Preconditions for efficiency and affordability in competitive healthcare markets: Are they fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland? Ten years later.

From the mid-1990s several countries have introduced elements of the model of regulated competition in healthcare. In 2012 we assessed the extent to which in five countries ten important preconditions for achieving efficiency and affordability in competitive healthcare markets were fulfilled. In this paper we assess to what extent the fulfilment of these preconditions has changed ten years later. In 2022, as in 2012, in none of the five countries all preconditions are completely fulfilled. In the period 2012-2022 on balance there have been some improvements in the fulfillment of the preconditions, although to a different extent in the five countries. The only preconditions that were improved in most countries were 'consumer information and transparency' and 'cross-subsidies without incentives for risk selection'. On balance the Netherlands and Switzerland made most progress in the number of better fulfilled preconditions. For Belgium these preconditions no longer seem relevant because the idea of regulated competition has been completely abandoned. In Germany, Israel and Switzerland, the preconditions 'effective competition policy' and 'contestability of the markets' are not sufficiently fulfilled in 2022, just as in 2012. In Germany and Switzerland this also holds for the precondition 'freedom to contract and integrate'. Overall, the progress towards realizing the preconditions has been limited.

Supplementary physicians' fees: a sustainable system?

In Belgium and France, physicians can charge a supplementary fee on top of the tariff set by the mandatory basic health insurance scheme. In both countries, the supplementary fee system is under pressure because of financial sustainability concerns and a lack of added value for the patient. Expenditure on supplementary fees is increasing much faster than total health expenditure. So far, measures taken to curb this trend have not been successful. For certain categories of physicians, supplementary fees represent one-third of total income. For patients, however, the added value of supplementary fees is not that clear. Supplementary fees can buy comfort and access to physicians who refuse to treat patients who are not willing to pay supplementary fees. Perceived quality of care plays an important role in patients' willingness to pay supplementary fees. Today, there is no evidence that physicians who charge supplementary fees provide better quality of care than physicians who do not. However, linking supplementary fees to objectively proven quality of care and limiting access to top quality care to patients able and willing to pay supplementary fees might not be socially acceptable in many countries. Our conclusion is that supplementary physicians' fees are not sustainable.

Supplementary insurance as a switching cost for basic health insurance: Empirical results from the Netherlands.

Nearly everyone with a supplementary insurance (SI) in the Netherlands takes out the voluntary SI and the mandatory basic insurance (BI) from the same health insurer. Previous studies show that many high-risks perceive SI as a switching cost for BI. Because consumers' current insurer provides them with a guaranteed renewability, SI is a switching cost if insurers apply selective underwriting to new applicants. Several changes in the Dutch health insurance market increased insurers' incentives to counteract adverse selection for SI. Tools to do so are not only selective underwriting, but also risk rating and product differentiation. If all insurers use the latter tools without selective underwriting, SI is not a switching cost for BI. We investigated to what extent insurers used these tools in the periods 2006-2009 and 2014-2015. Only a few insurers applied selective underwriting: in 2015, 86% of insurers used open enrolment for all their SI products, and the other 14% did use open enrolment for their most common SI products. As measured by our indicators, the proportion of insurers applying risk rating or product differentiation did not increase in the periods considered. Due to the fear of reputation loss insurers may have used 'less visible' tools to counteract adverse selection that are indirect forms of risk rating and product differentiation and do not result in switching costs. So, although many high-risks perceive SI as a switching cost, most insurers apply open enrolment for SI. By providing information to high-risks about their switching opportunities, the government could increase consumer choice and thereby insurers' incentives to invest in high-quality care for high-risks.

Should new health technology be available only for patients able and willing to pay?

