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8 September 2022

Regulation of public and private long-term care insurance in Israel: A case study

Sharona Tsadok Rosenbluth , Ben-Gurion University of the Negev , Israel

Abstract

Background: In most developed countries, national and public expenditure on long-term care (LTC) rises. Although many countries have publicly funded LTC, these public programs do not always meet the community's increasing needs. Governments are therefore trying to find other funding solutions, for example, through private insurance. Yet, LTC private insurance is not available in many countries due to demand and supply market failures.

Israel has a public LTC insurance program. Still, over 60% of the adult population owns private LTC policies creating a unique market that has been subject to significant changes in the past decade, some of which as an outcome of regulation changes. Today, only one available insurance product is a group policy within the HMOs.

Objectives: To analyze the public/private mix of LTC financing in Israel, the regulatory environment, and its effect on the LTC insurance market.

Methods: Combined research methods: qualitative research - analysis of the literature and in-depth interviews of policymakers, and quantitative research - interviews of a representative sample of the adult population in Israel.

Findings: The regulator identity, objectives, and methods in the public and private markets are not always the same. The goals of regulation of the public sector are quality of care, consumer protection, and financial stability of the system. There is a debate whether the responsible body for publicly funded LTC can be its own regulator. Many policymakers pointed out that supervising the service providers, timely reporting with transparency of the use of public funds, and financial stability are the most critical regulatory methods. The primary failure of the publicly funded LTC is the lack of adequate supervision of the service providers. Regulation purposes of the private market are consumer protection, competition, product availability, quality of service, and insurance companies' solvency. The regulator is the Capital market Insurance and Savings Authority, an independent entity, while the regulator of supplementary health insurance is the Ministry of Health, pointing to a debate as to whether it is suitable for a regulator of commercial LTC insurance to have no involvement in health policy. The main regulatory methods are control and supervision of the implementation of regulatory directives, reporting (to the insured public and regulator), increasing public literacy, and price control. The failures are many: mishandling of the group insurance policies (which were eventually cancelled by the end of 2017), elimination of competition between insurance companies, and leaving the private market to deal with the uncertainty of these policies.

Conclusion: It is difficult to predict the behaviour of the LTC private insurance market as there are many factors and market failures that are involved. Market changes may significantly impact the availability of private insurance products. Policy intervention and regulation do not necessarily have the expected impact. Reliance on private LTC insurance as a possible financing solution requires market development and regulatory support that includes understanding both public and private financing solutions for LTC.


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