Health Insurance in the Netherlands, Part II: The New Health Insurance Act in Practice

Por Edwin van Gameren

The new Health Insurance Act in the Netherlands (see my contribution of May 28th) was implemented with the intention to combine universal health insurance access with consumer choice and competition among insurers, providing incentives to reduce costs while improving efficiency and quality of care. Now, some four years after the enactment, we can make some observations on its results.

In this contribution I take a look at the market for health insurance and the choices made by consumers.

Competition in the insurance market

–          About 30 insurers offer basic health insurance, with in total about 55 different plans. Herfindahl-Hirschman Indices, measures of market concentration, show that in several provinces there are insurers with substantial –though less than oligopolistic– market power, and the same conclusion is drawn with respect to the purchasing clusters in which insurers cooperate (see for example CVZ’s “Zorgcijfers kwartaalbericht 2008. Financiële ontwikkelingen in de ZVW en AWBZ” and Vektis’ “Zorgthermometer 2010. Verzekerden in beweging”). Further, four large conglomerates – each consisting of several formally independent insurers – had a joint market share of about 80 to 90% in 2006 (for further detail see the paper of Gres, Manouguian and Wasem, “Health Insurance Reform in the Netherlands”). Since 2006, several mergers between insurers occurred, reducing consumers’ choices (see the references above of CVZ and Vektis). On the other hand, also the availability of too many insurance contracts may reduce competition when consumers are not able or willing to take the effort to compare all the available information on insurance contracts (Frank and Lumiraud analyze this fact for Switzerland in “Choice, Price Competition and Complexity in Markets for Health Insurance”).

–          Severe price competition between insurers kept the average annual premium (taking into account group discounts, see below) in 2006 at about € 1027, which was lower than the premiums the government had expected, and resulted in losses for the insurance companies. In 2007 the nominal premium was about 6% higher. In 2008 the premium decreased to an average of € 1040, due to a reform of the deductible. In 2006 and 2007 it was organized as a “no claim reimbursement” where people who had used less than € 255 of care had a part of their premium reimbursed. Since 2008 it is a ‘true’ deductible in the sense that the first € 150 (in 2009/2010: € 165) of health care costs are paid by the consumer. The decrease of premiums also occurred despite an extension of the insured package with short-term ambulatory mental health care, which until 2007 was financed through the insurance for exceptional long-term care (see Mot’s “The Dutch system of long-term care” for details). After a minor increase in 2009, a more substantial growth of the average premium in 2010 resulted in an annual premium of € 1080, according to the Vektis’ report. Further increases can be expected because the annual premium is still below the expenditures on the health care services of the basic package (see a CVZ’s more recent report “Zorgcijfers kwartaalbericht 2009, Financiële ontwikkelingen in de ZVW en AWBZ”).

–          In 2006, with the introduction of the new Health Insurance Act, 19% of the population changed insurers, as described in Smit and Mokveld’s “Verzekerdenmobiliteit en keuzegedrag 2008. Begin of einde van de rust?”. Part of the explanation for the high mobility is that under the earlier Sickness Fund Act a move was essentially ruled out, but also the new opportunities for collective (group) contracts caused mobility. Accounting for differences in age, gender, and education, mobility among the chronically ill and disabled was as large as mobility in the general population. Among the general population lower premiums and collective offers were the most important reasons to move, while for the chronically ill and disabled the content of the insurance package was more important. Quality of care was not reported as an important reason for mobility (for further detail on this conclusions, see the paper of De Jong, van den Brink-Muinen and Groenewegen, “The Dutch health insurance reform: switching between insurers, a comparison between the general population and the chronically ill and disabled”) . In subsequent years the number of movers is about 4% (as noted in the CVZ’s 2009 report), thus much lower than at the introduction of the new act. Additionally, there is some mobility between contracts within insurers, e.g. from a collective to an individual contract, of about 2% in 2009 and 2010, according to the Vektis’ report.

