Medical insurance madness

In the Netherlands and many other countries, medical insurance has been outsourced to the private sector. This has been running for some years now and it is high time to reflect on the next steps and whether it was the right thing to do.

this is an text paThe Dutch system is a combination of private and public sector funding. The government collects taxes and subsidize the bulk of the social welfare costs. Each individual also pays monthly fees to private insurance companies for coverage. These deal with the payments and reimbursements. They also set the standards for healthcare and drive the quality of service in the Netherlands.

The reason this was outsourced to the private sector was due to the in-efficiencies of the public sector. It was believed that the private sector could do it for less and more efficiently. Pretty much the same reasoning as most privatization projects.

In this article I want to focus on the private part of healthcare. The reasoning applies to all countries where private corporations deal with health. In the calculations, I have used the 8 largest companies in the Netherlands covering pretty much 90% of the total market. There are about 56 health insurance companies, but most belong to one of the 8. I have consolidated the figures in one pot as it shows the overall health of the sector in the last 2 years (whilst the economy was at it's worst). 

Healthcare Netherlands

After tax profits for the whole sector increased by 5.14% whilst inflation was just less then 1% and economic growth was just 0.8% in 2014. The total number of employees working for these companies decreased by 5.6% in one year.

From this we can conclude that private companies have done a tremendous job. Shareholders should be chuffed. All indicators are on green.

Unfortunately the story does not end there. We have to take into account that it is healthcare, thus about the wellbeing of our citizens. The key indicator should be quality of service followed closely by efficiency. I think everyone would agree that it is immoral to pay high dividends to shareholders whilst reducing the quality of service and increasing the premiums. The ideal healthcare system is one that provides the best possible care for all citizens in the most efficient way.

The costs of insurance have risen year on year. In 2010 the average cost for a basis insurance was 80 euro per month. In 2015 it is 105 euro per month, and is estimated to rise to 120 euro per month for 2016. Further more the compulsory own risk excess went from 220 euro in 2012 to 375 euro in 2015. Each citizen is paying more whilst the insurance companies are paying out higher dividends to shareholders.

I could not find any statistics on the changes in quality of service. The general feeling is that service is decreasing with the centralizing of hospitals and cost reduction programs.

In conclusion, healthcare insurers are liberating more profits year on year at the expense of the subscribers and quality of service. It is clear that this form of capitalistic approach is not fully moral, although efficient.

The answer may lie somewhere in between. How about centralizing healthcare in just 3 or 4 companies with special statuses:
  • The owners would be the employees and subscribers.
  • Profits redistributed to employees (10 to 15% of profit).
  • The rest of the profit split between re-investment in the company, reduction in tariffs and back to the government (after all they are the ones subsidizing this through taxation).
  • Run these just like private companies with board of directors, CEOs etc... as that seems to be working for the private sector.

These steps would ensure that profitability and efficiency in a competitive environment are still key drivers but with a fair and moral base.

It is nothing new as Univé already function as a Co-operative. This is close to the points above. Strangely enough, It is also one of the companies with the best quality of service and track record. It's after tax profits also rose from 21M Euros in 2013 to 27M Euros in 2014. This money will be re-invested in the company and profit the customer's in the form of price reduction.

There is nothing wrong with making profits and it’s actually a good way to stimulate people.  At the same time we need to keep an eye on morality. Healthcare is about the well being of a nation, and it’s about the principle of looking after each other. Many health problems are hereditary, other pure accidental, and some pure bad luck. We owe it to ourselves to do this in the fairest possible way: efficient, effective and with the highest possible service. Is shareholder value the answer?ge

Date created: 31/08/2015       Date modified: 02/09/2021
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