Complementary Health Insurance in Slovenia

Abstract

Almost all health care services in the Slovenian basic benefits package are paid for from two financial sources: compulsory and complementary health insurance (CHI). Although this is unusual, around 90% of the population is insured under CHI. CHI covers the costs of copayments for most of the services. One of the advantages of the CHI is that it enables the public sector to shift the costs of service onto the private sector, which can compensate for the higher costs through premiums. Its administrative costs are low, the risk selection is low due to the equalisation schemes in place, and costs of copayments for the socially weak are covered by the state budget. Out-of-pocket costs are low due to most of the population being insured in CHI. On the other hand, there are many disadvantages of this unique amphibian health system. Besides the higher complexity and costs of such a health insurance system, CHI premiums are flat and regressive. The voluntary nature of CHI is highly questionable as the copayments can be as high as 90% of the total service costs. And last, but not least, CHI removes an incentive for the providers and payer to aim for efficient services.

1. Introduction

Slovenia is usually counted among the countries whose health care financing system is Bismarckian. However, the Slovenian health care financing system is »bis-eridging« and getting more and more mixed. Most of the elements that are typical for a pure Bismarckian system, namely association of rights with labor status and no government interference, are not present anymore and lots of innovative elements entered the health care insurance space in the last decades.

Relatively, the Slovenian health care system ranks well across many indicators. Life expectancy has increased in the last two decades and is equal to the EU average of 80.6 years. Health spending is lower than the EU average (US$ PPP 2283 in 2019), and from the viewpoint of the benefits package, the accessibility to health services is almost universal. Due to its complementary health insurance and universal coverage, the financial protection is high-the out-of-pocket expenditures are one of the lowest in the EU, catastrophic spending is low, and unmet needs due to costs are low. The mounting problem is long waiting lists for specialist care and lack of health care personnel, especially in primary care [1].

In the following subchapter, we will describe the basic features of the health insurance system in Slovenia but will mostly focus on the concept of complementary health insurance and its role in the Slovenian health care system. On one hand, the institution of complementary health insurance brought Slovenia in front of the Court of Justice in Luxembourg; on the other hand, it played a crucial role in the economic protection of Slovenian citizens through the economic crisis between the years 2008 and 2013. Saying that it is necessary to point out that many adjustments have been introduced to complementary health insurance to ensure equal conditions for inclusion into the scheme for all citizens regardless of their age and gender and to ensure equal accessibility to complementary health insurance for all citizens is guaranteed without risk selection. In spite of all the adjustments, the nature of complementary health insurance is still ambiguous-it is declared voluntary but is in fact compulsory. Furthermore, it is run by private insurance companies while its package of services is completely dependent on the definition of services covered by compulsory health insurance does put the private providers into a subordinate position.

2. Health insurance system in Slovenia

According to the last available data, the public expenditures for health care in Slovenia amounted to 72.8% of THE (total health expenditures) in 2019, 69.4% being compulsory health insurance and 3.4% government expenditures. The private expenditures for health care amounted to the remaining 27.2%, from which 11.7% are out-of-pocket expenditures and the rest (15.5% of THE) are voluntary insurance schemes. The Health Care and Health Insurance Act (1992) defines more types of voluntary health insurance in Slovenia, which are as follows:

1. Complementary health insurance, which covers the difference between total price of the service and share of the price of this service covered by compulsory health insurance. This difference is in case of no complementary health insurance covered in a form of copayments.

2. Substitutive health insurance, which substitutes the coverage for services (and not more) that would otherwise be covered by the compulsory health insurance, including copayments. It is intended for persons that according to the legislation cannot be insured in the compulsory health insurance scheme. As substitutive health insurance is intended for specific population groups only that might for some reason be excluded from the compulsory health insurance – legislation in Slovenia does exclude any specific population groups, such as high-earners – therefore this type of insurance is not available.

3. Supplementary health insurance that covers costs of health care services that are not covered by compulsory health insurance, complementary health insurance or substitutive health insurance. They cover faster access to services or increased consumer choice.

4. Parallel health insurance is insurance for services that are covered by compulsory health insurance but are realized following different procedures and different conditions.

All persons who have a permanent residence in Slovenia must have compulsory health insurance in Slovenia. At the end of 2021, there were 3214 (0.15%) uninsured persons with permanent residence. Mostly, these are persons whose status is undergoing change, for example, students who finished their studies and are getting employed.

Compulsory health contributions are the largest source of income in the Slovenian health care system. Contribution rates, which are employment-based and paid from gross income, vary by group and type of employment of insured individuals. Employees pay 6.36% of their gross income, while employers pay 6.56% for illness and injury out of work plus an additional 0.53% for injuries at work and occupational diseases. The total contribution rate hence amounts to 13.45% of gross income. The contribution rates are the same for self-employed, though their contribution base is equal to the gross pension base and cannot be lower than 60% of the last-known average annual wage [2]. The contributions for the unemployed are covered by National Institute for Employment; the contributions for the pensioners are covered by Pension and Disability Insurance Institute at a 5.96% contribution rate from net pensions.