Consumers’ choice of insurance plans

–          More than half of the population benefits from some group contract. The number of people insured through collective contracts has risen from 53% in 2006 to 57% in 2007, 59% in 2008, 60% in 2009, up to 64.3% in 2010 (Vektis, 2010), which implies that insurers increasingly compete to attract collectives (organized through e.g. employers, municipalities, labor and sports unions, patient organizations) instead of individuals or households. On a collective contract insurers can give a maximum discount of 10% of the standard premium. The average discount is rather stable over time around 7-8% (Vektis, 2010). Representing large bundled groups of insured instead of individuals implies a more powerful position, and therefore it may increase the insurer’s bargaining power with respect to care providers and stimulate efficiency and quality improvements. However, Boone, Douven, Dröge and Mosca, in their paper “Health insurance competition: the effect of group contracts”, find that groups located near the home region of an insurer pay a higher price (obtain less discounts) than other groups, which contradicts the bargaining hypothesis (the former sickness funds had a local monopoly, and even though nowadays they are allowed to sell insurances all over the country, they still have a very strong position in their former monopoly region). It seems that the group discounts are mainly used to attract clients – and in the home region of an insurer, clients tend to come to him also without large discounts. Considerations of increased bargaining power versus providers seem less of an argument for discounts; if bargaining power was the main issue, a lower price in the home region could be expected – because that’s where the bargaining power is largest.

–          Discounts on the standard premium are also possible if clients voluntarily choose a deductible above the mandatory deductible of € 165. Only 6% of the insured chooses an additional deductible. Of those, in 2010 about 26% take the lowest possible additional deductible (€ 100) while 42% choose for the maximally allowed additional deductible of € 500 (Vektis, 2010). Compared with 2009, the percentage of people with the lowest extra deductible decreased, while the maximum deductible has been chosen more often. But despite the shift towards higher voluntary deductibles, the overall number of people who choose for more than the mandatory deductible remains small.

–          Insurance companies are reluctant to design and encourage “preferred provider” plans. Traditionally consumers have health insurance plans that do not exclude any providers; insurers fear a reputation loss if they are stricter in access to non-contracted providers than their competitors (see Van de Ven and Schut’s “Managed competition in the Netherlands: still work-in-progress”). About 70% of the insured have a plan that gives them access to contracted providers only, but due to the nonselective contracting – essentially insurance companies negotiate contracts with all providers – this does not impose restrictions, according to the NZa’s report “Monitor Zorgverzekeringsmarkt 2009. Trends en acties van de NZa”. Furthermore, also care from non-contracted providers is often (partially) reimbursed, although a rapid change can be observed here. In 2007, 50% of the clients had a 100% reimbursement when using non-contracted providers. In 2009, only 28% enjoys full reimbursement for non-contracted care, 38% is reimbursed for 80% of the costs, and 32% receives less than 80% of the costs of non-contracted care (see the NZa’s report). However, as long as selective contracting is not practiced, the financial consequences of a plan with reduced reimbursement for non-contracted care are small.

Source: The National Congress on Health Reform

–          The basic health insurance is mandatory, but people are free to purchase supplementary insurance for care that is not covered by the basic insurance. Insurers are free to design supplementary insurance plans, and also determine the acceptance rules. Comparison of available supplementary packages is therefore more difficult than the comparison of basic insurance plans. About 90% of total health care costs are covered by the basic package, leaving only 10% for supplementary care, as noted by Boone and his coauthors in the paper above. The most common supplementary packages cover physiotherapy, dental care, and/or alternative care. The large majority of the population has some form of supplementary insurance, but the number has slowly decreased from 93% in 2006 to 86% in 2010 (NZa, 2009; Vektis, 2010). Among the people with an individual contract we find more without supplementary insurance (17%) than among those with a collective contract (12%). It is permitted to obtain the supplementary insurance with another insurer then the basic insurance, but in practice less than 1% has different insurers for the two (Vektis, 2010). The average premium for the supplementary insurances has gone up from € 290 in 2006 to € 362 in 2009, a price increase that is much larger than the growth of the premiums for the basic package (NZa, 2009). Although legally the acceptance obligation only exists for the basic insurance package, until now the insurers have been generous in accepting clients for supplementary insurance (NZa, 2009). It is unlikely that the generous acceptance for supplementary insurance will continue forever, and due to the joint selling with the basic insurance plan, this may limit mobility.

It is clear that the introduction of managed (or: regulated) competition by the implementation of the Health Insurance Act has caused many changes in the health care sector, but also that it is an ongoing process, as van de Ven and Schut show. Despite the low mobility, trends towards collective contracts, higher deductibles, and less supplementary insurances suggests that people are looking for ways to reduce their expenditures on health insurance. Despite the insurer’s market power, the premiums are still insufficient to cover the costs of the delivered care. Presuming that insurers in the long run won’t be willing to loose money on the basic insurance, they can increase premiums but also they can decide to exercise their market power when purchasing care from the providers. Especially on the providers’ side more reforms are required to improve competition. In the next contribution I plan to focus at the role of the health care providers.

Edwin van Gameren es Doctor en Economía por la Vrije Universiteit Amsterdam (Holanda). Actualmente labora como profesor – investigador en El Colegio de México.


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