Social Health Insurance in Germany and the Market Position of the by liaoqinmei

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									Social Health Insurance in Germany
and the Market Position of the TK
Current Changes and Future Challenges




  Jens Martin Hoyer
  Head of Corporate Development
  Techniker Krankenkasse


  May 10, 2009
    Agenda




       Introduction to the German Health Care System



       Financing of the Statutory Health Insurance (SHI)



       Market Position of the TK



       Future Challenges




2
                       Constituent principles of the German health
                       care system


                                            Statutory Health Insurance (SHI)



                 Solidarity                                  Subsidiarity                    Benefits
                                                                                             in kind




    ƒ Provision of care according to                  ƒ Focus on the self-           ƒ Ensures benefits without up-front
      medical needs, contributions                      responsibility of the          payments (cost reimbursement
      according to financial ressources                 individual: The informed /     principle) on the part of the insured
    ƒ Co-insurance of family members                    mature patient               ƒ Provision of care without contract
    ƒ Contributions shared by                         ƒ Self-government of payers      between patient and physician
      employers and employees                           and providers

                                     Historical roots: Catholic Social Teaching

    Sources: Nell-Breuning O (1963, 1967), Fischer M (2008), Ritter G (1988)


3
                       Elements of German health insurance
                       Mix of public and private health insurance
    Population: 82.1 million
      Private supplementary health insurance                                                From 2009:
              21.7 mio. insured (20 % of population)                                        Health insurance is mandatory
                                                                                            ƒ Employees with assessable
                                                                                              income up to 49.950 €/y (4.162,50
         Statutory health insurance                                                           €/m) in SHI

                               (SHI)                                     Private            ƒ Employees with assessable
                                                                         health               income above 49.950 €/y, self-
                                                                       insurance              employed and civil servants can
                  69.8 mio. insured (85,1 % of                            (PHI)
                          population )                                                        choose SHI or PHI
                                                                        8.8 mio.            ƒ All other groups: dependig on
                     73 % paying mebers                                 insured               previous insurance or job status in
            27 % co-insured without extra payment                                             SHI or PHI
                                                                        (10,3 %)

                                                                       Private long
            Social long term care insurance                             term care
                                                                        insurance

                                                                                                    Uninsured: 45.000
    Other Insured: 3.4 mio. (4,3 % of population)                                                  (0.06% of population)

    Source: TK, Bundesministerium für Gesundheit 2009 , Verband der privaten Krankenversicherung 2010, BMG 3/2010


4
                   Basic features of the Social Health Insurance (SHI)


                                                                               Regulatory framework

                                                Insurers
           • Income-based contribution
           • Free choice of insurer                                  • Mix of collective and selective
                                                                       provider contracts
           • Open enrolment
                                                                     • Service guarantee
           • Contribution rate shared
             between employer
             and employees
           • Free insurance for
             co-insured
             dependants



                     Insured             • Free choice of provider      Care providers
                                         • Wide range of benefits
       Unions            Employers
                                         • Benefits in kind
       Patient           Consumer        • Growing co-payments
    organisations         Centers
    Source: TK

5
                    The legal framework for SHI is defined on a federal level
                    Main decisions are taken by bodies of self-government


                                                       Social Security Code No. V
         Levels of decision making
                                                       ƒ   institutional structures of health care
                   in SHI
                                                       ƒ   fundings mechanisms
                                                       ƒ   access to healh care provision
                                                       ƒ   quality standards
                                                       ƒ   Basis for health care reimbursement by SHI is
                         Govern-                           the "medically necessary"
                        mental level
                         (macro)
                                                             ƒ Definition of the range of benefits
                    Corporatist level                        ƒ Negotiation of prices, reimbursement
                 (meso / self-government)                       contracts
                                                                                     Principle of subsidiarity


                    Single player level                           Within the set frame, providers and health
                 (micro: payers, providers,                       authorities provide preventive, curative,
                          patients)                               rehabilitative and long term care

            The European Union still has minor significance for national health care systems.

