Financing of health insurance system under debate
The deficit of the Estonian Health Insurance Fund is forecast to be around EEK 400 million in 2005. The government and social partners have been debating various possibilities for increasing the finances of the health insurance system during 2005, though with little agreement on issues such as increasing the responsibilities of employers and employees.
On 27 January 2005, the council of the Estonian Health Insurance Fund (Eesti Haigekassa) approved its budget for 2005, which for the first time in the history of the fund showed a negative balance. In the total budget, income made up about EEK 6.8 billion and expenditure about EEK 7 billion. The negative balance was caused by an agreement on medical workers’ pay concluded in September 2004 (EE0410102N and EE0409102F). To meet this agreement's obligations, the prices for healthcare services have to be raised.
According to statistics, over 2001-4 the number of days of sick leave increased by 15% and the amounts of benefits by 45%. While in 2001 total sick leave stood at 4.5 million days and the sickness benefit paid amounted to EEK 500 million, the respective figures for 2004 were 5.2 million days and EEK 723 million. According to forecasts, the deficit of the Health Insurance Fund might be EEK 400 million in 2005.
Health insurance system
In Estonia, health insurance is a social insurance and relies on the principle of solidarity. The purposes of health insurance are to: cover the costs of health services provided to insured people; prevent and cure diseases; finance the purchase of medicinal products and medicinal technical aids; and provide benefits for temporary incapacity for work and other benefits.
Health insurance is organised by the Health Insurance Fund, which covers the costs of health services required by people in the event of illness, regardless of the amount of 'social tax' paid in respect of the person concerned. The Fund uses the social tax paid for the working population also to cover the cost of health services provided to people who have no income from work activities. Employers are required to pay social tax for all people employed, at a rate of 33% of the 'taxable amount', of which 20% is allocated for pension insurance and 13% for health insurance.
On the basis of a certificate of incapacity for work, the Health Insurance Fund pays benefit for temporary incapacity for work to insured people who lose income (subject to individually registered social tax) due to being temporarily relieved from the performance of their employment duties. The benefits for temporary incapacity for work include sickness benefit, maternity benefit, adoption allowance and care allowance. Sickness benefit becomes payable from the second day of absence from employment. Maternity benefit, care allowance and adoption allowance become payable from the first day of absence.
Discussion about possibilities of financing
In the light of the Health Insurance Fund's projected deficit, the financing of health insurance has been debated by the government and social partners during 2005.
According to the Prime Minister, Andrus Ansip, benefits for incapacity for work could be paid to employees only from the fourth day of sickness absence, thus cutting the expenses of the Health Insurance Fund by EEK 120 million. Furthermore, decreasing the rate of sickness benefit to 75% of the employee's wage would save about EEK 70 million.
The Minister of Social Affairs, Jaak Aab, has proposed that employers should pay sickness benefit on the first days of sickness and also called for an increase in the employers’ responsibility in the event of occupational accidents. Mr Aab believes that employers contribute too little towards workplace safety and the training of workers (EE0505102F), and that increasing employers’ financial burden would motivate them to invest more in their workers’ health. However, Mr Aab accepts that additional responsibilities for employers will increase labour costs, and suggests that, in exchange, other current obligations on employers should be reviewed.
According to Tarmo Kriis, the chair of the Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETTK (EE0310102F), the Minister of Social Affairs's proposal is completely unacceptable to employers, and even lightening some other obligations would not make up for giving employers the responsibility of paying sickness benefit. Mr Kriis argues that:
- short-term illnesses are usually due to catching colds or viral infections and the work environment plays a very small role in these. Besides, employers’ investments in their workers’ health are considered a special benefit;
- if small-scale enterprises were obliged to start paying sickness benefit, they would want to stop employing workers on employment contracts and would prefer to use workers who are, in formal terms, self-employed;
- the increase in labour costs would motivate enterprises to substitute labour with capital, where possible. It would lower the employees’ certainty of their income, and it is possible that enterprises would carry the effect over to workers and lower their income;
- family doctors issue certificates of incapacity for work very easily and practically no 'self-responsibility' lies with the insured person. ETTK supports a proposal by the Prime Minister to increase the self-responsibility of insured people, arguing that this would motivate them to take better care of their health; and
- in international comparison, the social tax paid by Estonian employers is among the highest, and at the same time the share paid by the employee is among the lowest.
ETTK suggests that sufficient improvement in the financing of the health service could be achieved by increasing the obligatory minimum rate of social security tax as high as the national minimum wage (EE0507101N). A plan to increase the obligatory minimum rate of social security tax is also included in the state budget strategy approved by the government. First of all, the increase in the minimum rate would affect those who are insured by the state and the self-employed. Calculations made on the basis of data from the Tax and Customs Board indicate that increasing the minimum social tax rate for self-employed people to the level of the state minimum wage would provide the health insurance system with additional income of up to EEK 150 million.
ETTK opposes the introduction of additional burdens on employers and argues that employers should instead be encouraged to take care of their employees’ health.
Trade union views
The Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit, EAKL) (EE0308101F) is opposed to increasing the self-responsibility of insured people. According to the unions, people with low wages would suffer as a consequence of the application of the Prime Minister’s proposal. Unions argue that the way to decrease sickness benefit costs is to make payment of benefits to some extent a responsibility of the employer, as happens in several other countries.
Trade unions state that additional financing for the health insurance system can not come only from the pockets of workers or enterprises, but must also come from the state. The unions support the proposal from ETTK to increase the minimum rate of social security tax.
It is not clear whether the above proposals would decrease the expenses of medical treatment. If a person continues working during sickness, the expenses may be substantially higher when that person finally goes to the doctor. Furthermore, sick workers may spread contagious diseases to their colleagues and thereby probably decrease productivity.
In Estonia, the benefit for temporary incapacity to work is higher than in many other European countries, while wages are much lower. It has been argued that a reduction in the benefit rate would both make the subsistence of low-paid people more difficult and increase the stratification of society.
The idea of increasing employees' self-responsibility is considered to be unfair in some quarters, as people usually cannot influence the probability of getting a contagious disease and they do not prefer to become sick. Unless it can be proved that obtaining a certificate of incapacity without cause is really a widespread phenomenon, it is not a reason to reduce sickness benefits.
The deficit of the health insurance budget has been an issue for a long time. The 2005 deficit will be covered by excess income from health insurance payments. Hannes Danilov, the chair of the Health Insurance Fund, says that, according to the prognosis, the health insurance payments income in 2005 should be EEK 425 million more than planned and this will help to patch up the hole in the budget. (Kaia Philips and Raul Eamets, University of Tartu)