Healthcare in the Netherlands – Insurance

In a series of short articles, I plan to describe the general characteristics of the Dutch healthcare system. My goal is to provide readers with the background needed to understand current issues, and to compare developments in the Netherlands with other countries.

Part I – Health Insurance

Dutch health insurance is governed by two legally distinct programs. One is designed to insure against routine health costs. The other is designed to insure against “extraordinary” costs, such as disability or long-term hospital admissions. In the Netherlands, these systems are referred to respectively as “cure” and “care”. The “cure” system is described in further detail below.

“Curative” health insurance
“Curative” health insurance is provided through a multi-payer model in the Netherlands. Health insurance policies are mandatory for all residents of the Netherlands. A number of privatized insurance companies provide services subject to strict regulation. The primary features of the insurance system are as follows:

  • It is mandatory for all residents to purchase insurance
  • There is a choice of insurance provider. Currently there are 4 major insurers each offering a wide variety of insurance plans
  • Insurers must accept all applicants, regardless of pre-existing conditions and without right of refusal
  • Insurers cannot cancel policies, except in rare cases of non-payment or fraud
  • Insurers must offer a basic-packet of insured services, defined yearly by the government
  • Insurers may freely define the premium for the basic-packet on a yearly basis
  • Once per year residents may switch insurers. Approximately 5% of people switched insurers in 2011.
  • Insurers participate in a financial transfer scheme, based on a risk balancing model designed to remove the financial risk associated with mandatory acceptance of patients
  • There is a personally payable deductible for certain insured services, with deductible amounts defined by the government
  • Insurers may offer reduced rates for higher deductibles, and may provide optional insured services outside of the basic-packet
  • Insurers are restricted from owning health care providers, except in exceptional circumstances where necessary services would otherwise not be available in a region. For example, an insurer is generally not allowed to own a hospital.

For most health services, individuals pay out-of-pocket for expenses, until a yearly deductible amount is exceeded. All expenses above the deductible are paid by the insurer. In 2012, the government defined minimum deductible is €220. Insurers may reduce premiums for patients who choose a higher deductible, but insurers may not offer policies with deductibles lower than this.

For certain services, the deductible fee does not apply. These include:

  • Primary Care, although the deductible does apply to medications
  • Obstetrical care
  • Dental care for patients under 18 years (dental care is not covered under the basic package after age 18, except in special cases)

Insurers can freely set premiums for the services that they offer, for both the basic-packet and additional insured services.

Premiums for 2012 rose approximately 5% from 2011 levels. Currently the cheapest annual premium is €1063 and the most expensive is €1350.

The government provides a discount for low-income individuals and families, and high-income earners pay an additional healthcare fee through general taxation.

Optional coverage
It is estimate that the basic package covers approximately 94% of healthcare costs. Additional dental coverage is commonly purchased. Insurers may exclude patients from optional coverage based on pre-existing conditions.

Collective insurance
Insurers may offer a maximum 10% premium discount for members of a collective, such as a business or organisation. Approximately 60% of the population is insured under a collective agreement.

Trends – “Curative” Insurance

Since the implementation of privatized insurance in 2006, insurers have undergone changes in a number of identifiable phases as they have transformed from non-profit to private businesses.

  • Phase I – Consolidation of Insurers

In 2007 there were 15 healthcare insurers in the Netherlands. In 2010, as a result of mergers and acquisitions, only 4 major insurers remained, representing a total market share of 90%. The largest of these 4 has a market share of approximately 35%.

  • Phase II – Internal Efficiencies

Parallel to, and particularly following consolidation, health insurers have focused on finding internal efficiencies and reducing overhead. They merged overlapping departments from formerly independent offices and implemented common IT solutions.

  • Phase III – External Efficiencies

Recently, insurers have been increasingly assertive during negotiations with care providers. Certain insurance policies allow insurers to identify preferred providers who they preferentially, or in some cases exclusively, recommend to patients. They have also begun to negotiate on pricing of services with providers, and in some cases have forced specialization and concentration of services in specific locations by defining volume requirements. For example, institutions that do not complete a minimum number of breast cancer operations per year have been excluded from some insurance contracts. Insurers have also implemented preference policies for pharmaceuticals to control drug costs.

  • Phase IV – Avoidance of High Cost Patients?

It remains to be seen whether insurers will attempt to avoid insuring high-cost individuals. Although there are regulations intended to prevent this behaviour, it may be inevitable for privatized insurers who are required to generate profit. Ultimately, continued focus on existing cost-saving activities produces fewer results. There will be potential profit to be made by avoiding high-cost patients, and at some point this will be hard for insurers to resist. In practice insurers may avoid high-cost patients through very subtle means, for instance by focused advertising on profitable patient groups and by not advertising to undesirable patients.

