A flagging government health insurance system and higher incomes present an opportunity for domestic and foreign insurers alike.
At cafes and in homes, healthcare costs have become a major talking point among Vietnamese people, with the Ministry of Health (MoH) recently announcing a draft proposal to raise hospital fees by 7-10 times more than currently applied.
Under the draft, patients will have to pay VND40,000 and VND100,000 (US$2.1 to US$5.2) per day for standard and first-grade beds, respectively, as opposed to the existing price of just VND3,000 and VND10,000. To undergo an endoscopy, for example, patients previously paid VND20,000-VND60,000 but will now be presented with a bill for more than VND300,000.
If the proposal is accepted, many people will find it extremely difficult to even afford basic healthcare. State officials are among those that must contribute to Vietnam’s health insurance system, with 6 percent of their salary, of which they pay half, being paid in premiums. The poor, the disabled, and students are also obliged to purchase a government health card, with partial financial support from the State budget.
The health insurance fund pays for all healthcare services as long as the cost does not exceed VND7 million per service, to a limit of only VND29.2 million (about US$1,500) in total. For those wanting better coverage of their health costs, private health insurance provides a sound remedy.
With a population of 87 million, Vietnam’s health insurance system generates a huge amount of money. As shown in a report from Vietnam Social Insurance (VSI), there were 49.5 million people insured by the government system, covering 56.6 percent of the population. At an average contribution of approxi- mately US$20, the total money received was some US$990 million.
Ineffective use
But such a large amount of money clearly does not guarantee good services for the insured. People with private health insurance or no insurance at all, and who will pay in full, are generally treated much better at hospitals.
“I don’t like to waste my money, but I’d be on a long waiting list and receive substandard care if I used my government insurance card,” said Ms. Bui Thu Huong, a patient at a state-owned hospital in Ha Dong district, Hanoi. She suffers from back pain and prefers to pay the hospital fees in full rather than receive a cursory physical examination under her government health insurance card. As a State official, she must take out government health insurance.
Hospitals defend this two-tiered standard of treatment. “The amount paid for healthcare services under the government’s health insurance system is outdated,” said Dr. Nguyen Minh Quan, Director of Thu Duc District Hospital in Ho Chi Minh City. “For instance, hospitals receive only VND3,000 (US$0.15) for each physical examination conducted, while the normal fee is around VND30,000. It is quite obvious why unequal treatment of patients, based on their insurance,
exists.”
The price scheme for visits to hospitals and medical centers, paid by the Vietnam Health Insurance Fund (VHIF), was developed by MoH in 1995 and has seen no significant change since.
In addition, there are leaks within the management of the health insurance fund and public money is being lost. The cost of health examinations, which are very hard to calculate, accounts for more than 50 percent of all health insurance payment in some provinces. “It is ridiculous that half of the fund is being spent on simple check-ups,” an expert from MoH told VFR.
In addition, the price paid by VHIF for pharmaceuticals is always higher than the market price, sometimes by as much as 30 percent. Lacking the power and the ability to control prices, VHIF is helpless. As a result, it has never been out of the red since its launch in 1992. Last year’s deficit was nearly VND2 trillion (more than US$100 million), the highest ever.
Speaking to the media, Deputy Director of the Viet Nam Social Insurance Agency Nguyen Dinh Khuong said that their statistics show that the cost of check-ups, treatment and medical services for patients with health insurance is higher than for those without. Yet the insured still receive substandard health services.
Better choice
High-income earners, who prefer and are able to pay for better health insurance services, have an alternative in private health insurance. Under the Vietnam Health Insurance Law issued in 2008, private enterprises are not allowed to take part in the health insurance scheme operated by the government, but private health insurance is permitted.
Appearing in the market in early 2000s, private health insurance has now developed into a segment recording VND1,203 billion (US$63 million) in revenue in 2007 and VND1,954 billion (US$100 million) in 2009, according to figures from the Association of Vietnamese Insurers.
With the increasing incomes of urban dwellers, plus the unsatisfactory nature of government health insurance, many people prefer to take out private health insurance. Corporate customers, who are looking to purchase an insurance package for all of their employees, are a possible gold mine for insurers. In 2008, Techcombank signed an agreement with Aon, a leading global insurance broker, for a premium health insurance program for their employees. The bank’s move signals a new opportunity for insurers in Vietnam.
“I choose the Medical Care service because I think it represents value for money,” said Mr. Hoang Manh Cuong, who has a health insurance policy with Bao Viet Insurance in cooperation with HSBC. He said that he can have periodic physical examinations at a renowned hospital. “I’d need to be quite sick to completely check out the service, but I’m happy with it at the moment,” he joked.
Better service should, indeed, come with higher premiums. Mr. Cuong took out the Preferred Package with a premium of VND2.125 million (US$110) per year, 5.5 times higher government health insurance but with a limit 11 times higher (VND324 million compared to VND29.2 million). “There are various kinds of packages to choose from, depending on your needs and age, which is better than a universal fee for everyone,” he said.
When introducing the Medical Care package for individuals and Employee Care for corporate consumers in mid-2009, Mr. Thomas Tobin, CEO of HSBC Vietnam, expected success in the new market. He believed that improving living standards and greater concern about health issues would motivate more people to take out health insurance, like that offered by HSBC.
Along with HSBC and Bao Viet, many other players have already jumped into the market, with AIA, Prudential, Bao Minh, and PJICO contributing to its rapid growth. Bao Viet, the largest non-life insurer in the market, claimed that their health and medical subsidiaries record the highest growth rate in the company, at 40 percent year-on-year in 2009.