Slovenia: Social partners have mixed reactions to proposed healthcare reform

Trade unions and employers have called for tripartite negotiations on a new healthcare reform proposal published in January by Health Minister Milojka Kolar Celarc. The government plans to abolish voluntary complementary health insurance in favour of a compulsory healthcare levy. While welcoming some aspects of the proposal, social partners expressed reservations about other aspects.

Background

In January 2017, the Minister of Health, Milojka Kolar Celarc, presented a new healthcare reform proposal (ZZVZZ-1) to the social partners and the public, all of whom have raised concerns about it. The proposal would significantly change healthcare insurance in Slovenia, thus indirectly influencing employees’ well-being.

The main reasons for changing the law are weaknesses in the existing funding arrangements for healthcare. Analysis of the Slovenian healthcare system shows it compares poorly with systems in other countries. Furthermore, the current single (unified) voluntary premium is not based on the principle of income solidarity (ensuring the cost is distributed fairly across people on low incomes and high earners), while health insurance companies have been criticised for years for unnecessarily spending tens of millions of euros on advertising and administrative costs that could be spent on health services.

Main changes proposed

The main proposal of the new law is the abolition of voluntary complementary health insurance, which would be compensated by universal compulsory levies, taking into account the concept of solidarity. However, a genuine solidarity model acceptable to all the ministries involved has not yet been discovered. More than 20 different simulations were made, the two favoured ones being:

  • levies based on a percentage of income (for example, 2.5% of an individual’s gross income);
  • flat rate levies of between €20 and €75 per month, according to a person’s income grade.

The Ministry of Health prefers the second option, which would rank citizens in seven income grades, according to their gross income (including any rents and/or share dividends they receive). Those in the top grade (earning more than 500% of the average wage) would pay €75 per month (about €600 a year more than now), while minimum wage earners would pay €20 per month (about €120 less per year). People on the average salary would be charged €27 per month, the same as the current unified complementary premium. According to the Minister of Health: ‘80% of people would pay less, only 20% would pay more’. The proposal would raise an additional €300 million for healthcare by 2020, according to calculations by the Ministry of Health and the Ministry of Finance.

Another proposal is to limit sick pay to one year or to 18 months within a two-year period (under current law the duration of sick leave is unlimited). After this time, a person’s compensation rights would be transferred to the Institute for Pension and Disability Insurance (ZPIZ). The Minister pointed out: ‘We are the only country in the EU which has an unlimited duration of sick leave and pay’.

Sick leave pay would be set at 80% of a person’s salary (it is currently 90% for everyone, except for public employees, who have received 80% since 2013). The lowest amount possible would be 80% of the minimum wage, while the maximum could amount to 2.5 times the previous year’s national average gross salary.

All children would be compulsorily insured, irrespective of the status of their parents.

Under the new system, there would only be two or three contribution rates (currently there are up to 11). The contributions of employees and employers would remain the same (at 6.36% and 6.56%, respectively). However, a special contribution rate would be introduced for pensioners, to be paid out of the State budget.

Under these proposals, it is estimated that by 2022 the State budget would be spending about €250 million more on health than it does now, financing 7% of healthcare instead of the current 3%.

Strengths and weaknesses of the new system

The main objectives of the new healthcare proposal are to:

  • provide access to a comprehensive basket of healthcare rights (all the services, medication, supplies and medical equipment that the insured person is entitled to receive according to law);
  • establish a stable funding system, which will provide a sufficient long-term source of revenue;
  • ensure fairness when raising funds for the system;
  • diversify public health revenues by expanding the contribution base, changing contribution rates and providing new funds;
  • reorganise the management of the Health Insurance Institute (HII), with its assembly and board being replaced by its Council (with considerably fewer members than now).

The proposal aims to preserve the scope and content of the basket of healthcare rights, but without complementary health insurance payments to private health insurance. All funds are expected to be fully collected from public sources. The proposal provides for the establishment of a single list of healthcare services and standards but, at the same time, introduces the idea of above-standard services (which could become a business opportunity for existing private health insurance companies). If public funds were restricted, this could cause a fall in standards and in the quality of public healthcare, thus endangering equality of access as only the wealthy would be able to purchase the most modern services and materials.

The proposal for the stable financing of healthcare, the long-term sustainability of the system and solidarity in raising funds deals mainly with the expansion of contribution bases and the adjustment of contribution rates. Nevertheless, it could lead to high progressivity in both passive income taxation (taxing the earnings an individual derives from a rental property, limited partnership or other enterprise in which they are not materially involved) and in the newly introduced compulsory levy. In most countries with a model of social insurance, the principal of increasing the tax rate as income increases is capped – but not in Slovenia.

The introduction of a compulsory healthcare levy should increase the solidarity in raising funds, taking into account an individual’s income. It is estimated that about €50 million of the ‘administrative costs’ of the current complementary health schemes could be additionally earmarked for health services. At the same time, it is also expected that there will be a deterioration in projected compulsory healthcare funds, due to the ageing population and their associated health problems. These could worsen the long-term sustainability of funds compared with the current premium system.

Three additional risk aspects were mentioned in the experts’ debate:

  • after the implementation of a new healthcare insurance system, Slovenia would significantly differ from all other Member States due to the high proportion of public healthcare funds;
  • the ‘new’ levy has a tax nature and this should be taken into account when reducing the personal income tax base;
  • with the abolition of current complementary healthcare insurance, the country would lose highly developed private healthcare insurance, which would be difficult to restore.

Social partners’ reactions to the healthcare proposal

On 31 January 2017, an extraordinary meeting of the Economic and Social Council (ESC) was held to discuss the new healthcare insurance proposal. Representatives of trade unions and employer organisations agreed that the draft was more of a working paper than a final legal proposal. They supported the idea of setting up a tripartite negotiating team to discuss and improve the proposal, separately from the public debate. They also agreed that reorganisation of the HII was unnecessary, on the grounds that there were no legitimate arguments to support claims that its current system was inefficient.

Trade unions were united in welcoming the fact that the proposal follows the principle of solidarity. They feel that the goal of the reform should not only be to achieve stable financing for healthcare, but also to ensure the adequate quality, safety and accessibility of healthcare services. The unions are unhappy about the current long waiting times and the poor transparency over the price of medicines. They rejected the capping of sick leave pay at one year.

However, employer organisations welcomed the proposal to restrict sick leave pay and the measures related to reducing waiting periods (and thus a speedier return of employees to work). They also suggested that employers should pay sick leave over fewer working days. Some opposed the expansion of tax contributions to passive income (that is, dividends, rents, interest and capital gains) However, they all agreed that the reform should not additionally burden the economy.

In the public debate that followed the ESC meeting, most comments on the draft law related to:

  • the basket of healthcare rights;
  • the vaccination of children (parents would have to pay for a child to be treated for a condition, if it could have been prevented by a vaccination which the parents had refused);
  • the duration of sick pay leave.

The latter two topics will be additionally examined by the Ministry of Health in a search for acceptable new solutions.

Commentary

The proposal has its strengths and weaknesses, and also raises some future risks. Some of these the social partners and the experts recognise. Now the Ministry of Health faces the long haul of negotiations to try to find the best solution.

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