Implementing Mandatory Health Insurance – Lessons from Abu Dhabi Discussion Material – June 2013

2 Agenda 2 The Abu Dhabi Experience Potential Lessons for Others Discussion

3 Abu Dhabi Largest and wealthiest of the Emirates in the UAE with 9% of world’s proven oil reserves and one of the highest GDP per capita in the world Population >2m of which <20% UAE citizens Ambitious economic diversification program (Ethiad Airways, Formula 1, Insead/NYU/Sorbonne, CCAD, …)

Health System Challenges Prior to Health Insurance Lack of access Lack of clinical and financial transparency Overreliance on public funding Lack of meaningful access especially for low-earning individuals Lack of choice for UAE Nationals (public sector free only) Limited data without ties between financial and clinical performance (“are we getting value for money?”) Public funding not based on activity (block budget) Perceived lack of customer responsiveness in public sector as a result Employers not adequately sharing in cost of providing health care especially for expatriates

Health Care Reform Response Introduction of Mandatory Health Insurance Creation of Pure Regulator (HAAD) and Modern Payment System Use of Private Sector/Public Private Partnerships Health Financing Reform Vision Access to health care for all Financing through health insurance Flexible and efficient financial system

Over 98% of Population Now Covered by Health Insurance Note Some member numbers may be inflated, as in-year cancellations are not excluded. Source Payer submissions; some insurance data not available ( AXA, and Al Wathba, Noor Takaful Family, Dubai, Green Crescent, Al Hilal Takaful – PSC and Methaq Takaful) Mixed model with three tiers reflective of demographic set-up

The mandatory health insurance scheme was rolled out in three phases 7 Preparation & Setup Feb - Aug 2005  Selection of international partner (tender): several international companies approached November 2005  of project in Abu Start Dhabi December 2005  Signing of contracts between Daman and Munich Re Phase 1 “Rollout“ 1 st May 2006  Start pilot phase 1 st July 2006  All „expats“ of government and companies with 1,000 employees  Around 250,000 Daman insured members end 2006 Phase 2 “Rollout“ 1 st January 2007  Health insurance compulsory for “all Expats“  950,000 Daman insured members end 2007 Phase 3 “Nationals“ June 2008  Compulsory health insurance for UAE Nationals.  Risk carrier government; Daman Management – TPA. Basic EnhancedThiqa  Monthly total salary package ≤ 5,000 AED incl. housing  Exclusively by Daman for 600 AED p.a.  Risk carrier: fully reinsured by Abu Dhabi government (until 2016)  Different benefits, limits and territorial coverage  Risk carrier: Daman with reinsurance from Munich Re  For UAE Nationals  Risk carrier: Department of Finance Abu Dhabi Insurance products reflect the different needs and demographic characteristics of the UAE population

8 Reduced Government Role in Financing IndividualsEmployer Department of Finance Private ProvidersPublic ProvidersForeign ProvidersAdministrative Insurers Actively regulated and increasingly competitive health insurance market Public providers now claiming insurance revenue and open to all payers Government still a very active player and responsible for some direct funding

Health Care Reform Response Introduction of Mandatory Health Insurance Creation of Pure Regulator (HAAD) and Modern Payment System Use of Private Sector/Public Private Partnerships Health Financing Reform Vision Access to health care for all Financing through health insurance Flexible and efficient financial system

10 Mandatory e-claims for all Standard coded data open to audits Standard price list regularly benchmarked for comparability “The Right Incentives” (DRGs, E&Ms, PBM, co- pays, …) A Modern Payment System Promoted by an Independent Regulator

11 Greatly Improved Transparency – Clinical and Financial

Health Care Reform Response Introduction of Mandatory Health Insurance Creation of Pure Regulator (HAAD) and Modern Payment System Use of Private Sector/Public Private Partnerships Health Financing Reform Vision Access to health care for all Financing through health insurance Flexible and efficient financial system

13 PPP started with MunichRe as an operator of DAMAN providing systems and management Building trust with the government after successful execution of mandatory health insurance, MunichRe became a shareholder Now both are jointly expanding locally (broader product range) and regionally (KSA, Qatar, …) DAMAN – Example for a Successful PPP Model

Daman is one the leading specialized health insurance companies in the region Support the reform of the healthcare system Ensure the health insurance of expats working in the Emirate of Abu Dhabi Today: 2.3 million members (409,173 “enhanced”; 1,287,511 “basic”; 689,189 “Thiqa”) Initial problem / challenge Daman fulfills its important role within the reform process of the healthcare system in Abu Dhabi Daman is expanding outside the Emirate of Abu Dhabi Daman has created 1,500 jobs in the Emirate and employs more than 100 Emirati Nationals Client value Daman is the first specialized health insurer in the UAE, licensed 2006 (no other lines of business) Daman is owned 80% by the government of Abu Dhabi and 20% by Munich Re Munich Re appointed as strategic partner responsible for the establishment and operation of Daman (Management Agreement) MR is the exclusive reinsurer for all enhanced products as an incentive alignment Daman is the exclusive provider for the government subsidized basic product (Abu Dhabi government is risk taker / reinsurer) Daman is managing the Thiqa program for the Abu Dhabi government Utilizes the insurance back-office IT system MedNext from Munich Re Employer is responsible for full payment of insurance premium by Abu Dhabi law Employee has to pay a small deductible / co-insurance per out patient visit Strong growth since inception with four main branches and more than 23 service points across the UAE Solution provided Membership development (incl. thiqa) 14

15 Critical Success Factors 1. Political/social support: Full government support at all levels 2. Win-win objectives: Social objective for AD government, viable investment for MunichRe, AD government shareholder of new regional champion 3. Competitive partner selection process: RfP process with participation of major international players 4. Seamless execution: Exceeding plans (both operational as well as financial) 5. Robust legal framework and good regulation: Support from law/bylaw and creation and continuous upgrading of HAAD 6. Appropriate risk allocation and controls: Economic incentives for DAMAN to succeed while mitigation of risk for DAMAN in government contracts (basic/thiqa) 7. Technology and skills transfer: Development of local layer of management independent of MunichRe 8. Good governance: Management of potential conflicts of interest between (a) government-funded and private business; (b) public majority and private shareholder

16 Agenda 16 The Abu Dhabi Experience Potential Lessons for Others Discussion

17 Clarify Your Intentions First Protect against risk of financial ruin and increase access to services? Shift financing burden from government to employers/employees? Increase financial/clinical transparency and increase efficiency through better incentives? Make people happy through more choice (public and private) and increase customer responsiveness of providers (money follows patients)? What is your ability to stomach potential cost increases as a result?

As a Result, Regional Design Choices Can Vary Abu DhabiSaudi ArabiaQatar (planned) Dubai (as-is) Mandate for all expatriates* yesno? Insurance for locals with choice of private providers yesnoyes(no) Modern payment system** yesnoyes(yes) Subsidy for low- earning individuals yesno? *including domestic staff **including mandatory electronic exchange of all information and partial risk transfer to providers (e.g., DRGs)

19 Carefully Prepare for a PPP Are you ready to accelerate the implementation of health insurance with imported technical skills in a PPP structure Can you clearly communicate your intentions to an external partner in a PPP venture Can you manage the complexity inherent in the creation of an able regulator and are you willing to adequately staff and pay for such a function which is needed as a counterpart in any PPP structure Do you have the contract management skills to set up and monitor a PPP structure with incentives for both sides to succeed

20 Agenda 20 The Abu Dhabi Experience Potential Lessons for Others Discussion