The new Dutch health insurance system
Health insurance reform in the Netherlands
By Yvette Bartholomée and Hans Maarse
Volume 12 Number 2, 2006
On 1 January 2006, a major reform of the Dutch health insurance system came into effect. The former system, a combination of a statutory sickness fund scheme for the majority of the population and private health insurance for the rest, was replaced with a single universal scheme.
Key elements of the new system
The extension of market competition is one of the key features of the new health insurance system. Health insurers, which may operate on a for-profit basis, are required to compete on premiums, types of health plan and service levels. Consumers are free to choose any health insurer and type of health plan (for example, with or without deductibles, with or without preferred provider networks) and are able to change to an alternative insurer or plan once a year. All legal residents of the Netherlands are obliged to purchase a basic health plan, but are free to purchase a complementary voluntary plan covering additional health services such as physiotherapy, dental care for adults, psychotherapy and various forms of preventive care (there is an enormous variety of complementary plans). The basic insurance package covering essential health care is defined by the government and is more or less the same as the package of the former statutory health insurance scheme. However, health insurers have some freedom to decide, for instance, which providers to contract, what types of care to cover and whether or not to offer benefits in kind or reimburse subscribers. Thus, the new health insurance legislation allows for some differentiation among health plans in order to give consumers choice.
Another element of the new system concerns premium-setting. The new system retains the nominal fee, so insurers must set a single flat rate premium for each type of health plan they offer. They are forbidden to vary premiums with age, sex or specific health risks. The government pays the premium for those under eighteen. Low-income groups receive an income-related government subsidy (a ‘health care allowance’) to purchase a health plan. Furthermore, each employed person pays a contribution of 6.5% of his/her income (up to an income ceiling of € 30,000 per year). Employers do not pay any contributions. For the selfemployed, retired persons and some other specific categories the contribution rate is set at 4.4%.
A further element of the health insurance reform relates to what the government terms ‘public constraints’. The new system is mandatory and covers the entire population. Pivotal in the new legislation is that health insurers must accept every applicant (open enrolment). They are not permitted to deny access to applicants with preexisting medical conditions or to charge them a higher premium. The ban on risk selection by insurers can only be enforced when insurers have no financial incentive to select risks. Therefore, a risk equalisation scheme has been developed to avoid risk selection by insurers and to facilitate fair competition. Insurers receive risk-adjusted capitation payments from a risk equalisation fund adjusted for age, sex, pharmaceutical consumption and major diagnostic groups. The risk equalisation fund pools income-related contributions and government contributions for those under eighteen.
A final element of the new health insurance scheme concerns its private character, as the government has presented it as an arrangement under private law.
Policy goals of the new legislation
…the preservation of risk and income solidarity can be regarded as a cornerstone of the new legislation. Health insurers must accept all applicants and premiums cannot vary based on individual characteristics. However, this regulation only applies to the basic health insurance scheme and not to complementary voluntary health insurance. In the future, health insurers may use the latter as a new instrument for risk selection (an insurer can do this by denying an applicant access to a complementary plan to discourage him/her from purchasing a basic health plan). The low-income groups health insurance subsidy system also aims to preserve income solidarity.
The key question, however, is how these arrangements will work in practice, particularly in the long-run? To what extent will market competition be compatible with solidarity arrangements? Markets tend to call for variation by differentiated packages and price-setting to enhance consumer choice. Health insurers and provider organisations may call for less restrictive government regulation to create more room for ‘private solutions’. One scenario therefore is that market competition will eventually lead to a redefinition of the solidarity arrangements. It is not simply a neutral policy instrument to achieve better the goals of health care policy but will impact upon how these goals are stated. Market competition is not only the outcome of a neo-liberal model of health care policymaking but also reinforces that model.
First, since the new legislation has come into effect, many more people than expected have changed insurer. According the latest data available, about 18% of the insured have switched from one insurer to another. While some insurers have grown significantly larger, one insurer has lost almost a quarter of its subscribers. Changing insurers has also caused a huge amount of administrative work.
Second, further consolidation in the health insurance market is expected if insurers are to survive and build up bargaining power in negotiations with providers.
Third, the new system creates administrative problems for providers.
Fourth, the government has had to concede that the new legislation may have unfair distributive effects for some groups of people and is looking for ways to compensate them (albeit reluctantly).
Beyond receiving reduced premiums, groups can also choose a plan that is optimally geared to their specific needs. The latter possibility in particular has provided the incentive for patients’ associations to form groups, but it remains to be seen how attractive the arrangement will be for insurers and patients with chronic illnesses. There are already signs that health insurers are not interested in signing a contract with patient groups, which cause a predictable loss to them. Another interesting observation is that it has been estimated that € 70 million has been spent on advertising.
In spite of preliminary results (of which the high proportion of people changing insurer is the most remarkable and unexpected), it is too early to determine whether or not the reform has been a success. Success would imply that the competitive changes enhance value and efficiency in purchasing health care. This is the real test of the reform.
The changing Dutch healthcare system
By Maud Rommers and Jeroen Breen
Watson Wyatt Europe
Healthcare Market Review
Under the new system, age or health risks cannot play a role in determining the premium to be charged. Therefore, to ‘compensate’ the insurer for the less healthy risks in their portfolios, the government will operate a ‘risk and claims settlement’ (risk equalisation) system along similar lines to that used by the former Dutch public health insurance funds.
Introduction of this system (vereveneningssysteem) means that, for an insurer, keeping a healthy, profitable portfolio will not be equated with the youthfulness of the policyholders, as was the case for private insurance portfolios previously. Now, policyholders who are older, and even ill, can be equally profitable risks. This, however, makes it a much more complex situation for the insurance companies to manage.