    Source: TK


6
                On a federal level traditional associations by types of funds
                were replaced by a new umbrella organisation

    before                                            After july 1, 2008




              8 federal associations                    Federal Association of Sickness Funds



    Objective: „Streamlining decision-making and removing barriers to action“




7
                          TK is one of currently 166 statutory health
                          insurance funds ("sickness funds") in Germany

     Number of sickness funds
               23.021
                            1965: TK merges

                      2028
       2000                  1815


       1500                         1319
                                       1147
                                                                                   1996: General right to free                                                        2008 und 2009:
                                                                                   choice of a health insurer
       1000                                                                                                                                                           First mergers across types
                                                                                                                                                                      of health insurance funds
                                                                                                               2000: TK merges
                                                                                                                                                                              2009: TK merges
         500                                                                                                         414
                                                                                                                                                                                            166

             0




                                                                                                                                                                                             currently
                                                                                                                                                                              2008
                                                                                                                                                                                     2009
                   1900
                          1960
                                 1970
                                        1980
                                               1990
                                                      1991
                                                             1992
                                                                    1993
                                                                           1994
                                                                                  1995
                                                                                         1996
                                                                                                1997
                                                                                                       1998
                                                                                                              1999
                                                                                                                     2000
                                                                                                                            2001
                                                                                                                                   2002
                                                                                                                                          2003
                                                                                                                                                 2004
                                                                                                                                                        2005
                                                                                                                                                               2006
                                                                                                                                                                       2007
    National Sickness Funds Exist next to Regional Sickness Funds
    Data: Brockhaus (1905), Dienst für Gesellschaftspolitik (2010); cut-off date: 01.04.2010
    Source: TK
8
                  Provision of health care based on collective contracts
                  Benefit package is comprehensive (95%)




                                        Associations of insurers
                                          (federal / regional)

    Selective
    contracting                                Collective contracting


                              Associations of Statutory Health
                                Insurance Physicians (KV)

                                                            Out- In-
                                                          patient patient




        Collective contracting still dominates - slow trend towards selective contracting


9
                    There is a high degree of uncertainty. Is the SHI developing
                    towards a single-payer system or towards more competition?




                                                                                                  Insuresr



                                        The most parties have an
                                            unclear position
Care provider                                                                                   Care provider



                                        ??                         ??
                                                                                                   Parties
   Parties


                Centralized                                             Decentralised scope
                decision-making                                           for differentiation

    More power to federal government,                               More scope for sickness funds
     Federal Association of Sickness                                  to set prices, differentiate
     Funds, Federal Joint Committee                                  products, contract providers


      10
                  Options for competition widened within SHI
                  but still unsufficient

         1996: free choice of insurer initiated competition within SHI

                      Elements of competition                                    TK


                            Selective Contracting                  Integrative contracts,
                                                                   rebate contracts

                            Elective Health Plans                  ƒ individualized elective
                                                                     health plans
                      Supplementary Health Insurance               ƒ suppl. health insurance

                                                                   High service standards
                                                                   ƒ 24/7 service hotline
                              Service Quality
                                                                   ƒ additional services (e.g.
                                                                     medical hotline)

                                                                   High internal efficiency and
                 Low contribution rate or additional premium       low administrative costs

     Abb.: TK


11
     Agenda




        Introduction to the German Health Care System



        Financing of the Statutory Health Insurance



        Market position of the TK



        Future Challenges




12
                      Containing non wage labour costs is an important
                      health and social policy objective

  Social Security Contribution Rate shared between employer and employee
  40%                                                                                                                               Longterm
                                  1,7%          1,7%           1,7%
                    1,0%                                                     1,7%          1,95%         1,95%                      Care
                                                                                                                       1,95%
                                                                                                                                    Insurance


     18,7%         18,6%         19,3%          19,5%         19,5%         19,9%          19,9%         19,9%        19,9%         Social
                                                                                                                                    Pension
                                                                                                                                    Scheme