The Health Care and Health Insurance Act (1992) defines the rights to health care alongside their coverage within compulsory health insurance. The coverage ranges between 10% and 100%, depending on the services. A minimum of 90% of the cost of services is covered for organ transplantation and urgent surgeries, treatment abroad, intensive therapy, radiotherapy, dialysis, and other urgent interventions included in the basic benefits package; 80% of the cost of treatment for reduced fertility, artificial insemination, sterilisation, and abortion; specialist surgery; nonmedical care and spa treatment in continuation of hospital treatment with the exception of non-occupational injuries; dental care and orthodontics; orthopedics; hearing and other aids and appliances; 70% of the cost of medications from the positive list and for specialist, hospital and spa treatment of non–work-related injuries.

A maximum of 60% is covered for non-emergency ambulance transportation, medical and spa treatment; 50% of the cost of ophthalmological devices and adult orthodontic treatment; 25% of the cost of pharmaceuticals from the intermediate list.

The remaining shares of the services must be covered by out-of-pocket copayments. As these can reach quite high levels, 95% of the population, liable to purchase the coinsurance, is insured with complementary health insurance. Due to the high share of the population covered, complementary health insurance is by far the main type of voluntary health insurance in Slovenia and has been described as ‘compulsory’ or ‘de facto essential’ [3].

There are three companies that offer complementary health insurance in Slovenia: Vzajemna, Generali, and Triglav zdravje. The premium is a flat rate and equal for everyone. The monthly premium amounted to an average of 34 EUR in 2021.

To ensure that the companies do not offer coverage only to low-risk or healthy and young individuals, the Ministry of Health (MoH) introduced the risk-equalisation scheme in 2005. According to the scheme, contributions are reallocated among the insurance companies based on the age and gender of the insured. The aim is to equalize the portfolio structures (according to the age and gender) of the insurance companies. The funds are transferred from insurance companies with more favorable risk portfolios to insurance companies with less favorable portfolios, the intention being the equalisation of differences in risk structures.

Individuals who have taken out supplementary health insurance pay premiums to the insurance companies, who in turn pay the full costs directly to the respective health care provider. As the basic benefit package in the compulsory scheme comprises a wide range of services, there is little room for supplementary health insurance. Parallel insurance, which covers services such as faster access to medical treatment, nonmedical services in hospitals, and higher-quality materials, with providers already offering services within compulsory health insurance, gains in popularity. Since 2017, the share of other voluntary health insurance (VHI) policies has been increasing, mostly due to ever-lengthening waiting lists in the public health care system. In 2019, supplementary and parallel insurance was purchased by 26% of the population (2011: 5.6%; 2015: 18.9%); however, their premiums still represent a small share (4.55%) of all voluntary health insurance premiums.

3. Financial and coverage overview

In 2018, public expenditure on healthcare in Slovenia amounted to 5.8% of GDP (gross domestic product) [4]. Over the last 10 years (Figure 1), the evolution of public expenditure on health reflects the fluctuations related to the adoption of certain measures and the economic cycle, but during this whole period, it remained at around 6% of GDP. The same is true for total current health expenditure, which reached 7.9% of GDP in 2018, the lowest level in the last 9 years, which is also below the EU average of 8.4 % of GDP [1, 4, 5]. Existing policies have been successful in maintaining spending levels, but there have been problems with the financial performance of public health facilities, and waiting times have increased, worsening the accessibility of health services [1, 5].

Figure 1.

Health expenditure by financing scheme, in % of GDP, 2005–2018. Source: Institute for Macroeconomic Analysis and Development, 2019 [5].

Expenditure on VHI amounted to 1.2% of GDP in 2018, while it increased by about 0.1–0.3% of GDP between 2009 and 2018. Total health expenditure by functions and sources of funding in Slovenia (2006-2019) is shown in Figure 2. Complementary health insurance is an additional source of funding for the health system, as much as 95% of the population is enrolled. According to the Health Care and Health Insurance Act (Article 23), most health services involve high copayments for most of the population. Only certain diseases, children, and young people under 26 years of age enrolled in school are fully covered by compulsory health insurance. The risk of copayments is hence very high [1].

Figure 2.

Total health expenditure by functions and sources of funding, Slovenia, 2006-2019. Source: Zver HE, 2021 [5]; Statistical Office of the Republic of Slovenia, 2018 [8].

