Abstract
This chapter provides an economic analysis of different regulatory instruments commonly adopted to achieve solidarity in competitive markets for basic health insurance. Furthermore, we test the legal suitability of these tools by analysing whether they conform with European Community (EC) law and jurisprudence. Our findings can be summarised as follows. Risk-compensation schemes are the preferred (i.e. first-best) regulatory mechanism because they can potentially achieve an “acceptable level of solidarity” without hindering free trade and competition. Premium- and excess-loss- compensation schemes follow as second-best regulatory tools because they guarantee solidarity in competitive health insurance markets but they also confront policy makers with a trade-off between solidarity and efficiency. Despite their popularity in many countries, premium rate restrictions and open enrolment are not recommended and should be avoided because they reduce efficiency and are unnecessary, not proportional and undesirable instruments to achieve solidarity in competitive health insurance markets. Our conclusions are relevant for a number of European countries with competitive social health insurance, and in particular Ireland and the Netherlands. In these two countries, the design of the basic and supplementary health insurance schemes should be in conformity with EC-law, i.e. premium rate restrictions and open enrolment regulations should be replaced, if necessary, with premium- and/or excess-loss- compensation schemes, to complement the “best” available risk equalisation system.
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Notes
- 1.
Consistently with the literature, in other chapters of this book we used the terms risk-adjustment or risk-equalisation schemes, when referring to mechanisms introduced to equalise the difference in risk profiles among competing insurers via a system of risk-adjusted subsidies. In this chapter, we mainly adopt the term risk-compensation schemes to be consistent with Article 54 of the Insurance Directives (see Sect. 5.3.2).
- 2.
Officially Council Directive 92/49/EEC of 18 June 1992 on the co-ordination of laws, regulations and administrative provisions related to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (OJ 1992 No. L 228, 11/8/1992, p. 1).
- 3.
Commission Interpretative Communication Freedom to Provide Services and the General Good in the Insurance sector. European Commission Brussels, 2/2/2000 C (1999) 5046:1.
- 4.
Article 2(1): “This Directive shall apply to the types of insurance and undertakings referred to in Article 1 of Directive 73/239/EEC”.
- 5.
- 6.
Article 54(1): “Notwithstanding any provision to the contrary, a Member State in which contracts covering the risks in class 2 of point A of the Annex to Directive 73/239/EEC may serve as a partial or complete alternative to health cover provided by the statutory social security system may require that those contracts comply with the specific legal provisions adopted by that Member State to protect the general good in that class of insurance, and that the general and special conditions of that insurance be communicated to the competent authorities of that Member State before use”.
- 7.
The concept of the general good is based on both the Treaty (Article 28 EC) and the Court’s Case law. The Court requires that a national provision must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it. Case 55/94 Gebhard ECH I-4165. In its interpretative communication, the Commission has applied these principles to the insurance sector. Commission Interpretative Communication. Freedom to Provide Services and the General Good in the Insurance Sector. C (1999) 5046 Brussels, 2.2.2000, pp. 22 and 27–28.
- 8.
According to the 24th recital in the Directive’s preamble.
- 9.
- 10.
- 11.
According to the Court this is the case when the entitlements depend solely on the amount of contributions paid by the recipients and the financial results of the investments made by the managing organisation rather than on a redistributive basis where contributions solely depend on income.
- 12.
- 13.
Case C-218/00 para 42.
- 14.
Ibid, para 43.
- 15.
AOK, para 56.
- 16.
The European Commission presented a Green paper on services of general interest (COM (2003)270) in order to clarify the concept of services of general interest and the relevant Community legal regime.
- 17.
See also the Communication made pursuant to Article 19 (3) of Council Regulation No 17, OJ 1999, C-363/2, N (10).
- 18.
See also, the “Bolkestein-letter”, ibid, p. 3.
- 19.
Currently in Ireland’s open enrolment, community-rating and lifetime cover are considered as expressions of the principle of solidarity not as tools for its fulfillment (White Paper, Department of Health and Children 1999, page. 21; European Commission, State Aid N46/2003 – Ireland, “Risk equalization scheme in the Irish health insurance market”).
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Paolucci, F. (2011). Competition and Solidarity in European Basic and Supplementary Health Insurance Markets: Economic and Legal Analysis. In: Health Care Financing and Insurance. Developments in Health Economics and Public Policy, vol 10. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-10794-8_5
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