New health technology comes on the market at a rapid pace and - sometimes - at a huge cost. Providing access to new health technology is a serious challenge for many countries with mandatory health insurance. This article analyses access to new health technology in Belgium and the Netherlands, using eight concrete examples as a starting point for comparing the two - neighbouring - countries. Contrary to the Netherlands, out-of-pocket payments for new health technology are widely accepted and practiced in Belgium. This difference is largely the result of different regulatory environments. A major difference is the way that entitlements to care are described: closed and explicit in Belgium versus open and non-explicit in the Netherlands. The characteristics of in-kind policies versus reimbursement policies also play a role. Allowing out-of-pocket payments for new health technology has consequences for the patients. It leads to greater access to new health technology (for those who are able and willing to pay), but has a negative effect on equal access to care. Choice and transparency are enhanced by allowing out-of-pocket payments for new health technology. It could be argued that lack of coverage by mandatory health insurance should not render private access to new health technology impossible.

How can the regulator show evidence of (no) risk selection in health insurance markets? Conceptual framework and empirical evidence.

If consumers have a choice of health plan, risk selection is often a serious problem (e.g., as in Germany, Israel, the Netherlands, the United States of America, and Switzerland). Risk selection may threaten the quality of care for chronically ill people, and may reduce the affordability and efficiency of healthcare. Therefore, an important question is: how can the regulator show evidence of (no) risk selection? Although this seems easy, showing such evidence is not straightforward. The novelty of this paper is two-fold. First, we provide a conceptual framework for showing evidence of risk selection in competitive health insurance markets. It is not easy to disentangle risk selection and the insurers' efficiency. We suggest two methods to measure risk selection that are not biased by the insurers' efficiency. Because these measures underestimate the true risk selection, we also provide a list of signals of selection that can be measured and that, in particular in combination, can show evidence of risk selection. It is impossible to show the absence of risk selection. Second, we empirically measure risk selection among the switchers, taking into account the insurers' efficiency. Based on 2-year administrative data on healthcare expenses and risk characteristics of nearly all individuals with basic health insurance in the Netherlands (N > 16 million) we find significant risk selection for most health insurers. This is the first publication of hard empirical evidence of risk selection in the Dutch health insurance market.

Improving access to essential health care services: the case of Israel.

In a recent article in this journal Simon-Tuval, Horev and Kaplan argue that in order to improve the protection of consumers there might be a need to impose a threshold on the medical loss ratio (MLR) for voluntary health insurance (VHI) in Israel [1]. Their argument is that VHI in Israel covers several essential services that are not covered by the mandatory benefits package due to budget constraints, while there are market failures in the VHI market that justify regulation to assure consumer protection such as high accessibility to high quality coverage. In this commentary it will be argued that in addition to market failures there are also government failures. It is doubtful whether imposing a threshold on MLR is effective because of government failures. It can be even counter-productive. Therefore, alternative regulatory measures are discussed to promote the protection of the beneficiaries. If essential services covered by VHI are unaffordable for some low-income people, government can extend the current mandatory basic health insurance so that it covers all essential services. If there is a budget restriction, the amount of government funds could be increased, or the health plans could be allowed to request an additional flat rate premium, set by them and to be paid by the consumer directly to their health plan. Also, effective out-of-pocket payments could be introduced. Subsidies could be given to low-income people to compensate for their additional expenses under the mandatory health insurance. If these changes are adopted, then the government would no longer be held responsible for access to benefits outside the mandatory health insurance. Accordingly, all VHI could be sold on the normal free insurance market, just as other types of indemnity insurance. In addition, the Israeli health insurance and healthcare markets could be made more competitive by introducing procompetitive regulation. This would increase the efficiency and affordability of healthcare.

Switching rates in health insurance markets decrease with age: empirical evidence and policy implications from the Netherlands.

