Dubai’s recent announcement that it will be introducing compulsory health insurance in 2014 came as little surprise, especially as it was first proposed more than eight years ago. But, with the country’s health insurance law approved at the end of 2013, it’s all systems go to ensure compliance.
The delay was largely down to the economics. When compulsory health insurance was first suggested, the emirate’s economy was performing strongly. But, before it had a chance to push forward its proposals, recession struck. Introducing additional costs was seen as unpalatable and, as a large proportion of the workforce is transitory, could have resulted in some employers relocating their business ventures.
Now that Dubai’s economy is returning to its former glory – a 4 per cent rise in GDP was posted last year – the additional costs will be more acceptable.
“The financial crisis meant that everything was delayed,” explains Aetna International head of sales for the Middle East Saif Obediat. “But, as the idea has been around for so long, everyone has already bought into it and it’s now just a matter of when and how to implement it.”
Dubai is making PMI compulsoryNew requirements
Although the final details of Dubai’s health law are still to be published, the new rules will require every national, resident and visitor in Dubai to have at least a minimum level of health insurance to give them access to essential health services. This will be funded by employers.
This minimum level will cover the basics including GP visits, specialist referrals, surgical procedures, tests and investigations and maternity and emergency services. In addition there will be an annual benefit limit of AED 150,000, equivalent to around £25,000.
The cost of the basic level of cover gives a good indication of its limitations. Premiums will be between AED 500 and 700 a year, roughly equivalent to £80 to £120. “The new compulsory health insurance is expected to cost around 1.5 per cent of pay roll, which is significantly less than you’d expect to pay for a UK or international policy,” says JLT Benefit Solutions head of healthcare and risk Bernie Clark. “A UK policy is typically between 5 and 8 per cent and you’d pay even more for a comprehensive international policy.”
However, as many employers already offer more comprehensive insurance, it is anticipated that they will top up this basic level of cover and this is being encouraged by the Dubai government. In addition, the government is also encouraging employers to extend cover to an employee’s spouse and dependants.
Regulatory roll out
Although the decision to introduce compulsory health insurance may have been a sudden one, employers are being given some time to make the necessary changes. The requirements are being rolled out between now and 2016, with compliance dependent on the size of the employer.
For example, companies with more than 1,000 employees will need to ensure they have appropriate cover in place by the end of October 2014; those with between 100 and 999 have until the end of July 2015; while those with fewer than 100 have until June 2016 to comply. June 2016 will also be the cut off point for employees to cover their spouses, dependants and domestics if their employer hasn’t already extended cover.
This staggered introduction means PMI Health Group senior consultant Chris Beardshall is expecting next year to be the key time for the international medical insurance market. “From an expatriate perspective there aren’t many employers with 1,000 employees in Dubai. The majority of our clients fall within the second and third phase and we will be looking at their cover to ensure it complies with the new requirements,” he explains.
There will also be fines to ensure compliance. Failing to have a compliant policy in place could result in a fine of up to AED500,000 (£85,000).
Gaining compliance
While the introduction of compulsory health insurance and the speed at which it is happening may appear challenging, the work required to ensure an employer gains compliance may not be as taxing as it first appears. For many years anyone looking to work in Dubai has needed to have some form of medical insurance to obtain a work visa so, in many cases, it will be a matter of ensuring this policy is compliant.
But, while it’s expected that the cover included on an international medical insurance policy will exceed the basic level proposed by the government, some tweaks may be required.
Clark says the growth of modular products may cause issues. “Where an employee or employer has removed a benefit such as maternity cover this will need to be added again to gain compliance. Insurers with modular products will be looking to highlight this issue,” he explains.
Pre-existing and chronic conditions cover may also need some revision. The mandatory requirements state that any pre-existing and chronic conditions will be excluded for the first six months, after which they will be covered. “Where this isn’t the case the insurers will need to adapt their plans to gain approval from the Dubai Health Authority,” explains Cigna Global Health Benefits managing director of distribution, Middle East Jai Verma.
Cancer cover falls outside of this requirement. The Dubai government has stated that treatment for this is likely to fall outside of the basic level of cover, with it currently working on a fund to pay for cancer care.
Where there may be more complexity is with the insurers. While the regulation around providing cover to employees working in Dubai has meant that an international policy from a UK-based insurer was an option for someone who wasn’t yet a resident, this is set to change.
Axa PPP International head of marketing Matthew Aston explains: “Under the new requirements insurers will need to have a licence from the Dubai Health Authority to be able to offer compliant policies. As this entitles an insurer to pay the healthcare providers, it will be impossible to service a policy without one.”
It’s expected that most of the insurers currently operating in the market will apply for a licence and will seek to gain approval for their products.
Sales opportunities
But while some work will be required to ensure compliance, the rule change presents huge opportunities for both advisers and insurers. Around three million people live in Dubai, of which only around a third have some form of medical insurance. This means the next two years will be very busy for advisers and insurers in the region. “It’s very exciting,” says Verma. “The changes bring huge opportunities and benefits for healthcare in Dubai.”
While many will gain from the changes being introduced, given the huge demand for cover, there is also a risk that the market will become distorted. Obeidat is concerned that some insurers will use aggressive pricing strategies to gain market share.
“If insurers look to price cover below its market rate this will cause problems with employers facing significant price rises at renewal,” he explains. “It’s a short-term strategy and isn’t really necessary given the scale of the opportunities.”
But, whether this type of activity occurs or not, advisers certainly stand to gain from the move to compulsory cover. “There will be a huge need for consultancy and advice as these employers introduce health insurance,” says Jelf Group director of international services Doug Rice. “Employers will want advice to ensure they have a compliant policy and to understand the level of cover they need to provide. It’s not so much shooting fish in a barrel; it’s fish jumping out of the barrel.”
BOX: Compulsory health insurance around the globe
While the international medical insurance market may still be grappling with the finer details of Dubai’s requirements and how these will affect their clients, the introduction of a some form of compulsory health insurance is becoming increasingly commonplace around the world.
Compulsion is already in place in a handful of countries including the US, Germany, the Netherlands and Dubai’s neighbours, Abu Dhabi, Saudi Arabia and Qatar. And, as economies begin to recover, more are expected to adopt a similar position.
Axa PPP International head of marketing Matthew Aston says it’s fast becoming an economic necessity. “Governments are increasingly facing funding gaps and, as healthcare is one of their largest bills, tackling this expense is logical,” he says. “Shifting some of the financial burden on to the consumer makes sense and I do expect to see more countries introducing similar models.”
This was the motivation for many of the Western countries including the US, Australia, Netherlands and Germany. For example in Germany, everyone working is required to have a local policy, which is funded by the employer and employee.
Shifting to compulsory health insurance can also work well in more developing countries. For instance Jelf Group director of international services Doug Rice says that where a country has an under-developed health system, introducing some form of compulsion can be an effective way to hasten development. “Greater certainty around how healthcare will be funded helps to attract better quality providers, with increased competition driving up standards,” he adds.
