Global analysis of health insurance in The Gulf Region

Global analysis of health insurance in The Gulf Region

The prospects for health care insurance in the GCC states The sharp sell-off in global oil prices that began in mid-214 triggered an economic slowdown across the Gulf Cooperation Council (GCC) states, with enormous consequences for many sectors, including the health insurance industry. Despite this unexpected turmoil, however, significant changes in government health insurance regulations and rising populations are expected to generate some growth opportunities for private health insurers over the next three years, especially in the Kingdom of Saudi Arabia (KSA), where the private health insurance market is expected to grow by more than 9% annually through 221, according to projections from Oxford Economics. The sudden decline in oil prices has forced the GCC states to think more strategically about how to diversify their economies. And, in many states, developing a more robust health care environment has emerged as an essential element of their growth plans. Many, like the KSA, are moving to mandatory health insurance programs to help boost the medical infrastructure and decrease the tendencies of some Saudi residents to leave the country for medical treatment. This, in turn, is expected to boost premium revenues in the sector. The single largest economy of the GCC states, with a population of 32m, the KSA now requires as of 217 health insurance for all employees in the private sector, as well as their families. Similar rules are now also in place in Dubai and Abu Dhabi in the United Arab Emirates (UAE). But in other parts of the UAE, such as Sharjah and Ajman, mandatory health insurance rules are not enforced. These two economies command about 8% of the insurance premiums in the six-nation GCC. This brief report surveys the health insurance landscape and assesses the prospects for growth in the KSA, the UAE, Oman and Qatar. 1 Global analysis of health insurance in The Gulf Region

Health insurance in the Kingdom of Saudi Arabia The collapse of oil prices sparked an austerity drive in the KSA, but the spigot of government spending is expected to turn back on during 217. From next year, government spending is forecast to recover gradually, enabling a pickup in the rate of government health expenditures. It should take until the mid-22s, however, before the spending levels of 214 are re-established. As a result, the growth in resources for public health expenditures will be slower than in the past. Moreover, if oil prices weaken again (The Oxford Economics baseline forecast is for a gradual rise), government spending might be even weaker than forecast. With expected population growth and the government focused on diversifying the nation s economy to create jobs in new sectors, consumer spending in US dollar terms is set to grow by around 6% annually through 221. Demographic trends are also favorable. While the overall population is expected to rise about 2% per year, the share of the population aged 65 or older is expected to climb by about 7%, reaching 1.4m by 221 from about 98, in 216. This aging trend will tend to accelerate overall demand for health care services in the years ahead. Saudi Arabia s Outlook The expected decline in government spending should boost prospects for those selling private health insurance. Oxford Economics forecasts that the private health insurance market in Saudi Arabia will grow to reach US$3.5b in 221, from an estimated US$2.4b in 216, representing an overall rise of 45%. Until recently, the government typically has financed the bulk of Saudi health spending. So, one result of the expected fiscal austerity brought on by the continued slump in petroleum prices is that private, out-of-pocket spending for health care, as well as demand for health insurance products, is poised to accelerate. Indeed, government data indicates that government spending on health care fell from US$28b in 215 to US$27b in 216 (less sharply than overall spending), and will fall further, to US$25.5b, in 217. A gradual recovery is likely thereafter, as the period of austerity eases a little; The Oxford Economics forecast government spending on health care to rise to US$3.5b by 221. Global analysis of health insurance in The Gulf Region 2

Saudi health care spending Figure 1: Saudi composition of total health spending US$bn 5 Forecast 45 4 35 3 25 2 15 1 5 21 211 212 213 214 215 216 217 218 219 22 221 To meet rising demand over this period, the Oxford Economics expects the pace of private health spending (both out-of-pocket and insurance spending) to accelerate. These developments will be aided by government policy, specifically Vision 23, which sets out an expectation that the private sector will have an increasing role in capacity building. They forecast the private health insurance market in Saudi Arabia to reach US$3.5b by 221, from an estimated US$2.4b in 216, an annual growth rate more than 9%. Goverment Private health insurance Out-of-pocket Private health care insurance premiums will rise Figure 2: Forecast US$m 4, 3,5 3, 2,5 2, 1,5 1, 5 Forecast To meet rising demand over this period, the Oxford Economics expect the pace of private health spending (both out-of-pocket and insurance spending) to accelerate. These developments will be aided by government policy, specifically Vision 23, which sets out an expectation that the private sector will have an increasing role in capacity building. They forecast the private health insurance market in Saudi Arabia to reach US$3.5b by 221, from an estimated US$2.4b in 216, an annual growth rate more than 9%. 21 211 212 213 214 215 216 217 218 219 22 221 3 Global analysis of health insurance in The Gulf Region

A snapshot of Saudi Arabia Growth rates, per annum 211 16 Forecast of 217 21 Total population Population 65+ 2.3% 1.7% 3.8% 7.2% Consumer spending Total health spending 5.6% 4.5% 8.% 12.4% Total government spending 2.4% 6.% Government health spending 2.4% 14.6% Private health insurance 7.6% 9.3% Spending, US$b 21 216 Forecast of 221 Government 11.9 27. 3.5 Out-of-pocket 5. 7.8 12.2 1.5 Private insurance 2.3 3.5 18.4 Total health 37.1 46.2 Global analysis of health insurance in The Gulf Region 4