All consumer groups with specific preferences must feel free to easily switch insurer in order to discipline insurers to be responsive to consumers' heterogeneous preferences. This paper provides insight into the switching behaviour of low-risks (i.e. young or healthy consumers) and high-risks (i.e. elderly or unhealthy consumers) in the Netherlands in the period 2009-2012. We analysed: (1) administrative data with objective health status information (i.e. medically diagnosed diseases and pharmaceutical use) and information on health care expenses of nearly the entire Dutch population (n=15.3 million individuals) and (2) three-year sample data (n=1152 individuals). Our findings indicate that switching rates strongly decrease with age. For example, in 2009, consumers aged 25-44 switched 10 times more than consumers aged 75 or older. Another finding is that switching rates decrease as the predicted health care expenses increase. Although healthy consumers switch twice as much as unhealthy consumers, this difference becomes much smaller after adjusting for age. We conclude that our findings can be explained by higher perceived switching costs by elderly consumers than by young consumers. Consequently, insurers have low incentives to act as quality-conscious purchasers of care for the elderly consumers. Therefore, strategies should be developed to increase the choice of insurer of elderly consumers.

Risk Selection Threatens Quality Of Care For Certain Patients: Lessons From Europe's Health Insurance Exchanges.

Experience in European health insurance exchanges indicates that even with the best risk-adjustment formulas, insurers have substantial incentives to engage in risk selection. The potentially most worrisome form of risk selection is skimping on the quality of care for underpriced high-cost patients--that is, patients for whom insurers are compensated at a rate lower than the predicted health care expenses of these patients. In this article we draw lessons for the United States from twenty years of experience with health insurance exchanges in Europe, where risk selection is a serious problem. Mistakes by European legislators and inadequate evaluation criteria for risk selection incentives are discussed, as well as strategies to reduce risk selection and the complex trade-off among selection (through quality skimping), efficiency, and affordability. Recommended improvements to the risk-adjustment process in the United States include considering the adoption of risk adjusters used in Europe, investing in the collection of data, using a permanent form of risk sharing, and replacing the current premium "band" restrictions with more flexible restrictions. Policy makers need to understand the complexities of regulating competitive health insurance markets and to prevent risk selection that threatens the provision of good-quality care for underpriced high-cost patients.

Improved estimates of Belgian private health expenditure can give important lessons to other OECD countries.

OECD Health Data are a well-known source for detailed information about health expenditure. These data enable us to analyze health policy issues over time and in comparison with other countries. However, current official Belgian estimates of private expenditure (as published in the OECD Health Data) have proven not to be reliable. We distinguish four potential major sources of problems with estimating private health spending: interpretation of definitions, formulation of assumptions, missing or incomplete data and incorrect data. Using alternative sources of billing information, we have reached more accurate estimates of private and out-of-pocket expenditure. For Belgium we found differences of more than 100% between our estimates and the official Belgian estimates of private health expenditure (as published in the OECD Health Data). For instance, according to OECD Health Data private expenditure on hospitals in Belgium amounts to €3.1 billion, while according to our alternative calculations these expenses represent only €1.1 billion. Total private expenditure differs only 1%, but this is a mere coincidence. This exercise may be of interest to other OECD countries looking to improve their estimates of private expenditure on health.

Switching benefits and costs in competitive health insurance markets: A conceptual framework and empirical evidence from the Netherlands.

Competitive health insurance markets will only enhance cost-containment, efficiency, quality, and consumer responsiveness if all consumers feel free to easily switch insurer. Consumers will switch insurer if their perceived switching benefits outweigh their perceived switching costs. We developed a conceptual framework with potential switching benefits and costs in competitive health insurance markets. Moreover, we used a questionnaire among Dutch consumers (1091 respondents) to empirically examine the relevance of the different switching benefits and costs in consumers' decision to (not) switch insurer. Price, insurers' service quality, insurers' contracted provider network, the benefits of supplementary insurance, and welcome gifts are potential switching benefits. Transaction costs, learning costs, 'benefit loss' costs, uncertainty costs, the costs of (not) switching provider, and sunk costs are potential switching costs. In 2013 most Dutch consumers switched insurer because of (1) price and (2) benefits of supplementary insurance. Nearly half of the non-switchers - and particularly unhealthy consumers - mentioned one of the switching costs as their main reason for not switching. Because unhealthy consumers feel not free to easily switch insurer, insurers have reduced incentives to invest in high-quality care for them. Therefore, policymakers should develop strategies to increase consumer choice.

