Private Health Insurers� Roles To Expand As National Healthcare Costs Soar, Projects PricewaterhouseCoopers

New report examines drivers of trends reshaping health insurance business model

31 October 2006 – Governments around the world are looking to expand the role of private insurers as a source of funding the delivery of healthcare, according to a new report issued today by PricewaterhouseCoopers. The report entitled �Healthy Choices: The Changing Role of the Health Insurer,� forecasts that the threat to governments� fiscal objectives from rising public sector health expenditures will drive the expansion of private sector contributions, and this trend will reshape the health insurance business model globally.

James Scanlan, US insurance industry leader, PricewaterhouseCoopers, said:

�While the contribution of private health insurance varies greatly from one country to the next, we�re seeing widespread pressure to expand the role of private insurers because taxpaying populations are losing faith in the ability of government to provide adequate healthcare as they grow older.�

“This trend will reshape national social policies and insurance business models as insurers� position in the healthcare value chain changes.�

The PricewaterhouseCoopers report examines the drivers and implications of change from a global perspective and explores in detail the existing health insurance systems in different territories around the world, including Australia, China, France, Germany, Ireland, the Netherlands, Switzerland, the United Kingdom and United States. A full copy of the report is available at

Key findings of the report include:

  • PricewaterhouseCoopers forecasts that healthcare spending will reach a median of 16 percent of gross domestic product (GDP) among the OECD countries by 2020. The share of GDP consumed by healthcare costs is rising in all territories, and publicly funded healthcare is putting enormous pressure on the sustainability of national fiscal policies. As a result, even governments that largely or solely fund healthcare are looking to private insurers to become part of the solution.

  • The duplicative insurance scheme � a private health insurance system that operates parallel to the publicly funded system as found in the UK � is giving way in some places to a substitutive scheme in which private health insurance replaces publicly funded insurance. In a substitutive system, policyholders are not entitled to public funding for relevant care and therefore are not expected to pay fiscal dues to the government. This system has evolved in countries with social health insurance such as Germany, and France where self-employed persons and those with higher incomes have increasingly opted for private insurance.

  • Bigger is better. In a competitive market, health insurers with scale will have an advantage and better bargaining position with healthcare providers, making them more effective buyers of healthcare services than government entities. This trend is likely to drive consolidation in the health insurance industry.

  • Risk sharing will grow as consumers pay more of the cost of their care and efforts to control health costs focus on the reduction of frivolous healthcare claims and over-usage. The challenge will be to carefully design risk sharing plans in a way that promotes preventive care and does not discriminate or jeopardize access. The risk for policyholders is being tempered in community-rated markets that require health insurers to charge a flat premium rate to all policyholders and guarantee policy renewal and acceptance of claims without exclusions. Community rating may constrain administrative costs by eliminating underwriting at the individual policyholder level.

  • Longer-term contracting, funded schemes such as level premium systems and ageing reserves are evolving and will reshape health insurance business model in many markets. It is proving difficult for health insurers and public sector pay-as-you-go systems to build a sustainable business model based on 12-month insurance contracts that properly encourage preventative care to manage costs over the long-term. Many private insurers are considering long-term coverage for 10 years and longer or for life, but must be careful to manage associated risks. In addition, in countries such as Germany, there is a legal requirement to set aside funds for use when the policyholder is aging, similar to pension funding.

  • Healthcare access policies will drive premium regulation in markets where health insurance achieves high penetration.

Jim Henry, global health industries leader at PricewaterhouseCoopers, commented:

�Health insurers are not just interested observers of national debates over healthcare financing. More than any other business, health insurance is linked very closely with social policies. Reform is on the agenda nearly everywhere and the way in which each country shapes its healthcare funding system will determine the future directions and role of its health insurers. What�s clear is that new winners and losers will emerge, and the winners will be those insurers who anticipate and prepare for the major changes ahead.�

About PriceWaterhouseCoopers

  1. A full copy of the report is available at

  2. PricewaterhouseCoopers ( provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. �PricewaterhouseCoopers� refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.