In the early years of the new system, there will be many uncertain factors which will make it difficult for insurers to balance competitive product pricing and securing distribution with the risks of unacceptable financial results. Some of this is purely technical and focused on suitable monitoring of claim progression at appropriate levels of detail. It will also be important to find out if there are groups of insured persons who are structurally worse off within the equalisation system.
Going Dutch — Managed-Competition Health Insurance in the Netherlands
By Alain C. Enthoven, Ph.D., and Wynand P.M.M. van de Ven, Ph.D.
The New England Journal of Medicine
December 13, 2007
The Dutch system is still a work in progress, and substantial problems remain. First, the risk-equalization model requires further improvement and continuing adjustment. Second, since the Dutch combine income-related subsidies for health insurance with similar payments for housing, child care, and scholarships, a high percentage of each extra euro earned reduces the earner’s subsidy, leaving people with little incentive to earn more money. Third, the existence of supplemental insurance with risk rating and without open enrollment may leave too large an opportunity for insurers to profit from risk selection. Finally, the current focus is on insurers, but the promise of this model lies in competition among delivery systems — which the insurers are now creating.
A U.S. version of the Dutch model would provide an opportunity for U.S. physician organizations to form their own health plans and present themselves directly to the consumer market, freeing them from control by large, remote, third-party insurance carriers and from the maddening complexity of having to deal with 15 to 30 different insurance companies and self-insured employers, each with its own payment criteria and plan designs. Medical groups could build their own customer base and loyalties. They could design their own coverage criteria, incentive schemes, utilization management, and other features.
Can “Regulated Competition” for Health Insurance Control Health Care Costs, Preserve Access, and Serve Society? The New Dutch Health System
By Pauline Vaillancourt Rosenau, PhD, Management, Policy and Community Health, University of Texas School of Public Health, and Christiaan J. Lako, dr, Public Administration, Radboud University Nijmegen, Netherlands
American Public Health Association
November 6, 2007
Health services experts note that, in isolation, health insurance reforms such as guaranteed issue, mandatory coverage, price competition for a standard health insurance package, and community rating, have limited potential. But if they are implemented together, with governmental sliding-scale subsidies based on income, might they form an integrated set of checks against gaming, promote cost containment, and serve society? The Health Insurance Act implemented in January 2006 in the Netherlands, is testing exactly this proposition. The first-year performance of new Dutch health system suggests that cost-containment has not yet been achieved, and that while insurance companies reported losses, consumers perceive the new health insurance policies to be more expensive than the old ones. Access is not compromised but the information made available to consumers to compare insurance plans is inadequate. Half find it more difficult to choose a health insurance plan now and a large percentage of the population distrusts the new health system (43%). On quality, more consumers perceive that quality has been reduced (41%) than find it improved (8%). Overall, with about 6 months of experience with the new system, only about 18% like it better than the old one. The Dutch experiment in health insurance reform indicates that efforts to both control health care costs and preserve access remain elusive. These conclusions are based on results of a poll by the Dutch Consumers Union and the financial assessment of the Dutch Central Bank. Results may change in the future because the experiment goes forward largely unmodified.
By Don McCanne, MD
The recently adopted financing reform for health care in the Netherlands has received considerable attention in the United States, and is being proposed as a private sector model that would be especially compatible with American ideals. The Dutch have discontinued their public insurance program and replaced it with an individual mandate to purchase private health plans competing in the marketplace.
Harvard Professor of Business Regina Herzlinger, as an advocate of consumer-directed health care, supports the Dutch system, but with the proviso that government oversight be removed so that the free market can improve quality and control costs. Stanford Professor of Management Alain Enthoven lauds the Dutch program, but only as a step towards his concept of managed competition in which physicians organize themselves into plans that compete with each other in the health care marketplace. Sen. Ron Wyden touts the success of the Dutch system as an example of how his proposal for a universal individual mandate is just what the United States needs. The neoliberals who support the proposal of the leading Democratic candidates - an individual mandate with an option to purchase a public, Medicare-like plan - also use the Dutch model as an example that their proposal not only would work, but would have strong public support. Even HHS Secretary Michael Leavitt recently visited the Netherlands to learn from a system that traded their public-private insurance mix for a market of competing private insurance plans - an ideal from the perspective of our conservative administration.
In reality, it seems that each interested party is projecting their individual and institutional ideologies on their perceptions of the Dutch reform. If you step back and look objectively at what the Dutch have done, their reform falls far short of many of the goals of each interest.
Just look at the way they have achieved the goal of pooling risk and funding health care equitably. Private plans competing on the basis of their premiums have absolutely no meaning when financing is readjusted based on an administratively-complex risk equalization system that will surely fail to equitably compensate for the private insurers’ skills at gaming the system.
Further, the Dutch have granted to the private insurers the right to control health markets in a manner that we are finding to be offensive. Consolidation of insurers is taking place, creating oligopolies. They are allowed to use their complementary plans to leverage risk selection, benefit packages, and to implement restricted choice of providers. The insurers have a highly leveraged advantage over the providers, controlling their fees and services while increasing their administrative burdens.
It is unbelievable the number of people who should know better that are suggesting that we should try their system. You would think that they might first want to review the reports of the Dutch Consumers Union and Dutch Central Bank. With 43 percent of the Dutch population already distrusting the new health system we really should look elsewhere for reform models.
But, wait. We’ve already found single payer. Why do we have to keep looking?