The government could attempt to discourage this behaviour through modification of incentives or through penalties. For example, the existing risk-balancing system for insurers is intended to retroactively compensate insurers with relatively expensive patients. However, attempts to prevent this behaviour will remain imperfect and retroactive. The potential for profit through avoidance of expensive patients is a structural component of a privatized system.

Rising Insurance Costs
It is estimated that annual mandatory out-of-pocket healthcare costs for the average person rose by €840 between 2005 and 2011, from €1452 to €2292. Since the implementation of the current insurance system in 2006, annual premiums have risen every year. A minimum mandatory deductible was introduced in 2006 and has also risen annually. Income-dependent rebates for insurance premiums (for low income earners) were reduced in 2012 and are expected to be further reduced in coming years.

It is expected that the long-term outcome of changes to the insurance system will result in lower costs, but this has yet to be realized.

“Care” Insurance
Insurance for exceptional health costs is administered through regional authorities and fully paid by the government. In each of 32 regions, the dominant health insurer is responsible for administering services through a non-profit department. Insurers carry no financial risk in the delivery of these services.

Trends – “Care” Insurance
The government has indicated a desire to introduce competition and the assumption of financial risk through the use of competitive contracting between for-profit insurers. This plan remains controversial, with many questioning how the incentives of for-profit companies would affect the availability and quality of long-term and complex care.

The budgetary shortfall for “exceptional” insurance costs is expected to grow by €4.5 billion in 2012, leading to a €15 billion gap in funding since 2008. Primarily, expenses have risen due to an increase in the total number of insured patients and increasingly expensive healthcare for elderly patients.

History of Dutch Health Insurance
There is a long history of multiple-insurer healthcare in the Netherlands. As early as 1874 the first “General Sickness Fund Amsterdam” was set up. Membership in these private funds was generally limited to specific professions. Contributions were usually made on an income-dependent basis and healthcare professionals billed the insurers directly, rather than patients. At the turn of the 19th century there were over 500 insurance funds representing approximately 10% of the population.

In the early 20th century, there were multiple failed attempts to establish a national healthcare insurance system. The Dutch Medical Association recommended that insurers conform with the following requirements:

  • Free patient choice of physician – rather than insurer-limited choice
  • A maximum income requirement – that excluded wealthy patients
  • A yearly capitation fee – that participating physicians would receive for each insured patient in their practice
  • Professional representation on the insurer’s Board of Directors

However, insurance funds were of the opinion that authority to define policy terms should primarily lie with the members of the fund. Despite these disagreements and failure to establish national standards, membership in insurance funds continued to grow. Many insurance funds hired professionals including physicians, and purchased clinics and pharmacies to provide services for their clients. In 1940 more than 650 insurance funds represented approximately 45% of the population.

In 1941, while under control of the Germans during World War II, the first national regulations were implemented. These was based on a strict separation of health system financing (privately or through insurers) and independent healthcare delivery. A “public” insurance system was set up, which provided mandatory insurance for employees with low incomes. A basic packet of insured services and a fixed premium were defined, and 50% of premiums were paid by employers. Public insurers were also responsible to provide services to all self-employed people earning less than a minimum income, although it was not mandatory to be insured.

In return for greater regulation a financial transfer system was developed to minimize public insurer’s risk. Stricter regulations for insurers led to a regional consolidation of approximately 200 remaining insurance funds. At this time there were “public” insurance funds who participated in the government-regulated plan, and private insurers who primarily served a small population of richer clients ineligible for the government programs. By the 1960’s the insured population had risen to 63%, where it remained until recently.

Over the years public insurers became responsible for insuring elderly patients, managing long-term care and insuring “extraordinary” costs (such as disability or long-term ICU admissions). Public insurance premiums rose, leading many younger patients to cancel their public policies in favour of cheaper, private insurance. This led to unsustainable pressures on the public insurers.

In 1968 the system was reorganized to address the impending failure of public insurance funds. This was accomplished by increasing the regulatory responsibilities of private insurers, who also began participating in a financial transfer system to reduce risk.

In 2006 the insurance system again underwent reorganization. The primary goal at this time was to extend mandatory insurance to the entire population. Distinctions between private and public insurers were eliminated and the regulatory system was overhauled. These changes remain in effect today, and form the basis for the current system.