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DHA officially launches regulation of health care costs
Posted on Nov 27, 2015 by Rob McBroom
UMI takes a look at the new DHA regulation around medical cost inflation. Starting from 2016, they will be setting the percentage increase that health care providers can apply each year.
Inflation is an economic issue many, if not all, countries and industries need to deal with on a yearly basis. In a recent report on International Private Medical Insurance Inflation (IPMI), released by UMI in conjunction with Pacific Prime, it was found that medical insurance premiums in Dubai rose by an average of 9.5% in 2015.
What drives this inflation figure? Well, the report found that the single largest influence on the cost of health insurance is the cost of healthcare. More specifically, the cost of healthcare at private medical facilities. As healthcare increases in cost you can expect to see a corresponding rise in insurance premiums. In fact, as the report points out, a study by Aon Hewitt found that medical costs have risen by an average of 10.15% in 2015.
How is Dubai dealing with this inflation?
The problem in Dubai, like in many other countries with a well developed medical system, is that private health care providers can charge pretty much whatever the market will accept. This results in high cost of care which essentially means that health insurance is necessary.
One of the ways Dubai is curbing this inflation is by implementing a number of initiatives revolving around the cost of medical care. The most commonly employed tactic is regulation of the industry by a government body. In Dubai's case, the main regulatory body overseeing this regulation is the Dubai Health Authority (DHA).
In order to better manage the inflation of medical costs, which some had deemed to be "runaway", the DHA announced last year that they would begin regulating the cost of health care starting in 2016. As an article in The National explains, "From next year, hospitals, clinics and polyclinics that want to raise their prices must apply to the Dubai Health Authority, which will evaluate the request based on the rate of inflation, the cost of doing business in the emirate, the quality of the services provided and the performance of the applicant."
The key around this regulation is the the DHA will not be setting strict prices for medical care. That will still be up to the hospitals and clinics. Rather, the DHA will be setting the maximum percentage that prices can be increased.
Regulation for 2016
In late November, UMI received word from the DHA that they had not only officially set the inflation rate, but also published a list of 127 providers who will be regulated by this increase, and 7 providers who are exempt.
For the 127 eligible healthcare providers, they can only increase the cost of care by a maximum of 4.41%. The DHA has made it clear that this increase applies to the gross cost of care - not the net - which means that providers can still apply discounts as they see fit.
For the 7 providers who are exempt, there is no set percentage increase, which means they will be able to increase costs as much as they desire. That being said, they are still bound by contractual obligations and negotiations around price increases.
Predictions as to what will happen
Regulation of the private healthcare industry is always a tricky subject, but we fully believe that the DHA's regulations are a large step in the right direction and will inevitebly result in a number of positive outcomes including:
More realistic tariff increases for customers
More controlled medical inflation in the region
More reasonable future premium increases for insurance
A more competitive market between providers with a more “fair” and competitive environment
There is little doubt that cost increase regulation will have an impact on the overall quality of care, which will be a good thing. However, it can be hard for the public to find out about the overall quality of healthcare facilities in Dubai. So, in relation to the regulation of cost increases, the DHA will be also be releasing quality scores for healthcare providers. This is the first time this has ever been done and will allow the public to make a more informed choice about where they receive care.
There is one major run-on effect that both cost increase and quality scores will have, however, and that is how these will impact the increase of health insurance premiums. In an ideal situation we should see a subsequent levelling of premium increases. There is another factor, however, that adds a large amount of uncertainty: The DHA's mandatory health insurance coverage. Because plans are now required to cover many costly conditions, we predict that the number and cost of claims will increase. Needless to say, it will be interesting to see how insurers react to this.
Stay tuned to our blog for further updates on this topic, and as always, if you have a question regarding your health insurance plan, please contact our experts today.