Since 1992, the share of copayments has gradually increased due to a lack of public funding, especially during the last economic crisis. The income-independent single premium is the largest weakness of complementary health insurance in the system. This means that the system is regressive, although it should be supported by income solidarity given the high risk of copayments. In 2016, for example, the annual premium was equivalent to 62% of the net monthly minimum wage, 33% of the average net wage, and 57% of the average net pension [4, 6]. The regressive nature of this source was significantly reduced in 2012 when new social legislation introduced the automatic transfer of user fees from the state budget for welfare recipients. This benefit had already been introduced in 2009, but until 2012, it was not automatically linked to eligibility for social assistance [1].

Almost every permanent resident of Slovenia is entitled to the health benefits covered by compulsory health insurance either as a contributing member or as a dependent person (e.g., children). Opting out is not possible. Permanent residence is one of the most important factors for defining entitlement to health benefits, but Articles 15–18 of the Health Care and Health Insurance Act [7] set additional conditions under which a person is compulsorily insured [1, 2, 8].

According to the available data, 2,116,739 people were compulsorily insured in 2019, representing more than 99% of the population [1, 9]. About 0.14% (3345) people were uninsured at the end of 2020 [1, 9]. Most of them were temporarily uninsured, for example, because they were waiting for their entitlement to pension or unemployment benefits to be recognised. The rest were mainly people who could not meet the formal residence requirements (e.g., undocumented migrants and ethnic minorities, such as the Roma population and homeless people). In addition, at the end of 2020, 15, 892 people had compulsory insurance but did not pay their contributions, which means that their entitlement to health services was suspended, and they could only access emergency services [1].

According to the Health Care and Health Insurance Act [7], there are 25 categories of insured persons. Each category has a different contribution rate, but contributions are mostly income-based. The first big group is employees (and their dependents), the second group includes the unemployed, other persons without a fixed income who are not registered as unemployed, pensioners, farmers, and the self-employed [1]. The National Institute for Employment pays the contributions for the unemployed; the state and/or municipalities for persons without income, prisoners, and war veterans. In addition, European regulations and bilateral agreements provide health insurance coverage for citizens from almost all EU countries. Special provisions apply to certain vulnerable groups [1, 7].

4. The introduction and development of complementary health insurance

Slovenia had historical experience with copayments since they existed already in the previous political and health system, which was in force until 1990. They were introduced in the early 1980s, mostly as flat rates on top of services. As the period of 1980s was marked by very high inflation rates, such an approach resulted in copayments becoming a negligible contribution (estimated only at around 1% of THE in 1989) as well as not an important burden on the patients. Still, this experience—together with the exceptions from copayments—fed directly into the solutions proposed by the new legislation adopted in 1992 [1, 10, 11].

When the legislation was being prepared in the period 1990−1992, different solutions to copayments were discussed. Considerations were given to the following options:

1. Flat rate copayments, which would be levied on a wide range of health services (counter argument was that any significant inflation might reduce their impact).

2. Percentage-based copayments (coinsurance), which would allow for flexibility and stratification.

3. Introduction of exceptions—these were eventually simply copied from the previous system described above.

One of the important issues in the introduction of copayments in Slovenia, however, is the absence of capping. The latter would prevent chronic patients from incurring excessive expenditure simply due to their real health needs, related to the management of their existing conditions. In turn, this might have been also one of the contributing factors to high coverage by the CHI [1, 10, 11].

CHI gained popularity, acceptance, and advocacy with the introduction of copayments into the system in 1992 under the Health Care and Health Insurance Act [7]. However, the most important regulations chronologically presented in the market development of CHI are listed below (Table 1) [1, 10, 11]. CHI served to raise additional funds for health care in addition to the funds from the compulsory health insurance and served to diversify the sources of funding. Originally, there were two providers of CHI: HIIS, and Adriatic, a for-profit commercial provider [11, 12].