                                  6,5%          6,5%                                                                                Social
                    6,5%                                       6,5%          4,2%                        2,8%
     4,3%                                                                                  3,3%                         3,0%        Unemployment
                                                                                                                                    Insurance


     12,5%         13,2%         13,6%          13,7%         13,3%         13,9%         14,0%         14,6%        14,0%
                                                                                                                                    Social Health
                                                                                                                                    Insurance

     1990          1995          2000           2005*         2006*         2007*          2008*        2009*        2010*/**
  Unemployment Rate                             13,0%         12,0%
                                                                            10,1%
                   10,4%         10,7%                                                     8,7%
                                                                                                        9,1 %
                                                                                                                 8,1% April. 2010
       7,2%

*) not included: SHI: additional contribution for insured 0,9%, Longterm Care Insurance 0,25% contribution for childless insured
**) not included:SHI: additional premium or refund for insured, Social Unemployment Insurance from 01. July 2010 3,0 %
13
Unemployment Rate aller abhängigen zivilen Erwerbspersonen (vgl. www.destatis.de)
                Until 2009 health care reforms had only limited
                success in keeping SHI-contribution rate stable
                                                                                     Health Fund
SHI Contribution Rate                                                               §
16                                                                                         §
                                                                             §                              ??
15
                                                                  §                                              14,9%
14                            §      §          §
                 §                                                                                               14,0%

13


12
                       average contribution rate                                           uniform contribution rate
                rates set by sickness funds idenpendently                                      set by government
11


10
  1989   1991   1993   1995   1997       1999       2001   2003       2005   2007   2009    2011     2013     2015
                                                                                           additional premium
                                                                                           With additional contribution rate
                                                                                           Without additional contribution rate


14
                    Central Health Fund with
                    morbidity-risk-adjusted allocations

         implemented in 2009


         Financial flows 2010                                                        Health insurance
                                                                                       funds (166)
     Uniform contribution
     rate: 14.9%
                                                               ƒ benefit costs
                                                                 (morbid.-
                                                                 adjusted)
                                                               ƒ administration
                            7,9%                                 costs (50%
                                                                 morb.-adjusted
                                                                 and 50% per
                                                                 capita)
       7,0%
          7,0%                         115,5bn€                ƒ others

                                            8,9%                            Refund
                                               %
                                                                                     Additional
                                                                                     premium with
                                                                                     1% hardship rule
                                                   Flat loan




      Source: TK; data: SHI finances 2010

15
        The newly created Central Health Fund constitutes the center
        piece of health reform and was implemented in 2009.

                       Employees                 Employers               Taxe subsidy

                           Uniform contribution rate 14,9%

                              7,9%               7,0%



   Additional
premium / refund                         Central Health Fund                            cash reserve
 for the insured                                168 billion



                        app. 93%                                            app. 7%

                   Morbidity-adjusted allocation for      Morbidity-adjusted / per capita
                             benefit costs              allocation for administration costs




                                               Sickness funds



   16
                  The contribution rate will be increased if health fund
                  allocations cover less than 95% of projected costs in two
                  consecutive years

     How the contribution rate is set: 95% - rule

     Legal framework


     • The uniform contribution is set by decree in November based on results of a
       forecast committee („Schätzerkreis“)

     • In the first year (2009) contribution rate is set so that health fund allocations
       cover 100% of projected costs plus build-up of a cash-reserve.

     • The contribution rate will not be increased unless health fund allocations
       cover less than 95% of projected costs in two consecutive years.

     • There is no ex-post adjustment if actual coverage rate turns out to be lower.




