GEORGIA: PRESIDENT SAAKASHVILI'S NEW HEALTH INSURANCE

UNCLAS TBILISI 000656 DEPT FOR EUR/CARC E.O. 12958: N/A TAGS: ECON PGOV GG SUBJECT: GEORGIA: PRESIDENT SAAKASHVILI'S NEW HEALTH INSURANCE POLICY COMES INTO FORCE ¶1. Summary/Comment: On March 1, Georgian President Mikheil Saakashvili's new government initiative to provide inexpensive health insurance to a wider circle of the population was officially launched. Registration for the program will remain open until July ¶1. The Ministry of Labor Health and Social Welfare has reported a surge of interest from the population, with insurance companies taking more than 15,000 calls on the program. How ultimately effective the initiate will be is unclear, but it is evidence that the GoG is committed to working on issues that affect ordinary citizens. At a minimum, the measure addresses the issue of lack of quality health care for the poor and attempts to modestly improve the social standing of the least fortunate in Georgia society. End Summary/Comment. GEL Five Package - Minimum Service -------------- ¶2. According to President Saakashvili, the new insurance initiative is targeting the portion of the population not eligible for fully state-funded health insurance which is available for those living below poverty line. The new plan is offered for a monthly payment of GEL 5 (USD 3),from which the state will co-fund GEL 3.35 (67 percent) and remaining GEL 1.65 will be contributed by insurance policy holders. GEL 15 million has been allocated in the state budget for the program, but the overall sum will be further specified based on the number of enrollees. The goal of the program is to make health insurance affordable for every citizen and provide basic risk protection. ¶3. More specifically, the new plan will include primary services such as accident coverage (up to GEL 5,000 annual limit with no co-payment requirement),urgent in-patient care (up to GEL 2,000 annual limit with 50 percent copayment plan),urgent out-patient care (up to GEL 300 annual limit with no copayment requirement), primary health care services, including unlimited visits to physician and nurse and some basic, limited laboratory test and diagnostics (no medicines included). Enrollment is voluntary and is open for application from March 1 through July 1, 2009. In comparison, the LES health care package envisages a USD 642 per person annual payment made by the employer; an annual ceiling of costs to be covered at USD 25,000; the insurance holder's copayment is set at 20% for visits to physicians, in and outpatient care, lab tests and diagnostics, medications, dental and eye treatment, and no copayment for hospitalization. Insurers to Compete for the New Plan -------------- ¶4. Ten insurance companies signed memorandums of cooperation with the Ministry of Health and Social Welfare to take part in the program. These are Aldagi BCI, GPI Holding, Irao, Imedi-L, Sakhalkho Dazgveva (People's Insurance),Archimedes Global Georgia, West, Partner, Tao and IC Group. These companies will offer beneficiaries the same 5-lari standard policies. However, as representatives of the insurance companies announced, they will offer additional service policies that would allow beneficiaries to upgrade for a higher fee. While the initial profit to the insurance companies seems minimal, according to Georgia's Association of Insurance Companies, the companies see this as an opportunity to expand operations in Georgia. ¶5. The program improves the affordability of health care for the Georgian public above the poverty line but who are not currently covered by any kind of insurance plan. It also increases health insurance awareness in the general public and might lead to expansion of the regular, full-scale private voluntary insurance. Insurers welcomed the state's decision to abandon past practices of QInsurers welcomed the state's decision to abandon past practices of giving a direct cash allowance to vulnerable groups and instead diecting funds to the insurance business, thus achieving two goals simultaneously: promoting insurance business development and providing needed protection for the needy. ¶6. There is concern that the initial inflow of clients will be largely comprised of those with preconditions, leading to cost The insurers believe, however, that the ultimate effect of the program will be positive, promoting both health care provision and insurance businesses. The project is envisaged for nearly 500,000 clients besides those 1.4 million persons, already insured with state assistance (vulnerable populations and government employees). Insurance market -------------- ¶7. According to the press, thirteen insurance companies currently operate in Georgia's insurance market. Georgian banks are majority shareholders of Aldagi- BCI (Bank of Georgia) and Cartu (Cartu Bank) and minority shareholders of two companies - GPIH (TBC Bank) and IC Group (TBC Bank),and EBRD acquired 34% of share of Imedi L. Due to rapid economic growth and emerging opportunities in the health insurance market, five new insurers entered the market in 2007 with investments from Azerbaijan, Ukraine and Israel, as well as through local sources. Three companies - GPIH, Aldagi-BCI and Cartu - account for about 85 percent of the health insurance market. ¶8. According to the organization "Association of Insurance Companies" in 2006, the number of insured people was estimated at 200,000. By the end of 2008 this number increased to 1.5 million, mostly due to state programs (1.2 million approximately),as the government decided to include health insurance in its economic assistance package to the vulnerable. State-insured groups includes the poor - up to one million in 2008; policemen - approximately 20,000; military personnel - up to 40,000; prisoners and employees of the penitentiary system - approximately 30,000; and teachers - around 80,000 (the 2009 state budget allocated GEL 19.5 million for 80,000 beneficiaries, while in 2008 GEL 13 million was allotted for 83,600 beneficiaries). About 300,000 citizens of Georgia have privately funded health insurance. ¶9. In 2008, the government completed a transition of health service to private insurance companies. The beneficiaries of government health programs get insurance vouchers from the GOG, which they then use with the insurance agency of their choice. ¶10. The government has declared an increase in funding for private insurance a priority. In 2006, funding for these programs stood at 15 million GEL, by 2007 it was up to 46 million GEL, and reached GEL 100 million in 2008. However, the entire insurance system in Georgia is relatively new. Major risks are related to sustainability of the government policies that expanded tremendously the private health insurance market in Georgia. The insurance companies have to invest their own resources (which they say are very scarce) to enhance public knowledge and build confidence in the system. Without a doubt, development of a Health Insurance Mediator (Embassy Note: The new system was implemented with USAID assistance to allow disputes to be handled by mediation rather than in civil litigation which was how previous insurance disputes were resolved. End Note.) by the association of Health Insurers was an important step forward in this direction. TEFFT