Too many health insurers?
Health insurance is an important component of the healthcare industry, and as with most things in life having choices and a bit of competition is a good thing. But can there me too many insurers to choose from. The relatively small expatriate community in Dubai of around 3.5 million residents, can choose from 50 Dubai Health Authority (DHA) licenced health insurers and it’s more than 60 if we include the international insurers operating through fronting arrangements.
While this may seem like a good thing for consumers, it can also have negative effects on the quality of healthcare and the standards of the industry. Here are some reasons why too many health insurance providers can sometimes be bad for consumers:
Damaging competition: When there are too many health insurance providers in the market, they often engage in damaging competition to win over customers. This can lead to lower premiums and reduced benefits, which can negatively impact the quality of healthcare that consumers receive. Another problem is the “here today, gone tomorrow” trend we see whereby the only way insurers can sell and grow its books at a high rate with what are usually undifferentiated offerings is by reducing premiums to levels below what is required to cover costs. It is a recipe for disaster, that plays out all too often, leaving the insured clients high and dry and often with difficult pre-existing conditions which must then be underwritten and loaded for with any new insurers.
Lower levels of quality: With too many health insurance providers in the market, the competition can be fierce, and some providers may resort to cutting corners or even deceptive selling such as hidden caveats to keep costs down. This can lead to lower levels of quality in the healthcare services offered, including the quality of medical equipment and facilities, as well as less comprehensive and even unpredictable coverage. Moreover, intense competition and therefore very thin margins can lead to cost cutting which results in the lowering of the standards for the services provided and a lack of investment in things like new technologies.
Complexity and confusion: Having too many health insurance providers in the market can make it difficult for consumers to choose the best provider for their needs. The variety of options available can be overwhelming, and consumers may not have the knowledge or resources to compare the different providers effectively. The problem even extends to brokers which cannot keep up with all the products and options which can lead to incomplete or even inaccurate advice. Essentially this complexity and confusion can lead to consumers making uninformed decisions about their healthcare coverage.
Limited network options: When there are too many health insurance providers in the market, they may not have access to the same network of healthcare providers. This can limit the options available to consumers for receiving medical treatment and services. In some cases, this can lead to consumers having to travel further or pay higher costs to access the healthcare services they need. The proliferation in the use of specialised Third-Party Administrators (TPAs) however helps tackle this problem, ensuring wide networks and better discounts for direct-billing to be obtained, but it also means the insurer losing a vast element of control over the servicing of its clients.
While it may seem like having many health insurance providers in the Dubai market is a good thing for consumers, it can have negative consequences. Consumers may experience damaging competition, lower levels of quality, complexity and confusion, and limited network options. It is therefore important for policyholders to carefully consider the health insurer they choose and recognise that simply going for the cheapest might not be the best decision. Ensuring the desired level of coverage, reliability, service, and importantly the policy’s sustainability will usually end up being the best commercial decision in the long run.
There are measures in place to regulate health insurers operating in Dubai which helps control the number of new entrants and aspects of the quality and cover provided, but also natural market forces, just like natural selection in nature, help to weed out the weaker players. Insurers that do not invest in new technologies and their people, along with those with short-term strategies that only compete on price cannot not survive in an increasing mature market that is growing in its sophistication and competitiveness, as evidenced by several high-profile departures in the last few years. Consolidation in the form of mergers and acquisitions is also gathering momentum resulting in bigger, stronger, and more capable players. Ultimately insurers that can innovate, invest and put their clients rather than revenues at the top of their priorities will win out in the end and this is a promising proposition for consumers.