, universal health coverage in Dubai has them looking at a potential windfall in new premium generation. “Two things will happen in medical insurance costs when insurers have a larger pool of premium coming in,” said Mustafa Vazayil, managing director at brokerage firm Gargash Insurance. “Their costs could stabilise or even fall when the pool gets spread out.

“But what is also happening is that cost of medical treatment is escalating. Nowhere in the world is medical insurance highly profitable. It will depend on how hungry insurers are for business and up to them to decide how profitable they want to be.

“They can’t depend on the regulator to make it profitable. In Dubai, it is only on the mandated insurance cover — the basic cover for blue-collar workers where the premium is Dh600 or just above — that insurers don’t lose money.”

Since the start of the decade, the cost of accessing health care — whether primary or speciality needs — have shot up significantly. More hospitals and clinics are getting added, but new capacities and more health care providers entering have not translated into less costs for UAE residents. Having employers provide health insurance was thus a comforter when Abu Dhabi and Dubai made these mandatory.

Where possible, the regulators are putting strict limits on what insurers can charge on their annual premiums. Case in point is the basic cover in Dubai, and in which only 12 insurers have been allowed by Dubai Health Authority to provide this.

But what of the spiralling costs outside of the basic packages? “DHA is doing everything in a phased manner,” said Vazayil. “It is getting into controlling health care costs, prescribing the rise (in costs) scenario, etc. There could be systems where random audits are done at clinics or hospitals.

“DHA is communicating the changes very clearly and they have been quite open about the final objectives. A free market doesn’t mean a free for all … it still requires regulations for the overall benefit.”

According to Standard & Poor’s Emir Mujkic, global ratings credit analyst, it’s only of late that medical insurers here are seeing better profitability out of the line. “While we have seen some constant double-digit year-on-year growth in medical premiums, technical performance has historically been mixed. It is only recently that profitability has shown some improvement since companies have started to focus more on bottom-line results rather than top-line volumes.

“We expect that premium income from medical insurance will continue to grow by more than 10 per cent in 2017 as a result of the introduction of risk-based actuarial pricing and ongoing medical inflation. Profitability is likely to improve … but market conditions are likely to remain very competitive.”

The staggered manner in which Dubai has rolled out its health insurance programme has been a plus, whereby the larger organisations and their employees were brought on-board in the initial phase. And then this filtered down to each level, and reaching a key milestone with the March 31 deadline when all expats had to have the cover.

“In the past, there have been misuses by the insured when it comes to frequency of hospital visits for cursory check-ups, etc,” said Jobilal Vavachan, CEO of Aster Pharmacy. “But that’s part and parcel of the evolution of a market where universal health coverage was being introduced. And we have been seeing stability in the frequency.”

This is where co-payments on health insurance seems to be having a clear effect. At a 20-30 per cent co-payments, local residents are turning circumspect on their need to consult a doctor. In short, they are learning to do only for valid reasons.

“No one’s rights for quality treatment are being denied — the change in mindset is happening at the individual level,” said Vavachan. “Similar trends were witnessed in Abu Dhabi and it’s all part of the maturing of the health care marketplace.”

Steep climb

• The percentage of the insured population under Dubai’s compulsory health insurance scheme increased to almost 100 per cent as of end 2016 from about 60 per cent at the beginning of the year, as per S&P estimates. This led to a “significant increase” in gross premium income for the insurers that were authorised to write this business. “Although there is some indication that loss ratios of the scheme were relatively low in 2016, indicating that this business was profitable, we anticipate that profitability may start to decline in 2017 as premium growth settles down and we start seeing more claims coming through,” said Emir Mujkic of S&P.

“In addition, the Dubai Health Authority extended the number of approved insurers to 12 in early 2017 from 9 in 2016, which may lead to additional completion in the market and consequently lower margins.”