1992	The HCHI (1992), the Health Services Act (1992), and the Pharmacies Act (1992) enable the introduction of private financing (CHI as VHI is introduced in 1993).
1999	The Act amending the Health Care and Health Insurance Act (HCHI, 1998) established Vzajemna as a separate legal entity, completely separated from the HIIS.
2000	The Insurance Act (2000) declares that CHI serves the public interest; risk equalisation is introduced. In 2003, the White Paper (2003) is published and a reform proposal by the MoH calls for the abolition of CHI, which covers copayments.
2004	The Insurance Act (2004) again announced the introduction of a risk equalization mechanism. However, the mechanism was not implemented, and risk-based premiums were still allowed.
2005	The HCHI Amendment Act (2005) introduces community-based premiums for CHI to cover the copayments, risk equalisation CHI and penalties for late joiners to CHI (for every 12 months without CHI, calculated from the month a person becomes liable for paying the copayments, the premium increases by 3%, up to a maximum of 80%).
	Adriatic Slovenica (in October 2005) and Vzajemna (in December 2005) challenge the risk equalisation scheme in the Supreme Court. Adriatic Slovenica argues that the scheme would lead to higher average premiums and that this would undermine competition as it would lead to a monopoly in the long run; Vzajemna argues that the scheme does not consider the differences in the health status of persons insured with a given company and treats the companies unequally; the court upholds the government and confirms the legality of the adopted risk equalisation scheme.
2006	The HCHI Amendment Act (2005) comes into force; in response to the introduction of community rating, CHI premiums increase by 18%; a further 5% increase in premiums is attributed to rising health costs.
	In June 2006, Vzajemna complains to the EC about the following shortcomings of CHI covering user fees: (1) insurers offering CHI must be included in the compensation scheme; (2) the insurance supervisory authority must be informed of any change in the conditions of CHI; (3) any increase in these premiums must be confirmed in writing by a certified actuary and can only be made under the supervision of the appointed Authority; (4) the premiums for CHI to cover the access must be the same for all subscribers of a given insurer and the contracts must not be shorter than 1 year; (5) insurers may only terminate a CHI contract if the policyholder fails to pay the premiums; (6) the revenue generated by the CHI scheme may only be used for the implementation of this scheme; (7) half of all profits generated must be used for the implementation of the CHI scheme; (8) before an insurer enters the CHI market, it must obtain the written approval of the Minister of Health.
2007	In March 2007, the EC issued an official warning regarding Slovenia’s health insurance legislation. The government had argued that CHI, which covers the copayments, despite its voluntary nature, was an integral part of the compulsory health insurance system and therefore a matter of public interest justifying government intervention to protect the general interest. The EC rejects this and argues that complementary health insurance is not a full or partial alternative to compulsory health insurance and cannot be considered part of the compulsory social security system based on EU law.
2011	The legislation on CHI is not changed and the EC refers Slovenia to the ECJ. The new reform proposal of the MoH. The modernisation of the health system by 2020 envisages the abolition of copayments and the introduction of a redefined, publicly financed benefits package.
2012	The Public Finance Balancing Act (2012) shifts costs from compulsory to complementary insurance (from public to private sector) which leads to a 13% increase in premiums for CHI.
	The ECJ confirms that Slovenian legislation on the CHI does not fully comply with the Directives on non-life insurance. The ruling concerns, among other things, the use of profits, systematic reporting, and prior authorisation; it does not concern risk equalisation.

Table 1.

Development and regulation of CHI in Slovenia, 1992–2012.

Note: EC—the European Commission; ECJ—the European Court of Justice; CHI—complementary (voluntary) health insurance; HCHI—The Health Care and Health Insurance Amendment Act; MoH—Ministry of Health; VHI—voluntary health insurance.

Source: European Commission, 2012 [10]; Sagan A, Thomson S, 2016 [11].

In 1993−1994, mainly large companies concluded collective agreements with CHI for their employees. After initial fears that a two-class medical system would emerge, this later became a matter of individual choice. However, it was argued that the introduction of the CHI system would put an end to unlimited entitlements and the use of the compulsory health insurance system, as consumers would have to raise additional funds [11, 12].

In 1998, the Health Care and Health Insurance Act [7] was amended in such a way that the HIIS had to separate its compulsory insurance and CHI. As a result, a new non-profit mutual insurance company, Vzajemna, was established, independent of the HIIS, which subsequently became the largest provider of CHI. Ever since CHI has been on the market, there have been clear signs of imbalances between the various CHI companies. The equity problems became apparent when CHI introduced a regressive element into the system due to its flat-rate premiums (i.e., not risk-based). At that time, premiums for CHI were not risk-based and two companies (Adriatic and Vzajemna) charged identical premiums [11, 12].

When the two commercial companies offering CHI entered the Slovenian market in 2004–2005, they launched an obvious advertising campaign for younger and healthier policyholders with risk-based premiums. CHI is regulated by the Insurance Supervisory Authority (premiums level) and the MoH (market entry, approval of initial premiums, risk equalisation procedure). It does not receive tax subsidies. The CHI market is subject to relatively strict regulation, and some argue that these rules violate EU regulations [11, 12].

In 2006, the amendment to the Health Care and Health Insurance Act 2005 [7] came into force. In response to the introduction of the Community Rating, premiums increased by 18% and by a further 5% due to rising health costs. In June 2006, Vzajemna complains to the European Commission (EC) about the shortcomings of CHI (Table 1). In 2007, the EC issued an official warning regarding Slovenia’s health insurance legislation. The government had argued that CHI, which covers the copayments for most of the services in the basic benefit package, despite its voluntary nature, is an integral part of compulsory health insurance and a matter of public interest for the protection of the common good.

