The current place of State insurance in contingency coverForeseeable trendsProf. dr. Paul Schoukens

KU Leuven – RUESS

CDBI Seminar on predictivity, genetic tests and insurance3-4 December 2007

Structure of the intervention

Delineating the concept of social security Private insurance and social security

Introducing the main contingencies of relevance Health care, care, work incapacity and

survivorship Trends and evolutions

Trend towards more privatisation? Do private insurances take a growing stake in the

coverage of social security contingencies?

Delineating the concept of social securityFor this contribution: Social security = body of arrangements

shaping in the eventuality of certain social risks the solidarity with people facing (the threat of) a lack of income from paid labour or facing particular costs

Social security = social insurance + social assistance

Delineating the concept of social security Social security providing

Income replacement benefits Old age, survivorship, work incapacity,

unemployment Cost compensation benefits

Health care, care, family burden Benefits addressing need (social assistance)

Delineating the concept of social security Social insurance vs. Social assistance:

Subjective right (entitlement)? Means test?

Today boundary less marked

Delineating the concept of social security

Private insurance v. social insurance? Social insurance “shaping the solidarity” (redistribution

horizontally and vertically) Relies (often) upon public law, setting the level of contributions and benefits in a

fixed manner

Private insurance “the core idea of a private insurance is to spread a particular risk over many shoulders, on the basis of an equitable actuarial relationship” (J. Berghman)

Risk R = P * D Level of contribution and/or benefit to be negotiated

Vertical redistribution Problem of adverse risk selection

Delineating the concept of social security

Private v. social insurance

Not so relevant criteria

Public/private character administrative body Voluntary/compulsory membership

Some “voluntary” insurances are “social” insurances

Health care coverage

Huge diversity in the access to health care: National Health System vs. Social health care

insurance; Diversity in way of paying doctors and hospitals In kind provision of heath care or Refund? Importance of co-payments Contents of the guaranteed health care package

Health care coverage

“Modernisation Health Care” = addressing simultaneously the upcoming challenges related to

Access

Quality Sustainability

Health care coverage

Position of private/voluntary insurances

Of a substitutional kind Of a supplementary kind Of a residual/complementary kind Of a parallel kind

Depending upon kind system and policy of “uncovered package”

Care

In a number of countries emerged schemes addressing the ‘new’ social risk of dependency: the care schemes, characterised by a mix of benefits

Still a large own share from the “patient” is being demanded

Left to the private market? Role of private insurance? Left to collective arrangements in company/industrial sector?

Work incapacity

Diversity in approaching the social risks of

- Short term work incapacity: a sickness benefit from social security or a duty of the employer to continue payment of wage?

- Long term work incapacity (invalidity): a consolidated sickness benefit or an early old age pension?

Labour accidents and professional diseases: One, two or no social insurances specifically

addressing these risks? Which privileges?

Work incapacity

Private insurances/privatisation

Growing responsibility for employer Self-employed persons Collective agreements covering (additionally) the

risk of work incapacity

Survivorship

Survivors pensions:

Social risk put in question

Why still to be covered by a statutory scheme? Importance of collective arrangements (within the

framework of a company and/or industrial sector) Less public intervention (e.g. through regulatory

framework) to be expected when the coverage of this contingency would be taken up by the private market

Trends and evolutions

Trends in the European Social Security Systems (Pieters – Council of Europe)

1) the economic context from a social protection perspective

2) the main trends in addressing the challenges

Trends and evolutions

With regard to the Public/Private Mix Was not fundamentally changed in the statutory social

security schemes, notwithstanding ‘privatisation fashion’ The additional cover on top of the statutory basic schemes

got more importance and was often left to the private market

More market oriented behaviour with the traditional social security administrations

Privatisation > private insurances (elements of competition, market behaviour, making employers/social insured persons more responsible, pushing out elements from the public coverage, etc.

Trends and Evolutions

Social security Quo Vadis (Pieters-Schoukens)

Semi-open interviews with some seventy CEOs of

social security administrations in 15 Western European countries between May 2005 and June 2006

Key question:

How do these CEOs see the middle range future of social security and its administration?

Trends and evolutions

“Social Security Quo Vadis”?Main factors determining the future of social security,

mentioned by the CEO’s. :- demographic problems ( greying + less natality),- immigration - changes in family patterns, - unemployment but also future lack of work force- the over-all economic situation - the importance of a number of persons working without social

protection - declining social morals- rising expectations and demands; privatisation and

decentralisation

Trends and Evolutions

“Social security quo vadis”?The authors selected 12 issues on the basis of their importance, because many CEOs mentioned them or because they were especially original:

the fundamental faith in social security the interaction with democracy the need for security and reform the need for more interaction the intergenerational solidarity working without social protection the impact of migration the activation policy the question marks relating to financing and privatization the need to manage a growing number of complaints the need for internal restructuring of social security administrations national social security in a larger world.

Trends and Evolutions

„Social security quo vadis“? Questions in relation with financing and privatisation

Financial problems: creativity required!

Make sure that people pay due contributions

Privatisation??

“Although privatization and competition have indeed been political and ideological buzz-words in the recent past, most interviewed CEOs do not expect important changes in the coming decades.”

Creates new problems to be solved by legislation!

Private insurances and their (growing?) share in coverage of risks- Health care and pensions -

Study Mossialos and Thomson: “Voluntary health insurance in the EU” (2004)

Share of public expenditure in the European health care systems rather stable last 20 years

Sometimes even tendency of growing public amount spent on health care (at the detriment of voluntary substitutional health care insurances)

Spending on voluntary health insurances as a proportion of total expenditure on health care rather low in the EU

Private insurances and their (growing?) share in coverage of risks- Health care and pensions -

Study Mossialos and Thomson: “Voluntary health insurance in the EU” (2004)

Will this change in the future: growing share of voluntary/private health insurances in order to safeguard financial sustainability?

Authors raise fundamental doubts Effect ageing and health technologies? Evans (2002): “it is not evident nor logical to assume that a country’s

ability to sustain a given level of expenditure on health care is increased by raising money through one funding source (e.g. private health insurances) rather than another (public insurance)”

Areas of possible growth Substitutive policies Complementary policies Importance of tax incentives

Private insurances and their (growing?) share in coverage of risks- Health care and pensions -

Leisering: “From redistribution to regulation” (2003)

shift to private and occupational pensions creates new problems, which need to be addressed by the governments

privatisation in the sense of giving a more important role for private insurances, does not necessarily mean “less state”

Conclusions

Not to be expected that states will massively privatise social security

Privatisation > private insurances do not forget when you intend to intervene

If there is a tendency to more private insurances (privatisation) public intervention (regulatory framework) required E.g. social concerns intervention with regard to

accessibility