17
             If health fund allocations do not cover costs sickness
             funds will have to levy an additional premium


                                   Additional premium
                                  refund for the insured




         Income related as percentage                  Community rated as
             of assessable income                       nominal premium


                                                  > 8 Euro             < = 8 Euro




     1% hardship rule:                             •   Hardship exemptions are
     •   Additional premium payments may               financed by increasing the
         not exceed 1% of assessable income            additional premium




18
                    The 1% hardship rule limits revenues that can be generated
                    with an additional premium and distorts the price signal


     Additional premium   Actual revenues per   % of members under
     levied per member         member              hardship rule

           8 Euro              8,00 Euro               0%

          10 Euro              8,34 Euro               38%

          15 Euro             11,01 Euro               55%

          20 Euro             12,88 Euro               69%
                                                                         Health fund allocations 2009:
          25 Euro             14,17 Euro               79%               98,7% of costs
                                                                         => average additional premium
          30 Euro             14,99 Euro               87%
                                                                         3,60 Euro per month



        Health Fund       Additional premium    Additional premium   % of members under
       coverage rate                              with hardship         hardship rule
                                                   exemptions
           99%                2,75 Euro             2,75 Euro                0%
           95%                13,77 Euro            22,04 Euro              69%



19
                  The health fund changes price signals for the
                  insured and incentives for switchers

     before                                         January, 1 2009
 Rates vary among sickness funds:                   Uniform rate set by government: 15,5%
                                                    Additional premium or refund may vary


 Examples for contributions rates (October 2008):   Examples for addition premiums (January 2009):
 • 12,5% Bundes-IKK Gesundheit (BIG)                • 0.- Euro Bundes-IKK Gesundheit (BIG)
 • 12,9% AOK Plus (Sachsen, Thüringen)              • 0.- Euro AOK Plus (Sachsen, Thüringen)
 • 13,8% Techniker Krankenkasse                     • 0.- Euro Techniker Krankenkasse
 • 14,4% Barmer Ersatzkasse                         • 0.- Euro Barmer Ersatzkasse
 • 14,5% AOK Bayern                                 • 0.- Euro AOK Bayern


 Incentives for switchers                           Incentives for switchers
 • Savings depend on income of the insured and      • Savings independent of income and
 • shared between employer and employee             • not shared between employer and employee

                                                    •   At the outset of the central health fund price
     Examples for maximum price differences:            differences between sickness funds only
     • Barmer > BIG:    68 Euro per month               through elective health plans („Wahltarife“)

     • TK > AOK Plus:   32 Euro per month           •   Insured under the 1% hardship rule have no
                                                        incentive to switch


20
                       Stakeholder positions about the future financing
                       system are deeply entrenched


Insurers




Insurers

                                                  ??


                   Unions                                          Employers


              less nominal                                          more nominal
              premium                                                   premium

           Reduce the financing share of                  Increasing the financing share
            nominal premium or avoid                         of a nominal premium and
                nominal premium                             finance hardship rule by tax


    21
     Agenda




        Introduction to the German Health Care System



        Financing of the Statutory Health Insurance



        Market Position of the TK



        Future Challenges




22
                         Techniker Krankenkasse (TK)




          Basic data
                                                                       TK headquarter in Hamburg

         Founded                  03 Aug 1884 in Leipzig, Germany
         Legal state              Non-profit organization under public law
         Insured                  More than 7.3 million (5.1 million paying members plus 2.2
                                  million co-insured dependants)
         Region                   Operating nationwide
         Customer contacts        80 mio personal contacts per year
         Employees                11.281 (of which 469 apprentices)
         Local Service Points     231
         Turnover                 Approx. 17,6 bn Euro (2010)
     Source: TK , 2010


23
                      The TK achieved continuous organic growth
                      With a market share of 1/10, TK is a significant market player

                                                                                market share:
        Number of TK insured                           ƒ Merger                 10,4% (4/2010)
        (mio; January, 1)                                                        7.3



         4.6




        1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010


     Free choice of         Merger with      Take-over insured of      Merger with
     sickness fund         „Gärtner KK“        „BKK Airbus“ and        „IKK direkt“
                                              „BKK Meyer Werft“


        Before 1996 the TK could only insure people with technical professions.
        Since this restriction was lifted in 1996 the TK grew by almost 60%.