In 2011, EC took Slovenia to the European Court of Justice (ECJ) for failing to amend the CHI legislation. As a result, the MoH proposed to reform the health system by 2020 and abolish CHI with a redefined publicly funded benefits package. In 2012, the Public Finance Balancing Act was passed, resulting in a shift of costs from the public to the private sector and a 13% increase in CHI premiums to cover user fees [11]. The European Court of Justice confirms that Slovenian legislation on the CHI does not fully comply with the non-life insurance directives. The ruling concerns, among other things, the use of profits, systematic reporting, and prior authorisation; it does not concern risk equalisation [11]. After several reminders, EC decided to refer the issue of this non-life insurance (health insurance) to the ECJ, which resulted in a ruling by the ECJ declaring that the provision of CHI in Slovenia is in breach of the Non-Life Insurance Directive. No direct penalty was imposed, but the Slovenian government was ordered to put an end to the infringement and to inform EC of the decision [10].

5. Advantages and disadvantages of complementary health insurance

5.1 Complementary health insurance in economic crisis

Slovenia was hit by an economic crisis a little bit later than some EU countries, at the end of 2008, when the business orders from abroad began to decline and consequently, the unemployment started to increase. As 98% of all incomes for compulsory health insurance are represented by contributions paid from wages and other incomes by the population, these changes had a big impact on the health insurance income. To assure that compulsory health insurance can still cover all its expenditures, numerous measures had to be passed. Among these measures, CHI played an important role. Compared to 2010, in 2015 expenditure on compulsory health insurance increased by € 49.17 M or 2.3%, while expenditure on CHI increased by € 66.31 M or 16.3% (Figure 3).

Figure 3.

Expenditures of compulsory and complementary health insurance, in M€, 2010–2015. Source: Health Insurance Institute of Slovenia, Annual report for years 2013 and 2015 [13, 14]; Slovenian Insurance Association, Statistical insurance report 2016 [15].

The average annual growth rate of compulsory health insurance expenditure in this period was 0.46%, while CHI expenditure was 3.07%. The growth rate of CHI expenditure was, hence, seven times higher than the growth rate of compulsory health insurance.

Despite stricter business conditions and the same contribution rate and equal (or at least not lower) access of insured persons to health services, the HIIS must comply with the commitment of the Stability and Growth Pact adopted by the EU in 1998 and subsequently upgraded several times. The Stability and Growth Pact is a set of rules that ensure that countries in the European Union maintain sound public finances and coordinate fiscal policies. According to the rules, HIIS must ensure the balance of revenues and expenditures without borrowing. As this was simply not possible in times of economic crisis, HIIS adopted and implemented innovative measures in 2009 to ensure its stable business operation. In determining the measures, the focus was on finding reserves in the compulsory health insurance system, without compromising the access of insured persons to services and without changing the rights from compulsory health insurance. The measures were primarily aimed at lowering the prices of health services and reducing the share of the price covered by compulsory health insurance and increasing the share of the price covered by CHI for medicines, medical devices, services, sickness benefits. The changes in the coverage shares happened at two levels.

The first transfer of financial obligations from compulsory onto CHI happened when HIIS passed the Decision on determining the percentage of the value of health services provided in compulsory health insurance, on 18 July 2009, namely for a spa treatment that does not represent the continuation of hospital treatment and for medicines from the interim list. The validity of the amendment to the resolution on determining the percentage of the value of health services provided in compulsory health insurance was extended to the whole of 2010. On 15 February 2010, HIIS additionally extended the reduction of the share of services at the expense of compulsory health insurance to the field of non-emergency ambulances, spa treatment other than hospital treatment, dental prosthetic services, and eye accessories for adults.

The second package of changes was brought about by the Fiscal Balance Act (2012) with the following measures:

Reduction of the share of the value of health services covered by compulsory health insurance (from 1 January 2013 onwards), meaning the transfer of the financial burden to CHI, namely:

• Around 90% of the value (instead of 95%) for organ transplants, the most demanding surgical procedures, regardless of the reason, treatment services abroad, intensive care, radiotherapy, dialysis, and other most demanding diagnostic, therapeutic and rehabilitation services,

• Around 80% of the value (instead of 85%) for health services related to the provision and treatment of reduced fertility and artificial insemination, sterilisation, and abortion; specialist outpatient, hospital, and spa services as a continuation of hospital treatment, except for injuries outside work, non-medical part of care in hospital and spa within the continuation of hospital treatment, except for injuries outside work, treatment of dental and oral diseases, medical devices, and injuries outside work,

• Around 70% of the value (instead of 75%) for specialist outpatient, hospital, and spa services as a continuation of hospital treatment and non-medical part of the hospital and spa care as a continuation of hospital treatment, medical devices related to the treatment of injuries outside work, medicines from the positive list.

The increase in complementary health insurance is evident also from the increase of the share of complementary health insurance expenditure in GDP between 2010 and 2015: while this share increased by 0.10 percentage points, the share of compulsory health insurance decreased by 0.22 percentage points.

