Private Health Insurance Poised For Growth, Held Back By State
BMI View : Private healthcare insurance has had relatively small market penetration in Romania, but is expected to pick up significantly in the long term, albeit from a low base. Issues around deductibility and the pace of healthcare reform continue to impede the market's potential. The market for private health insurance will continue to be marginalised unless authorities undertake serious liberalisation of the healthcare sector and allow the private sector to assume some of the burden.
The private health insurance market in Romania is continuing to face the impact of the eurozone slowdown, with declining numbers of policies taken out by consumers. Macroeconomic uncertainty is feeding into consumer behaviour and purchasing decisions. Although the local private health insurance sector has huge potential, it is a very small market at the moment, representing 1% of the total insurance market in the country. This is despite the fact that out-of-pocket contributions by Romanians were RON6.3bn (US$2.1bn) in 2011, indicating that a large proportion of healthcare costs are borne by patients.
|Out Of Pocket Payments A Large Proportion Of Healthcare Spending|
The relatively undeveloped private healthcare insurance market is a marginal market worth RON80mn (US$24mn) in written premiums in 2012, with most of these premiums coming from employer provided policies. Despite this, the private health insurance market grew by 54% in 2012, according to data from the Romanian Insurance Supervisory Commission. The private health insurance market lags behind European peers in terms of scale.In the Netherlands, it accounts for some 6.7% of GDP and 1.2% in neighbouring Slovenia and given the chronic dysfunction within the national healthcare system, there are plenty of incentives for Romanian consumers to turn to the private sector. The main issue has been financing and pricing matters. The dependency on the corporate sector to buy insurance products meant that during the downturn, demand for policies has been moderated as companies cut costs and reduce headcounts. Nevertheless, as Romania's economy recovers and experiences growth over the medium term, we expect to see the private healthcare insurance market resume its growth trajectory, especially once individual policies become more palatable to consumers.
Potential tailwinds to the uptake of private health insurance include liberalisation of the current healthcare system to enable CNAS, the national insurance fund, to reimburse private companies for services provided in private facilities. While most countries with public-private insurers offer financial incentives such as tax breaks for taking out insurance policies, Romania does not currently allow for deductibility of premiums from tax liabilities. Similarly, consumers taking out private insurance policies are doubly insured - they pay both the compulsory contribution to the state insurer and the premium to the private firm. While Romania has made overtures towards shifting the burden of healthcare over to its citizens, it has stopped shy of completely liberalising the sector given the left-leaning, populist government in power.
Private health insurers have drawn up proposals to the Ministry of Health and Ministry of Finance to plead for deductibility of all types of private health insurance. They have argued that doing so would attract additional funds of between EUR400mn to EUR1bn in the next five years towards the Romanian healthcare system, removing some of the pressure from public institutions and supplementing the annual healthcare budget. We believe there is a large, unmet need for high quality healthcare services which the private sector can provide in lieu of the public healthcare system, especially when factoring in the severe drug shortages and levels of debt that public hospitals have faced over the past two years. We expect to see private expenditure on healthcare continue to grow in line with a similar trend across Central and Eastern European countries.