24
                     However, size does not necessarily translate into market
                     power in the relationship with health care providers


                                 Regional                             National
                                 sickness fund                        sickness fund


 For example                             AOK Bayern                   Techniker Krankenkasse
 Members                                  3,0 Mio.*)                          5,1 Mio. **)
 Insured                                  4,2 Mio.*)                          7,3 Mio. **)

 Area of activity                          Bavaria                              federal

 Market share overall                         6%                                10,5%

 Market share regional                       40%                                  7%
 Collective provider                                                            VdEK
 contracts on a regional                 AOK Bayern                    Substitute sickness fund
 level are negotiated by                                                     association
 Supervisory authority         Ministry of Social Affairs Bavaria   Federal Social Insurance Office
     *) 1 January, 2010
     **) 1 April, 2009


25
     An excellent brand position and brand extentions are key
     to the market success of the Techniker Krankenkasse



            Social Health Insurance Coverage:
            1. High quality standards
                 •   24/7 service hotline
                 •   additional services (e.g. medical hotline)
                 •   elective health plans (Wahltarife)
            2. at (until 2009 - below) average price




            Supplementary health insurance (since 2004):
            •   1.1 Mio contracts



            Medical Centers (since 2007):
            •   In Köln, Hamburg, Berlin, Leizig



26
     TK Awards




27
     Agenda




        Introduction to the German Health Care System



        Financing of the Statutory Health Insurance



        Market Position of the TK



        Future Challenges




28
                                Challenges of the German SHI-system
                                Growing financial gap of SHI


             Growth of benefit expenditure and                                         Policy Options
             assessable income of the insured
                                                                                             Control expenditure on
    140                                                                                      benefits
                                                                                            • Cut benefits, control volume
    135                                                                                     • Control prices
                                                                                            • Reduce fraud, waste, abuse
    130


    125
                                                                                                                                 Find other funds
Index




                                                     expenditure on
    120                                              benefits
                                                                                                                                 • Tax subsidies
                                                                                                                                 • Increase co-payments
    115                                                                                                                          • Premium for the
                                                                                                                                   insured
    110

                                                   assessable income of
    105                                                the insured                          Increase assessable income
                                                                                            • Increase assessable income limit
    100
             1995 '96   '97   '98   '99 2000 '01     '02   '03   '04 2005 '06   '07   '08
                                                                                            • Charge other types of income
                                                                                              '09
                                                                                            • More payers (PHI switchers)


        29
                  The next health reform debate in Germany is
                  likely to center around a number of questions

     1.   Central Health Fund „Gesundheitsfonds“:
          •   What role will nominal premiums play in the future SHI
              financing system?
          •   How can the 1% hardship financing be improved?
          •   How will contribution revenues develop during economic
              downturn and how will this affect the contribution rate?


     2.   Competition in the social health insurance market:
          •   How will power shift in the health insurance market?
          •   How will the conflict between central decision-making power
              and decentralised scope for differentiation evolve?


     3.   Relationship between SHI and PHI:
          •   What would be meaningful regulatory steps to allow the
              systems to converge?


30
                 Strategic challenges for the TK

     Opportunities                                        Threats
 • New opportunities for growth in areas where            • Price position of the TK is unsustainable in
   former regional low price competitors now                the long run as competitors increasingly
   have an average price position                           benefit from risk adjustment.


 • New options for growth through mergers                 • Competitors are investing in service quality
   across types of sickness funds                           and provision of care.


 • New market segments may be willing to                  • High degree of political uncertainty.
   switch health insurer.


 • Service differentiation increasingly important.


          •   (How) can market share be translated into a competitive advantage in
              provider contracts ?
          •   How can the TK further increase efficiency of health care provision without
              risk for the brand position ?
          •   What is the future role of management of health care provision
              (gatekeeper-models) ?