5.2 Complementary health insurance and inequities

CHI is purchased by more than 95% of the population liable for co-insurance, which means 73% of the population. The premiums are flat-based and regressive and cover copayments in the range between 10% and 90% of the price of the services. Due to flat-based premiums, CHI has always been criticized from the equity viewpoint. In time, many adjustments have been made to the flat-based premium, such as coverage of costs of copayments for the socially vulnerable, who cannot afford to purchase CHI. Copayments are also covered for war veterans and prisoners. As the copayments are covered at the point of the service, the inequities caused by flat-based premiums are largely tackled, except for around 5% of the population right above the income limit, which would enable them to receive social benefits. For these citizens, the insurance is out of reach and might face higher unmet needs.

Since 2006, the share of CHI in total household consumption levelled around 2.9%. In 2012, the regressive nature of CHI premiums was importantly limited, when automatic coverage of CHI claims for all socially vulnerable populations from the central budget was introduced (Figure 4).

Figure 4.

CHI expenditure as share of total household consumption, according to income quintiles, 2008–2018. Source: Zver et al. [16].

Due to the widely defined basic benefits package, covered by two financial sources, the demand for additional services, that are not included in the basic benefit package, is very low. The out-of-pocket payments are, consequently, the lowest in the European region and amounted to 12% according to the last available data from 2018.

5.3 Complementary health insurance and risk selection

In Slovenia, a system of risk equalisation and the creation of an efficient model for the long-term sustainability of the health care financing system was prepared by the MoH and included in the law in 2005 [7, 12, 17]. Risk equalisation or compensation schemes are necessary to support community-rated health insurance and were created for the market CHI. Basically, health insurers receive credits or subsidies from a national fund or authority to compensate for the additional costs of insuring older and less healthy members. The Health Care and Health Insurance Act in Article 23 regulates the basket of health benefits for a compulsorily insured person [7], albeit very substantial, from 100% to 10% of the value of the healthcare service for most adult insured persons; payment of the difference or balance up to 100% of the value of the healthcare service is the responsibility of the insured person who received the healthcare service (also depending on the type of treatment or activity) [17]. To prevent ‘cream-skimming’, companies have been obliged to participate in risk equalisation to compensate for differences in health care costs between insurance companies [7, 12].

Quite restrictive legislation [7] stipulates that insurers are obliged to cover the costs of all publicly financed health services. Children are exempt from the copayments and therefore do not need CHI. CHI appears to be compulsory for adults, as they must pay penalties if they do not take out CHI once they become liable for the copayments. For each full year (12 months) that they do not have CHI, the penalty is 3% of the premium. The maximum penalty is 80% of the premium [17, 18]. The uniform flat premium for all CHI-insured persons established by the Health Care and Health Insurance Act [7] is independent of gender, age, or health status. However, equality is guaranteed between the different providers of CHI and between the insured person and the insurance conditions of CHI regarding the duration and termination of CHI contracts (Table 2) [12].

	Triglav zdravje	Vzajemna	Generali (Adriatic)
Basic premium	€ 35.55	€ 34.60*	€ 34.50

Table 2.

Monthly premiums for CHI (€), April 2022.

Note: *Due to the circumstances of COVID-19, the premium CHI in December 2021 was €12.1 instead of €34.6, as Vzajemna returned €22.5 to policyholders. The average monthly CHI premium was thus €32.72 in 2021, but rose again to €34.6 in January 2022, as the other two CHI companies returned profits to shareholders in the form of dividends. Source: e-Zavarovanja, 2022 [19].

The monthly basic insurance premium for the three companies in the Slovenian market of CHI shows a sustained upward trend over the period 2006–2019, despite a slight price decrease from 2013 to 2014 (Figure 5). Between 2006 and 2013, the premium increased by €93 per insurance policy [12, 20]. Apparently, Generali and Triglav zdravje are slightly higher than Vzajemna, which could be a form of risk selection [19, 20].

Figure 5.

Monthly premiums for CHI (€), March 2016—December 2019. Source: Data from CHI companies (authors’ own calculations).

The experience with risk equalisation shows that all three companies make regular payments to CHI, as would be appropriate given their risk profiles. However, these payments are quite small, amounting to only €12 M in 2014. This corresponds to about 3% of the total premium income [19, 20].

The simplest risk adjustment factors used to balance premium risk are based on age and gender. They are easy to collect and monitor, but they are a poor measure of expected health care costs [21]. Improving the risk equalisation formula should be a focus of government action to ensure that the market CHI functions efficiently [20].

