Dubai: Medical insurance premiums could be in for a 10 to 20 per cent hike this year as insurers try to catch up with the spiralling cost of health care in the UAE. It could also be that the increases will become an annual exercise.
This year's hike would also be a response to the "abuse" of the current low-premium regime by some health care operators as well as those seeking treatment.
According to medical insurance industry observers, the cost of health care — for in- and out-patient treatment — has shot up by 30 to 40 per cent in the last three years, but the insurance premium charged has lagged considerably behind.
"It's fair to say the local health-care industry has not lagged in prescribing all manner of treatments… even when they are not required," said an official who oversees the healthcare insurance line at a leading local insurer.
"They know that if the patient is covered, it's more or less a given that the insurer would pay up. Most health-care operators assume that health insurers are there to facilitate their operating cashflows.
Cost strategy
"At the same time, many of those with medical insurance are also misusing the privilege by going to the doctor even for the mildest inconvenience. By raising insurance premiums, such practices can be checked… to an extent."
At the same time, blame should also be directed at the insurers as many of them have pursued group medical contracts by quoting the lowest possible rates.
The win at any cost strategy is now proving debilitating for the insurers.
Now, by raising the insurance premium on health care, they believe they would be able to get a better handle on managing their portfolio and making it "slightly" profitable. This is more so the case for insurers in Dubai, as there are no subsidies offered by the local authorities as there are in Abu Dhabi.
What is even more galling for health insurers is that the cost of drugs cutting across a broad swathe of treatments has actually fallen slightly or been held in check by the local authorities. (In the UAE and across the Gulf, the government and the concerned agency recommend the retail prices of drugs.)
"In fact, price reductions are being discussed for drugs related to the treatment of chronic diseases such as diabetes and hypertension, while the last time the aspirin protection price was raised was two years ago," said Dr M.K. Ebrahim, managing director of Docib Healthcare Management. "Recently, prices were raised on only a couple of vitamins, and that by 10 to 12 per cent."
But that does not mean local health-care facilities are necessarily prescribing the low-cost alternatives.
"There is definitely a misuse by certain doctors — and the institutions they represent — by prescribing expensive brands even if cheaper generic drugs are available for the same treatment and with the same results," said an insurer.
One reason that local health care insurers are moving towards a premium hike could also have to do with medical insurance being made mandatory for all employees in Dubai as well.
This move has been in the works for several years, but the impression among industry circles is that it could happen this year.
As of now, only Abu Dhabi has mandatory health care insurance for all employees. Insurers believe they will be better served by making the premium hikes before Dubai comes out with its own version.
"Medical insurance has never been a highly profitable line in the UAE and in recent years insurers have been feeling the pinch from the substantial — and ever growing — claims outgo," said Abdul Khader Panakkat, senior director for claims at Nasco Karaoglan.
"So when the time comes for medical policy renewals, insurers have to rationalise their expenses. The proposed increases in premium is a testament to that."
All that remains to be seen is how far insurers are willing to go to raise premiums and, just as important, stick with them. Having made the decision, they would need to stick to it and not let any short-term drop in premium collection get in the way.
Insurers facing the heat
- Health care premiums in the UAE could be in for a 10 to 20 per cent increase this year.
- The steep increase in health care-related claims has led to haemorrhaging of insurers' financials.
- While drug price increases are controlled, hospitals have raised their rates on a slew of services — consulting fees, lab expenses, etc. — by well over 20 per cent in the last three years and more.
