Medical underwriting and risk adjustment practices: United Arab Emirates

Health insurance models vary from country to country. As highlighted in our first series of articles on international health markets, governments often dictate the role of private and public health insurance within any country. Milliman has produced a new series of blogs focused on the medical underwriting and risk adjustment practices of eight countries: Australia, Ghana, Ireland, New Zealand, Saudi Arabia, South Africa, Spain, and United Arab Emirates. This is the eighth article in our series.

Background to healthcare in the Middle East
The Middle East is going through rapid health reform with the transformation of a historical publicly funded health system into a hybrid public-private insurance model. The governments in these countries are facilitating the development of the provider community through the legislation of compulsory health insurance coverage, thus shifting the onus of the development of healthcare from the public sector to a public-private partnership, with the help of the private provider community and insurance industry.

Though no more than 10% of the population of any one Gulf Cooperation Council (GCC) country is currently covered by insurance, this is expected to change quickly. Workers covered under these plans can choose care at either public or private institutions, a system that has the benefit of ensuring that public providers must learn to generate claims in order to be reimbursed by the government. Once private health insurance takes hold, patient volumes for private providers will rapidly increase, as patients are allowed to pursue reimbursed care at private institutions.

Depending on the country, the health insurance opportunity could either be to enter as a stand-alone private player, or to form a joint venture with the government to establish and manage a national insurer.

United Arab Emirates (UAE)
UAE is a typical hybrid public-private insurance model. By regulation, UAE nationals and citizens of other GCC countries receive free inpatient and outpatient healthcare at government hospitals and clinics, fully funded by the state. However, UAE nationals can also opt to purchase private medical insurance coverage through state-subsidized premiums.

The leading health insurance company in Abu Dhabi is Daman National Health Insurance Company, owned by the government, offering health insurance to expatriates and their families. Daman commenced writing business on May 1, 2006, and has a cooperation agreement with Munich Re, which provides reinsurance and direct underwriting and claims expertise. Daman will provide insurance services for all government expatriate employees for a period of 10 years from July 1, 2006.

Daman also provides private medical insurance for all UAE nationals through its Thiqa plan. As of April 2009 there were about 500,000 members in the Thiqa plan. Members receive a Thiqa card with which they can obtain private medical treatment within the Daman preferred provider network, subject only to on-the-spot cash payment at the clinic or hospital by the individual in respect of member coinsurance. Otherwise the services are paid for directly by Daman, subject to production of the Thiqa card at clinics and hospitals.

A change to the Thiqa plan was announced in 2009 by Daman, which introduced a 50% coinsurance payment for all dental treatment and for pharmaceuticals sourced in the private sector. Pharmaceuticals sourced in the public sector remain free of charge for all UAE nationals. Salamat, an extended plan similar to Thiqa, is now also available for UAE nationals, providing medical expenses coverage on an optional regional or worldwide basis.

Resident expatriates, who received free healthcare in the past, now have to pay for treatment at government medical facilities, albeit at a subsidized rate. However, compulsory health insurance for expatriates is now fully implemented in Abu Dhabi, under Law No 23 of 2005.

The standard compulsory health policy for expatriates and their families resident in Abu Dhabi covers the employee, spouse, and up to three dependent children under the age of 18. The onus to purchase compulsory insurance for expatriate employees and their families lies with the employer. No expatriate work permits are issued or renewed without proof of insurance and proof of premium payment. The scheme has been a success, with the insured population exceeding 1 million in 2009.

There are four basic policies under the compulsory law as described below:

• A basic policy at a subsidized rate of AED 600 (USD 163) per annum for workers paid less than AED 3,000 (USD 817) per month, plus housing allowance, or AED 4,000 (USD 1,090) with no housing allowance
• A basic product policy, for members whose salary is over or equal to AED 3,000 (USD 817) per month, plus housing allowance, or AED 4,000 (USD 1,090) with no housing allowance
• An emergency policy for visitors
• Enhanced policies for higher earners, including all basic product coverage plus additional coverage over and above the legal compulsory minimum

The law does not cover members for chronic diseases unless they have been in Abu Dhabi for six months or more. A member can shift from the basic product to an enhanced product at any time, subject to payment of an additional premium.