5.4 Complementary health insurance and administration costs

In general, although monthly basic insurance premiums fell slightly from 2013 to 2016, they have shown a sustained upward trend in recent years. It seems that the austerity measures during the economic crisis had little impact on the price level (Figure 5). To understand the reason for the escalation of premium costs, it is useful to examine the relationship between premium income and claims costs. This helps in analysing the efficiency of CHI in financing health care. The discrepancy between revenue and claims costs shows the transaction costs of using CHI for this key role in health care financing. If this discrepancy increases, it indicates inefficiency as the same number of people is insured but with higher administrative costs. Moreover, in due course, this may undermine the affordability of CHI, especially for poorer households [20].

Figure 6 shows how claims costs increased between 2007 and 2013 and then decreased slightly in 2014 (due to lower reserve costs, partly due to government pricing policies and covered benefits). Premium income has generally increased since 2006 (with slight decreases in 2010 and 2014). The difference between premiums and claims rose sharply before the crisis, reaching a peak of €64 M in 2009. As a result of the crisis, the premiums declined slightly in 2010, while claims kept on increasing, resulting in the lowest difference between both (€34 M in 2010). In the next 4 years, the revenues from premiums kept on increasing and the difference almost reached the pre-crisis level again in 2014. Another drop in the difference between revenues and claims can be observed in 2016 and 2019, the difference was again back to €65 M. [20, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35].

Figure 6.

Revenues and costs in the markets of CHI €, 2006-2019. Source: Slovenian Insurance Supervisory Authority, Annual Report for the years 2007–2020 [22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35] (authors’ own calculations).

Figure 7 shows a breakdown of the difference between premium income and non-claims expenditure, suggesting that much of this is due to actual operating costs rather than profits. However, the official profit figures may not fully reflect the difference between revenues and costs [20, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35]. However, compared to other countries that provide similar resources to CHI, transaction costs in Slovenia are very low [20]. This may not be too surprising, as Slovenian insurers do not purchase services and should therefore have lower administrative costs. There are also concerns that new solvency requirements could push up transaction costs further, although the extent is not yet fully known. Rising transaction costs should be a focus of regulation to ensure that CHI remains affordable for everyone and that the CHI market is administratively efficient [20, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35].

Figure 7.

Profits and non-claims costs in the markets of CHI, 2006–2019. Source: Slovenian Insurance Supervisory Authority, Annual Report for the years 2007–2020 [22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35].

It should also focus on better monitoring so that the market is more transparent for regulatory authorities and consumers. In a truly competitive market, insurers would automatically correct prices downwards when their cost base is reduced. A helpful piece of regulation would be to set a minimum claims ratio so that insurers must spend a minimum share of premium income on health care costs. This would limit transaction costs and help secure affordability in the CHI market. The government should also tighten reporting requirements [20].

Although the administrative costs of CHI are low by international standards, CHI on the other hand incurs transaction costs related to insurers’ profits and administrative costs, and indirectly to the costs of government regulation. The main risk of CHI is that transaction costs will continue to increase over time, reducing the administrative efficiency and affordability of this option, especially due to the new solvency requirements [20].

5.5 Complementary health insurance and efficiency

An increase in the efficiency of the health care system in Slovenia had been one of the declarative goals of the introduction of the CHI. It was supposed to reduce the ‘unnecessary’ demand for health services while also raising some additional financial resources for its functioning. One of the reasons for such reasoning lies in the fact that the structure of expenditures of CHI by categories is significantly different from compulsory health insurance. Namely, around 45% of the CHI expenditures are for the reimbursement of copayments on medicines (cf. the expenditures on medicines represent only 11.7% of the expenses of HIIS [36].

One of the disadvantages of CHI, which is rarely mentioned and discussed, is the impact of CHI on the efficiency of health services provision. As discussed above, the levels of copayments differ for different services. While they amount to 10% of the price for most important services, they can amount to as much as 90% of the price for services, less important for health (such as non-urgent transportation). While HIIS as a single provider of compulsory health insurance restricts the health care providers and pays the volume of their services up to a defined plan, the private health insurers offering CHI have no such restrictions. Intuitively, the providers can hence provide an unlimited number of less important services as they are 90% covered by CHI, resulting in less efficient and less cost-effective care provision. While a study, confirming such a theory, has not been conducted yet, the logic of the idea remains.

Another disadvantage of CHI to which not enough attention has been paid is surely its stabilisation role. As discussed in other sections of this chapter, CHI had a huge stabilisation impact in an economic crisis, buffering the negative impacts of higher unemployment. Resulting in a higher premium, the CHI managed to alleviate the impact of the lower incomes and contributions to compulsory health insurance. On the other hand, this enabled the health system, HIIS, and health care providers not to implement organisational changes, cost-effective measures, or increases in efficiency. The waste in the system remained the same, the outcomes are still not discussed and measured, and necessary reforms that would put the patient in the centre of integrated care still seem non-urgent in spite of long waiting times.