31
Thank you for your attention
                            Backup
                            Overall satisfaction with the German health care system is
                            based on benfits
         What is your overall satisfaction with the German health care system?
                                                                                                                           8
       totally/                                                 9              8              8                            8
          very                                  13                                                                               11
                  18,7
      content
                                                               41             37             36
                                                                                                                           45
                                                52                                                                               48
      content
                   54


                                                               49             54             54
                                                                                                                           44    40
     less / not                                 35
                  27,3
       content



                  2001          2002           2003           2004           2005           2006           2007           2008   2009


                                 ƒ Low number of uninsured
                                 ƒ Patient-centered health care system
             Benefits
                                 ƒ Good access to medical services
              of SHI
                                 ƒ High quality standards
                                 ƒ Cost containment has succeeded in parts

        Source: TK-Meinungspuls Gesundheit 2001-2009 (Survey among 2.000 insured in Germany), in %; differences: "don't know"
33
                          Back Up
                          Services Covered by the SHI - Expenditures 2008
                                                                      Administration
                                                                      8.3 bn € (5.1 %)
                                                        Others        118 €
                                                   1.8 bn € (1.1 %)
                                      Other benefits
                                     9.9 bn € (6.2 %)
                                                                                           Hospitals*
                              Home care
                         2.3 bn € (1.4 %)                                                  50.9 bn € (31.6 %)
                                     33 €                                                  724 € per insured person
     Prevention/Rehabilitation**
                 2.5 bn € (1.5 %)
                             35 €
                      Dentures
               2.9 bn € (1.8 %)
                            42 €
                Transportation                                                                    Drugs
                3.3 bn € (2.0 %)                                      160.9                       29.1 bn € (18.1 %)
                            46 €
            Therapeutic appliances
                                                                      bn €                        415 €
                   4.5 bn € (2.8 %)
                               65 €
                               Remedies
                         4.6 bn € (2.8 %)
                                     65 €
                              Sick pay
                              6.6 bn € (4.1 %)
                              94 €
                                           Dentists                                      Physicians
                                           8.0 bn € (5.0 %)                              25.9 bn € (16.1 %)
                                           114 €
                                                                                         369 €
     *without post-hospital rehabilitation (AHB); **with AHB
     Source: BMG (2009) and own calculations; Fig.: TK
34
                       Back Up
                       Total Health Expenditures, International Comparison
                        $US Purchasing Power Parity / Capita                   2007      % Gross Domestic Product

                                                                    (1)        USA        (1)
                                                                    (2)      Norway      (15)
                                                                    (3)   Switzerland°    (3)
                                                                    (4)   Luxembourg*°   (25)
                                                                    (5)      Canada       (6)
                                                                    (6)   Netherlands°    (9)
                                                                    (7)      Austria      (6)
                                                                    (8)      France       (2)
                                                                    (9)     Belgium°      (5)
                                                                   (10)     Germany       (4)
                                                                   (11)     Denmark       (9)
                                                                   (12)      Ireland     (21)
                                                                   (13)      Sweden      (14)
                                                                   (14)      Iceland     (12)
                                                                   (15)     Australia*   (16)
                                                                            OECD-30
                                                                   (16)         UK       (18)
                                                                   (17)      Finland     (20)
                                                                   (18)      Greece      (11)
                                                                   (19)        Italy     (16)
                                                                   (20)       Spain      (18)
                                                                   (21)      Japan*      (21)
                                                                   (22)   New Zealand    (13)
                                                                   (23)     Portugal*     (8)
                                                                   (24)    Rep. Korea    (26)
                                                                   (25)    Czech Rep.    (27)
                                                                   (26)     Slovakia     (22)
                                                                   (27)     Hungary      (24)
                                                                   (28)      Poland      (28)
                                                                   (29)      Mexico      (29)
                                                                   (30)     Turkey**     (30)
     *2006, **2005, °Estimate
     Source: OECD Health Data 2009, Version: June 2009, and own calculations
35

								
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