The level of consumer information about health insurance in Nanjing, China.

The Chinese government is considering a (regulated) competitive healthcare system. Sufficient consumer information is a crucial pre-condition to benefit from such a change. We conducted a survey on the level of consumer information regarding health insurance among the insured population in Nanjing, China in 2009. The results from descriptive analysis and binary logistic regression demonstrate that the current level of consumer information about health insurance is low. The level of consumer information is positively correlated with the subscribers' motivation to obtain the information and its availability. The level of searching for health insurance information is also low; moreover, even upon searching, the chance of finding relevant information is less than 25%. We conclude that the level of consumer information is currently insufficient in China. If the Chinese government is determined to adopt market mechanisms in the healthcare sector, it should take the lead in making valid and reliable information publicly available and easily accessible.

Choice of insurer for basic health insurance restricted by supplementary insurance.

Choice of insurer is an essential precondition for efficiency in healthcare systems based on regulated competition. However, supplementary insurance (SI) may restrict choice of insurer for basic health insurance (BI) due to a joint purchase of BI and SI. Roos and Schut (Eur J Health Econ 13(1):51-62, 2012) found that the belief in not being accepted by another insurer for SI was an important reason for not switching insurer for BI for 4% of the non-switching Dutch population in 2006. This increased to approximately 7% in 2009. In this paper, we provide evidence that in 2011 and 2012 approximately 10% of the Dutch population expected that another insurer would not accept them for SI. An additional 20% of the consumers expected to be accepted by another insurer, but only for a higher premium than other consumers with the same SI. About one-third of the elderly (55+) consumers, and more than half of the consumers with bad or moderate health status, expected their current insurer to offer them more favourable conditions for SI, in terms of acceptance and premium, than other insurers do for similar SI. However, if dissatisfied high-risk consumers, due to a joint purchase of BI and SI, do not switch insurer for BI, the disciplining effect of 'voting with one's feet' is substantially reduced. This is a serious problem that may increase in coming years. We discuss several potential solutions. Our conclusion is that the integration of BI and SI into one basic-plus-insurance is an effective solution under current EU legislation. This conclusion may also be relevant for other countries.

Risk selection in a regulated health insurance market: a review of the concept, possibilities and effects.

The Dutch basic health insurance is based on the principles of regulated competition. This implies that insurers and providers compete on price and quality while the regulator sets certain rules to achieve public objectives such as solidarity. Two regulatory aspects of this scheme are that insurers are not allowed to risk rate their premiums and are compensated for predictable variation in individual medical expenses (i.e., risk equalization). Research, however, indicates that the current risk equalization is imperfect, which confronts insurers and consumers with incentives for risk selection. The goal of this paper is to review the concept, possibilities and potential effects of risk selection in the Dutch basic health insurance. We conclude that the possibilities for risk selection are numerous and a potential threat to solidarity, efficiency and quality of care. Regulators should be aware that measurement of risk selection is a methodological and data-demanding challenge.

Risk equalization in The Netherlands: an empirical evaluation.

The Netherlands relies on risk equalization to compensate competing health insurers for predictable variation in individual medical expenses. Without accurate risk equalization insurers are confronted with incentives for risk selection. The goal of this study is to evaluate the improvement in predictive accuracy of the Dutch risk equalization model since its introduction in 1993. Based on individual-level claims data (n = 15.6 million), we estimate the risk equalization models that have been successively applied in The Netherlands since 1993. Using individual-level survey data (n = 8735), we examine the average under-/overcompensation by these models for several relevant subgroups in the population. We find that in the course of years, the risk equalization model has been substantially improved. Even the current model (2012), however, does not eliminate incentives for risk selection completely. To achieve the public objectives, further improvement of the Dutch risk equalization model is crucial.

Preconditions for efficiency and affordability in competitive healthcare markets: are they fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland?

