Integrated health insurance models are the future
3 November 2010
Daman National Health Insurance in Abu Dhabi has reached an important milestone just five years after it was established: this first private health insurer in Abu Dhabi, operated by Munich Re on behalf of the emirate’s government, has now acquired its two millionth client. Word is spreading quickly about the successful know-how transfer between a private-sector insurer from Germany and the public sector in the Arab emirates. So much so that a number of other states in the region are also showing interest in this innovative project, which would enable them to improve the quality of their healthcare systems and save costs at the same time.
Daman National Health Insurance demonstrates on a small scale the factors that will drive the global health market in the coming years. The traditional model of pure risk assumption by primary insurers and reinsurers does not go far enough, and the provision of services and management is rapidly gaining in importance. For this, an integrated approach is a huge advantage, as pursued by Munich Re since 2009 with its own specially created business field Munich Health, which forms the third business segment of the Group alongside primary insurance and reinsurance and has over 5,000 staff at 26 locations worldwide.
Any company seeking to exploit the growth potential on the healthcare market has to correctly gauge the different development stages of the markets involved and quickly devise and implement competitive solutions. To this end, Munich Health brings together under one roof the Group’s global healthcare know-how and develops intelligent solutions tailored to the needs of individual clients and markets.
This is also the approach adopted with Daman, in which Munich Health holds a 20% stake. The company offers three products: state-subsidised basic healthcare for foreign workers in the lower income brackets, a more extensive private comprehensive cover, and the health insurance programme “Thiqa” for the local population.
The comprehensive health cover in particular is comparable to German private health insurance products, offering, for example, care in private clinics and some treatment abroad. It is available to all foreign workers (“expats”) with a monthly income of over €900. Moreover, an annual premium of just €2,000 makes it less expensive than similar products offered in Germany. The product has met with considerable success, with annual renewal rates of over 90%. Munich Health carries the reinsurance risk for this product, and is thus involved in both primary insurance and reinsurance.
Daman’s success has not gone unnoticed in other countries of the region, which have expressed a keen interest in this business concept. For example, Munich Health is currently engaged in the licensing process to establish a health insurer in Saudi Arabia, drawing on its experience gained with Daman.
Each market with its special set of circumstances has to be considered individually. For the fact is that even though problems such as a lack of medical or billing standards are similar in most of the emerging markets, there are no patent solutions available. Developing appropriate insurance products is about understanding how medical care and local markets work and what the underlying dynamics are. Consequently, the objective of high-quality healthcare at affordable prices can only be realised through extensive know-how drawn in part from the German health system. An example is diagnosis-related groups (DRG), which form the basis for the payment of hospital services. The principal idea of DRG is that hospitals are paid on the basis of diagnoses and not on how long a patient spends in hospital. The advantage of such standardised payments is that they help to make the treatment and cost structure more transparent and encourage competition between clinics. This system was gradually phased in for Germany in 2007, since when health insurers there have paid the same prices nationwide for the same services. The government in Abu Dhabi was also interested in this standardised solution and Daman introduced the system in its basic cover on 1 August 2010. This move relied on operational support from experts in Germany’s statutory health insurance who had already been involved in the roll-out of the German system. There are now plans to extend the system to the comprehensive cover for higher-earners.
The billing and accounting of payments for healthcare services offers additional potential for optimisation. In this area, Munich Health has developed a system with Daman geared to the needs of the health markets in the Arab emirates. The system automatically checks the services that hospitals charge insurers for. It is based on the standardisation of medical decision processes, the application of evidence-based guidelines and greater automation of the entire process. It also makes it easier to identify cases of abuse and billing errors on the basis of the insured portfolio’s payment history. These measures help to reduce medical and operative costs and also improve processing quality.
Disease management initiatives in Abu Dhabi have also benefited from German expertise, as the know-how of Munich Health and the ERGO subsidiary almeda GmbH was on hand to help establish a medical service centre there. The centre offers a telephone helpline for diabetes and obesity. The cornerstones of this service are the programme concept and coaching methods of almeda GmbH, which has established itself as a provider of assistance and telemedical services. Its long-standing successful telemedical services in Germany were adapted to the cultural requirements of the Arab market.
Munich Re’s pioneering role in developing the health insurance market in the Gulf region has made Daman what it is today. Even though the market has developed dynamically, around two dozen competitors are now active there, Munich Health aims to extend its leading position even further. The experience gained in Abu Dhabi will help in successfully introducing integrated health models in other countries of the region. It will benefit local decision-makers by giving them access to more information and better advice, while new insurance solutions will place the funding of the health system on a much broader basis and help to establish a modern health insurance system. For Munich Re, the development of innovative solutions opens up new markets and additional business potential, resulting in sustainable growth and excellence – to the benefit of all stakeholders.
Source: „Zeitschrift für Versicherungswesen“ (special issue Reinsurance), November 2010