All in good time: Mandatory health coverage set to change sector dynamics

The question of compulsory health cover is not a new one for Bahrain’s insurance industry. The issue first came to the fore in 2005 when a proposal was presented to the Shura Council from where, having been approved, it was redrafted in legal format and sent to a parliamentary sub-committee for discussion. The rationale behind the initiative was the same one that had persuaded the governments of the UAE and Saudi Arabia to introduce compulsory health insurance in their respective jurisdictions: a growing population, both national and foreign, was increasingly becoming a burden on the government, and annual health care spend was starting to place undue strain on the budget. By 2007, a fully fledged draft health insurance law had been submitted to the Shura Council, at which time the Ministry of Health announced it was waiting for approval by parliament and the cabinet. Despite the advanced stage of the draft law in the legislative process, the initiative stalled with the end of the parliamentary term and has yet to regain its lost momentum.

SHIFTING GEARS: The most obvious cause of the law’s progress is the change that has taken place in the global economic environment, which occurred during its formulation. By the time it was ready for approval, the effects of the credit crunch were starting to become apparent, and the added costs to employers anticipated in the new legislation made its introduction problematic at a time of economic uncertainty.

In 2008, despite spending over BD20m ($52.8m) per year on subsidising health care services, or around 6% of GDP, the prospect of hampering the recovery of employers, or compelling them to pass on increased costs to consumers to add to an inflationary trend the government was busy trying to reduce, held little appeal.

However, the fundamental argument on which the compulsory health care proposal is founded remains as strong as ever. Health care spend accounted for a disproportionally large amount of the 2011-12 general budget – the largest in the nation’s history. Around BD534m ($1.41bn) of the BD6bn ($15.84bn) total was allocated to improving health services, making a larger claim on public finances than housing projects, which cost BD360m ($950.47m) and infrastructure development, totalling BD189m ($498.99m). As the effects of the global economic crisis receded it was unsurprising, then, to see the issue of compulsory health cover reemerge as an industry talking point. In February 2011, Ashraf Bseisu, the former chairman of the Bahrain Insurance Association (BIA), suggested that the implementation of the draft law would come in the short term. “We at the BIA have been working with the Ministry of Health and parliament to put legislation in place. We have had a new parliament, so the draft law was delayed, but hopefully it should come into force this year. I think it is long overdue,” he told delegates at the Middle East Insurance Forum held in Manama.

CHANGING DYNAMICS: The political unrest made implementation of any new law difficult in 2011 but, with its eventual promulgation now viewed as a certainty by the industry, attention has turned to its potential impact on the Bahraini market. The introduction of mandatory health coverage, if it follows the implementation process first proposed, will initially be confined to foreign employees, with fees paid by their employers to provide coverage for them being introduced gradually. In early 2011, Abdul Rahman Mohammed Al Baker, the executive director of financial institutions supervision at the Central Bank of Bahrain, estimated there would be a 50-60% increase in premiums, a reasonable expectation when one considers the 300% rise in private health insurance premium income seen in Saudi Arabia between 2006 and 2010, when it introduced a similar system. Bahrain is also likely to benefit from an expansion of hospital and clinic construction. The details of the new law have yet to be revealed, and questions regarding its final implementation remain. Will, for example, employers be obliged to pay premiums for family members of their employees? While this is as yet unclear, the issue of compulsory care, so long a topic of debate, is firmly back on the government agenda.