1. LESSONS FROM THE SPREAD OF LONG-TERM CARE INSURANCE IN ISRAEL
Shuli Brammli-Greenberg12, Ruth Waitzberg1
1Smokler Center for Health Policy Research, Myers-JDC-Brookdale Institute, Israel; 2Department of Health Systems Management at the School of Public Health, the Faculty of Social Welfare and Health Sciences University of Haifa.

2. Overview of the presentation
Introduction – why is LTCI important?
The structure of the Israeli LTC insurance market
Development of the LTCI market
How Israel overcame market failures according to health economic theory

3. Introduction – why is LTCI important?

4. LTC is costly and public funding is limited
Israeli national expenditure on LTC totals USD 3 billion
1.3% of the GDP
Of which 44% comes from private funding:
10% voluntary insurance
34% out-of-pocket including co-payments
Source: Ministry of Health, 2010

5. Responsibility for different types of LTC
NII  community care, (up to 18 hours of care, by means test)
MoH and MoSA institutional care in nursing homes (graduated assistance, based on a means test of the applicants and their children)
NHI 1995  HPs' acute care, hospitals and community 5

6. People wishing to prepare financially for old age have several options
Save for LTC
Out of pocket: Private savings bank, pension funds…
LTCI
Do nothing
Rely on government
Rely on family

7. Private LTCI is not very popular yet worldwide
The risk of needing LTC is among the highest risks faced by an elderly person
LTCI may be an alternative to public funding of LTC
In most countries, LTCI is a relatively new and small branch of insurance; this is not the case in Israel
Israel 69% (2011)
USA ~4%
France ~3%
Rate of LTCI insured, % of the total population
Source: MOF, 2012

8. The Structure of the Israeli LTC Insurance Market

9. Health Insurance Market in Israel
Health insurance layers and % of insured*
Commercial insurance: Benefits package tailored to individual needs; marketed by for-profit insurance companies. Regulated by MOF.
Supplemental insurance 83%
National Insurance (uniform basket) 100%
CI 42%
Supplemental insurance (SI): Uniform benefits package marketed by the health plans. Regulated by MOH.
* Among adults aged 22+.
Source: Brammli-Greenberg and Medina-Artom, 2013

10. The LTCI market in Israel
In million people held some kind of LTCI
Distribution of market share by type (% of population*)
Health Plans 51%
Commercial Collective 13%
Individual Commercial 5%
Regulated by MOF
* Including children
Source: MOF, 2012

11. The LTCI market in Israel
In million people held some kind of LTCI
Distribution of market share by type (% of population*)
Health Plans 51%
Individual Commercial 5%
Regulated by MOF
* Including children
Source: MOF, 2012

12. The evolution of take-up of LTCI
Source: MOF,
Source: Brammli Greenberg et al,

13. Development of the LTCI market
1998
2004
2009
2011

14. In the beginning…
Commercial insurance – insignificant market (4% of the population in 1997)
HP's collective insurance – HPs were the insurer, limited LTC was one of the services provided by SI (40% of the population in 1997)
Source: Brammli-Greenberg and Gross, 1999.
1998
2004
2009
2011

15. The 1998 Reform The Budget Reconciliation Law:
HPs were forbidden to include LTCI in their SI
HPs could offer LTCI only through a collective policy provided by a commercial insurance company.
Consequences:
Those who held SI policies in 1998 were automatically enrolled in their health plan's LTCI.
Suddenly 50% of the Israeli population owned LTCI
MOF had to regulate a new product in the insurance market
1998
2004
2009
2011

16. The 1998 Reform MOH's directive:
HPs could not obligate members to purchase their collective LTCI
LTCI and SI must be purchased separately.
Yet, HPs offer SI and LTCI together.
Consequences:
The marketing method linked the ownership of HPs' collective LTCI to SI.
Many holders of LTCI were not aware of it.
1998
2004
2009
2011

17. Incremental changes Directives for Individual LTCI (2001-2002)
Fixed premium for policyholders aged 65+
"Protected" premium
1998
2002
2004
2009
2011

18. Incremental changes
Definition of the insurance event (2003) Compulsory coverage for at least 3 of the 6 ADLs and for mental frailty
Include compensation for LTC at home
Improving disclosure and information
1998
2002
2004
2009
2011

19. Incremental changes Directives for Collective LTCI (2004)
Rules for a pre-existing medical condition (eliminating underwriting at time of claim)
Continuity following a change in insurance company or when the individual leaves the group
1998
2002
2004
2009
2011

20. Incremental changes
2005: MOH included LTCI to the means test for assistance in funding institutional care
The rationale: to make better use of the sources of funding available in the system
The problem: family members prefer not to claim for benefit and do not report ownership of LTCI
2009: For new and renewed collective policies, a major change to the pricing method based on individual pricing with collective management
1998
2002
2004
2009
2011

21. Upcoming proposed reforms
MOH (2011)
Include LTC in the basic NHI benefits package
All LTC provision will be transferred to the HPs
LTC will be financed by a compulsory “national LTC insurance”
Provide universal coverage of LTC and improve continuity of care
MOF (2012)
Standardization of HP's collective policies
Uniform premiums and coverage
Allow continuity of LTCI policy in case one switches HPs
Ease the transition between the HPS and increase the competition
1998
2002
2004
2009
2011

22. How Israel Overcame market failures according to health economic theory

23. Products are vertically differentiated
Individual Commercial LTCI (5%)
HP's LTCI (51%)
Individual policies expensive (around US$150 monthly)
Fixed premium, paid-up premium
All-life insurance period, flexibility as to the amount of benefit purchased
Limited accessibility in purchasing the insurance
Commercial insurance company insures, HPs hold the policy
Relatively cheap
Premiums increase with age
Uniform policy and price for all members within the same age group
Benefits are low relative to the costs of LTC.
Benefits provided usually decrease with enrolment age

24. Supply barriers Prices higher than the actuarially fair price
High transaction and administrative costs  collective policies are cheaper
Adverse selection collective policies diversify risk + cross-subsidize.

25. Demand barriers
Limited Knowledge or Rationality: people underestimate future need and cost of LTC  Israeli HPs' marketing method linked to SI + increased awareness + cheap
Moral hazard: Elderly persons who prefer not to be institutionalized tend to purchase less LTCI  in Israel LTCI policy includes compensation benefits for LTC at home

26. Summary 1998 reform  new product + huge coverage
Ongoing regulations  improved LTCI + enlarged the market
Features of HP's collective  overcome supply and demand barriers
69% insured  but are they prepared for LTC?
1998
2002
2004
2009
2011