CONTEXT: From the mid-1990s several countries have introduced elements of regulated competition in healthcare. The aim of this paper is to identify the most important preconditions for achieving efficiency and affordability under regulated competition in healthcare, and to indicate to what extent these preconditions are fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland. These experiences can be worthwhile for other countries (considering) implementing regulated competition (e.g. Australia, Czech Republic, Ireland, Russia, Slovakia, US). METHODS: We identify and discuss ten preconditions derived from the theoretical model of regulated competition and assess the extent to which each of these preconditions is fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland. FINDINGS: After more than a decade of healthcare reforms in none of these countries all preconditions are completely fulfilled. The following preconditions are least fulfilled: consumer information and transparency, contestable markets, freedom to contract and integrate, and competition regulation. The extent to which the preconditions are fulfilled differs substantially across the five countries. Despite substantial progress in the last years in improving the risk equalization systems, insurers are still confronted with substantial incentives for risk selection, in particular in Israel and Switzerland. Imperfect risk adjustment implies that governments are faced with a complex tradeoff between efficiency, affordability and selection. CONCLUSIONS: Implementing regulated competition in healthcare is complex, given the preconditions that have to be fulfilled. Moreover, since not all preconditions can be fulfilled simultaneously, tradeoffs have to be made with implications for the levels of efficiency and affordability that can be achieved. Therefore the optimal set of preconditions is not only an empirical question but ultimately also a matter of societal preferences.

Consumer choice among Mutual Healthcare Purchasers: a feasible option for China?

In its 2009 blue print of healthcare reform, the Chinese government aimed to create a competitive health insurance market in order to increase efficiency in the health insurance sector. A major advantage of a competitive health insurance market is that insurers are stimulated to act as well-motivated prudent purchasers of healthcare on behalf of their enrolees, and that consumers can choose among these purchasers. To emphasize the insurers' role of purchasers of care we denote them, as well as other entities that can fulfil this role (e.g. fundholding community health centres), as 'Mutual Healthcare Purchasers' (MHPs). As feasible proposals for creating competition in China's health insurance sector have yet to be made, we suggest two potential approaches to create competition among MHPs: (1) separating finance and operation of social health insurance and allowing consumer choice among operators of social health insurance schemes; (2) allowing consumer choice among fund-holding community health centres. Although the benefits of competition are widely accepted in China, the problematic consequences of a free competitive health insurance market - especially in relation to affordability and accessibility - are generally neglected. To solve the problems of lack of affordability and inaccessibility that would occur in the case of unregulated competition among MHPs, at least the following regulations are proposed to the Chinese policy makers: a 'standard benefit package' for basic health insurance, a 'risk-equalization scheme', and 'open enrolment'. Potential obstacles for implementing a risk equalization scheme are examined based on theoretical arguments and international experiences. We conclude that allowing consumer choice among MHPs and implementing a risk equalization scheme in China is politically and technically complex. Therefore, the Chinese government should prepare carefully for a market-oriented reform in its healthcare sector and adopt a strategic approach in the implementation procedure.

Risk adjustment and risk equalization: what needs to be done?

In this paper, we first deal with the rationale of risk adjustment and risk equalization in health insurance markets. Then we discuss the state of the art concerning the application of risk adjustment and risk equalization in practice. Finally, we focus on: What needs to be done?

Effects of purchaser competition in the Dutch health system: is the glass half full or half empty?

In 2006, the Dutch health insurance system was radically reformed to strengthen competition among health insurers as purchasers of health services. This article considers whether purchaser competition has improved efficiency in health-care provision. Although supply and price regulation still dominates the allocation of health services, purchaser competition has already significantly affected the provision of hospital care, pharmaceuticals and primary care, as well as efforts to gather and disseminate information about quality of care. From this perspective, the glass is half full. However, based on the crude performance indicators available, the reforms have not yet demonstrated significant effects on the performance of the Dutch health system. From this perspective the glass is half empty. The article concludes that the effectiveness of purchaser competition depends crucially on the success of ongoing efforts to improve performance indicators, product classification and the risk equalisation scheme.