The law sets out the healthcare services that are covered under the basic health insurance policy. The annual upper limit for the basic healthcare services is AED 250,000 for every person.

A compulsory health system is currently only effective for residents of Abu Dhabi, the capital city. For all residents in Dubai, including expatriates, the compulsory law was due to commence its first phase on January 1, 2009, continuing over several phases until 2015. Implementation has been delayed, however and it is not known when the matter will be resuscitated.

Underwriting, risk selection, and risk adjustment
For citizens whose healthcare is provided free, coverage is provided by the state without any underwriting or limits.

For private medical insurance (group health insurance for expatriates), it is usual for underwriters to offer a number of plans, which are based upon geographic coverage with limits per person per year that vary from AED 50,000 (USD 13,624) to AED 1.5 million (USD 408,720). It is not usual for deductibles to be applied to inpatient treatment, but it is standard procedure to apply a combination of copayments and deductibles to outpatient benefits, in order to curb abuse. Copayments may be as high as 20% and deductibles range from a minimum of AED 50 to AED 150 per claim (USD 14 to USD 41).

Sub-limits are applied when granting cover for maternity, dental, and optical benefits. Some underwriters also apply sub-limits for medicine, diagnostic services, and doctor consultations. Doctor consultations may also be subject to a utilization limit, for example 15 visits per annum.

Companies allow elective treatment subject to prior approval. However, where procedures are carried out by nonnetwork providers, whether inside UAE or overseas, it is standard practice for there to be a copayment of at least 20% of network rates. In some cases payment may be limited to 80% of 80% of normal network rates (that is, 64% of costs can be recouped).

A similar underwriting approach is adopted for emergency inpatient treatment at nonnetwork providers in the UAE and overseas. Cover for such elective and emergency treatment is also on a reimbursement basis.

Contracts are annual, and contain no cancellation provisions. They are renewable at the invitation and discretion of the insurer subject to agreement over terms.

Some leading insurers and third-party administrators provide an automated underwriting rules tool that allows the insurer to define proposed risk units, set parameters for coverage eligibility per plan, fix corresponding premium tables, and choose from an additional range of optional automated features to assign other eventual specific restrictions.

There is an extensive standard list of exclusions applying to the compulsory health policy for expatriates, spouses, and dependents resident in Abu Dhabi.

Private Medical Insurance (PMI)
For individual private medical insurance (PMI), most insurance companies restrict their acceptances to group PMI (compulsory in Abu Dhabi or voluntary in other states of UAE) and do not underwrite individual coverages unless written as a rider to a life insurance policy. PMI business is written by nonlife insurers and by life insurance companies as a rider to life contracts.

All leading companies operating in the Abu Dhabi market (including all of the major national insurers, the head offices of which are in Abu Dhabi, Dubai, and other emirates) are now licensed by the General Authority of Health Services (GAHS) to transact this business in Abu Dhabi. Several branches of foreign companies also have licenses.

For medical coverage riders to life policies, the two global life insurance companies in the UAE market are both branches of foreign companies, ALICO and Zurich Life. Premiums are not separately identified in official statistics.

Major writers of group PMI in UAE include Abu Dhabi National, Al Ain Ahlia, Emirates, Al Dhafra, Al Khazna, Oman Insurance Company, AXA, and Arab Orient. Several of these companies write individual medical business, but Abu Dhabi National and Emirates only write group medical business. The major international PMI insurers include InterGlobal, AXA-PPP, Good Health, William Russell (through Dubai Insurance Company), and BUPA International.

Comment
The GCC countries will face an unparalleled and unprecedented rise in demand for healthcare over the future decades. According to an estimate by McKinsey & Company, the total healthcare spending in the region will increase from over USD 12 billion today to USD 60 billion in 2025. Going forward, some of the key factors and trends we expect to see in the UAE market include:

• Prevalence of lifestyle diseases
• Prospering middle-class population
• Continuous influx of expatriates in this region and government’s requirements for mandatory medical healthcare for expatriates in UAE
• Shortage of all kinds of healthcare professionals, including physicians, dentists, nurses, and midwives