As had been established with a specially commissioned analysis of the performance of the Slovenian health system in 2015 by the World Health Organization (WHO) and the European Observatory on Health Systems and Policies [37], CHI played an important role in buffering the shocks experienced by the health system in the times of austerity (the period between 2009−2010 and 2014). These shocks were reflected primarily in a rapid decline in paid contributions against compulsory health insurance as unemployment rose dramatically between the end of 2009 and the first half of 2012¹ [38]. In that period, the Government intervened at various levels to stabilize public finance (e.g., by reducing salaries in the public sector) but in doing so it also further reduced the contributions to health insurance. HIIS acted in two ways—partly their payments were positively affected by the reduction in salaries, but they still reduced payments to hospitals by 15% in 2 years and they shifted some expenditure to CHI. This was possible as HIIS had the authority of establishing the percentage coverage of a range of services, which attracted copayments. Such an approach reduced pressure on HIIS and introduced further ‘cost-sharing’ between HIIS and the insurance providers of CHI.

6. Health policy and complementary health insurance

CHI has remained one of the main focuses of health policy in Slovenia since its introduction. As much as it has been praised at its introduction and as much as it has been criticized all along the way, no government so far was able to significantly modify it in either way (e.g., either abolishing it or turning it into a more extensive mixed mutual health insurance). The first serious and organized attempt had been done with the Health Reform proposal published in 2003 [39].

According to that initiative and reform, the CHI would be entirely integrated into the compulsory health insurance and would thus cease to exist. After a fierce debate and controversies within the government itself, it was not implemented. There were two more attempts, which were systematically carried out by the Government, more precisely by the MoH. The first of the two was the initiative of the MoH in 2012 to seek reconstruction of this insurance and explore the possibility of it extending its scope. A policy dialogue was organised together with the European Observatory on Health Systems and Policies (Observatory). It resulted in the conclusions of not liberalising the market of these insurance and not extending their role to additional services, for example, long-term care. Finally, in the MoH term between 2014 and 2018, the minister was focused strongly on transforming the CHI into parallel compulsory insurance, which would be stratified in contributions by the income brackets, established by the IRS. This initiative ran close to its completion, but there were significant reserves. One of the important ones was in the report commissioned by the MoH to the Observatory and WHO, where the main conclusion was that the CHI contributed to the stabilisation of health financing in the times of austerity and shortages in public funding (see also above and [40]).

Remaining at very high levels of coverage and effectively covering around 83% of the total population and around 95% of those who are obliged to pay copayments it represents an important instrument for raising additional financial resources and collecting them in a transgenerational manner. The latter is the main factor why the CHI remains an asset and not a burden for the decision- and policymakers.

7. Conclusion

Although CHI had not been envisaged as such at the very beginning of the transitional reforms in Slovenia from the old political, social, and economic system to a new one in 1990–1992, it has taken ground over the past 30 years. This development occurred despite several attempts at abolishing it or transforming it into a different conceptual framework (especially in view of the need for a system approach to long-term care insurance). It has proven to be robust, and it has served to the purpose of buffering some potential negative fallout of the economic crisis from 2009 to 2014. Furthermore, contrary to the most significant and often repeated criticism, namely, that it was a regressive type of health insurance, it has proven to have a good level of transgenerational solidarity. Flat-rate premiums were the trigger to claims of regressivity, but the fact that a healthy population of persons in their 20s and 30s paying the same premiums as those above 65 years of age clearly shows an important lever for solidarity. A very high level of coverage through the inclusion of much of the adult population in the CHI enables such a situation. The intervention with which the Government around 15 years ago protected persons, who for economic reasons cannot pay for the premiums of the CHI serves as another example of solidarity and social correction of socio-economic differences. The more covert aspects of inefficiency, namely, the structure of the provided services and delay in cost-effectiveness measures, are visible only upon a systematic understanding of the health care financing system and therefore rarely discussed and put forward. Generally, productivity is dealt with only indirectly through the pricing of reimbursement criteria set up by HIIS, which has not been updated and endorsed by the medical professional societies.

The most adverse effect of a potential abolishment of CHI would very likely be a system of uninsurable copayments, which would affect the vulnerable layers of the population in Slovenia to a much more significant degree than the flat-rate premiums, with all the introduced adjustments for socially vulnerable, do. We can conclude that amidst strong pressures for either its abolishment or its expansion, the CHI in Slovenia has proven to be an important resource for the stabilisation of health expenditure. Despite it being a private insurance as it is paid after taxes, it bears a very strong public and social component.

List of abbreviations

WHO

World Health Organization

CHI

Complementary Health Insurance

MoH

Ministry of Health

VHI

Voluntary Health Insurance

THE

Total Health Expenditures

GDP

Gross Domestic Product

HIIS

Health Insurance Institute of Slovenia

ECJ

European Court of Justice

EC

European Commission