At first glance, it is evident that in the series of amendments to the Health Insurance Act, there is actually not a single systemic measure for rationalizing the operations of the health system. They mainly boil down to increasing the contributions that HZZO charges from the obligated parties.
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Minister Kujundžić announced that he expects public discussions on certain proposals, but also the laments of certain, as he said, interest groups. In one of those groups, the insurance sector, they emphasize that they actually have nothing to discuss because nothing new is being offered, but rather the old story of adding unfounded levies continues, which is why they can truly only lament.
The government likes to highlight its successful moves to relieve the economy and employees, but the amendments to the Health Insurance Act mainly boil down to increasing the contributions that HZZO charges. There is not a single systemic measure that would rationalize operations.
Insurers, in fact, believe that they are in an unequal position compared to the state HZZO for two reasons. First, insurance companies that deal with voluntary health insurance are in an unequal position compared to HZZO, which also engages in this type of insurance. The difference is that insurance companies must meet strictly prescribed conditions to carry out this activity, including ensuring capital, forming technical reserves, and are subject to strict supervision by Hanfa.
The state HZZO, which is also on the market with its voluntary health insurance policies, does not have to meet any of these requirements. It is exempt from everything that insurance companies must fulfill for the same product and the same type of activity by law. Additionally, so-called vulnerable social groups, of which there are more than half a million considering the social situation in Croatia, realize their right to free supplementary insurance by having the state contract a policy with HZZO for them.
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If we are all equal before the law and if a fair market competition is guaranteed, insurers ask, why wouldn’t the state purchase identical DZO policies from them and provide them to those who are entitled to them? This inequality is even more pronounced in the losses incurred. Insurers ensure their solvency with their own money, while HZZO’s losses are covered by public funds.
The number of injured in traffic accidents has decreased by more than 40 percent over 12 years. HZZO now proposes that the contribution of insurers for automobile liability be paid at a rate of seven percent, nearly 80 percent higher than the previous rate.
HZZO has also announced an increase in the so-called participation, or the amount of co-payments that insured persons pay for services in the public health system, but at the same time announces that it will not raise the prices of DZO policies. This means that the amounts that insurance companies will allocate for paying services to public institutions where their insured persons are treated will significantly increase.
DZO on the brink of collapse
At the same time, since HZZO will not raise its prices, insurance companies will not be able to raise the prices of their services either. The likely loss that will arise for both HZZO and insurance companies, as both will be charged higher costs for the same premiums in the case of insurance companies, will fall on their shoulders, and in HZZO’s case, it will fall on the shoulders of all citizens. Thus, DZO, which has been a generator of growth in the twenty years it has existed in Croatia, is now, it is certain, facing yet another collapse. Instead of encouraging what has proven to be a good product in the market to further growth, every legislative change (and there have been quite a few in health insurance) undermines it.
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The second stumbling block between HZZO and insurers is the amount of compensation that insurance companies must pay to HZZO based on the responsibility for treating persons injured in traffic. The long-standing practice was that in the so-called recourse procedure, the actual costs of HZZO that insurance companies were obliged to reimburse for the injuries caused by their insured persons were calculated individually.
Minister Kujundžić announced that he expects public discussions on certain proposals, but also the laments of certain, as he said, interest groups. In one of those groups, the insurance sector, they actually have nothing to discuss because nothing new is being offered, but rather the old story of adding unfounded levies continues.
Then, starting in January 2009, with the intention of introducing a more practical solution instead of many individual calculations, a legal obligation was introduced for insurance companies to pay a contribution at a rate of 10 percent on the functional part of the premium for automobile liability policies. This met with resistance from insurance companies, the matter even reached the Constitutional Court, and the state lowered the rate to seven percent.
After the judicial battle between HZZO and insurance companies was completed, the issue of contributions was regulated so that insurers were prescribed to pay four percent of the functional premium amount in favor of HZZO, as an advance payment for costs for which insurers are responsible, with a final settlement to be made by April 30 each year. If the costs were higher than what was paid, insurers had to pay an additional amount, and vice versa, in the case of overpayment based on the advance, HZZO was to return the excess amount paid.
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How complex and demanding the final settlement is, is shown by the fact that the one for 2016, which was supposed to be completed by April 30, 2017, was only completed at the end of the year after ten months of calculations, agreements, and negotiations. Before that, insurers had paid 47.2 million kuna as advances, and according to the final settlement, they owed HZZO an additional 2.5 million. That amount, slightly less than 50 million kuna, represented a total of 4.2 percent of the functional premium for automobile liability insurance.
HZZO announces an increase in participation with the same price for voluntary health insurance. Thus, insurance companies will pay more for services for their insured persons, but will not be able to raise the prices set by HZZO.
The settlement for 2017 has not even begun because HZZO is unable to provide the appropriate cost bases, but its starting position is around 52 million kuna. This would mean an increase in contributions from 4.2 to 4.6 percent. Insurers were even inclined to accept this HZZO calculation because they believed that due to the constant decrease in the number of traffic accidents and the severity of injuries, the contributions could only be lower, not higher.
More expensive auto insurance
Thanks to the good results of the National Road Safety Program, in which insurers also participated, benefiting not only themselves but also society as a whole, the number of accidents and injured persons in traffic has decreased. From 2005 to 2017, the number of traffic accidents decreased from 25,092 to 14,566, with the number of lightly injured persons decreasing by 43 percent to 11,815; the number of seriously injured persons also decreased by 35 percent, with 2,751 seriously injured persons recorded in 2017.
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According to the new Proposal for the Health Insurance Act, instead of a reduced contribution rate (because the number of injured persons had to be reduced in the total cost of their treatment), HZZO proposes that the contribution of insurers be paid at a rate of seven percent, which is almost 80 percent higher than the previous rate. There is no doubt that the only possible response to the new levies will be an increase in automobile insurance premiums.
It will be interesting to see what the government’s communication strategy will be, which, by the way, likes to highlight its successful moves to relieve the economy and employees, when it explains its moves that clearly do not aim to regulate the system and put it on healthier legs, but rather to satisfy its own irrationality at the expense of others.
Written by Dr. sc. DAMIR ZORIĆ