Health insurance in the United Arab Emirates With a population of just over 9m, the UAE is the GCC s secondlargest economy. While Abu Dhabi has imposed mandatory health insurance on employers since 26, Dubai has recently created mandatory health care requirements, and implementation has been underway. This requirement should boost the number of premiums being serviced in Dubai, though many are expected to be basic policies. Despite new government austerity measures, the capacity of employers to pay for health insurance should remain intact. Thanks to the increased diversification of the economy and continued inward migration, consumer spending in the UAE fell only modestly from 214 to 216, and spending growth is expected to increase by an average of 3.7% from 217 to 221. In July 216, the government of Abu Dhabi abruptly changed the state health insurance plan, requiring those seeking treatment at private hospitals to bear a 2% co-pay. This is likely to boost the prospects for insurance companies because they will be able to sell considerably more policies, even if many will be basic packages. United Arab Emirate s outlook The enhanced commitment to increased health care is not only boosting investments in the health care sector but also incentivizing insurers to work with employers on ways to help their workers improve their overall health. Across the GCC, obesity and diabetes are growing concerns, and engaging with insurers to monitor and improve their lifestyles could become a major part of cost-containment strategies. Since government spending is expected to rebound, Oxford Economics forecasts government health expenditures to rise to US$9.8b in 221, from US$8.4b in 216, while out-of-pocket spending will rise to US$3.7b by 221, from US$2.9b in 216. Consistent with this forecast, private health insurance spending should reach US$1.3b in 221, from just over US$1b in 216. 5 Global analysis of health insurance in The Gulf Region

UAE health care spending Figure 1: UAE composition of total health spending US$bn 16 14 12 1 8 6 4 2 Forecast Demographic tides in the UAE are also shifting. After growing at double-digit rates through the first decade of the millennium, slower growth has cooled inward migration, which makes up 9% of the population. However, a rise in the number of aging expatriates (those over the age of 65), which should reach 218, in 221, from 121, in 216, should also boost health care and insurance spending. 21 211 212 213 214 215 216 217 218 219 22 221 Goverment Private health insurance Out-of-pocket Health insurance premium forecast for UAE Figure 2 Forecast US$m 1,6 1,4 1,2 1, 8 6 4 2 21 211 212 213 214 215 216 217 218 219 22 221 Daman Health, a key health insurance provider in the UAE, is trying to harness big data and mobile applications to help employers better monitor employee health by suggesting exercise regimens and other habits for healthier lifestyles. Because price competition among providers is so intense, We have to invest more in service for our corporate clients, explains Dr. Sven Rohte, Chief Commercial Officer. Using big data analytics, We want our clients to better understand how much they pay for their workers lifestyle-related diseases, such as diabetes and lung cancer. The future for health insurance providers in the region is not just to cut benefits or increase employee co-payments but also to help employers develop calls to action for their workers to help them improve their own health. Global analysis of health insurance in The Gulf Region 6

A snapshot of UAE Growth rates, per annum 211 16 Forecast of 217 21 Total population 1.8% 1.4% Population 65+ 13.4% 12.5% Consumer spending Total health spending 1.6%.9% 3.7% 3.5% Total government spending Government health spending Private health insurance 2.2% 3.%.6% 3.% 4.% 4.6% Spending, US$b 21 216 Forecast of 221 Government 8.1 8.4 9.8 Out-of-pocket 2.3 2.9.8 3.7 Private insurance 1. 1.3 11.2 Total health 12.3 14.8 7 Global analysis of health insurance in The Gulf Region

Health insurance in the Sultanate of Oman The difficult economic environment created by low oil prices has forced some employers to reduce their medical coverage to employees. Group health insurance premiums declined by 2% last year, the government reported, while personal health insurance premiums grew by 12.5%, to US$315m in 216. While Omanis can visit free clinics, expatriates are especially affected by these changes, and the Oman Chamber of Commerce and Industry has proposed that mandatory health insurance coverage be provided to all private sector workers by 2181. Government spending has typically contributed 85% of total health spending in Oman over the past couple of decades. However, austerity measures are likely to cause this to decline gradually in the years ahead, dropping to 8% by 221. 1: http://timesofoman.com/article/9615/oman/health/health-cover-for-all-workers-a-must-in-oman Global analysis of health insurance in The Gulf Region 8

Oman composition of health spending Figure 1: Oman composition of total health spending US$bn 4 Forecast 4 3 3 2 2 1 1 This implies that the role for private health spending will continue to grow steadily in the years ahead. Private health insurance spending is forecast to grow from just under US$17m in 216, to US$22m by 221. Oman s population grew by about 4.5% each year from 2 to 216, mostly the consequence of expatriates moving in to find opportunities in the petroleum-based economy. Migrants comprised nearly half of Oman s 4.4m population in 216, compared with a quarter of 2.4m residents in 2. While population growth is expected to ease, the proportion of residents aged 65 will remain relatively stable. 21 211 212 213 214 215 216 217 218 219 22 221 Goverment Private health insurance Out-of-pocket Health insurance premiums in Oman Figure 2 US$m 25 2 Forecast Economic diversification and ongoing inward migration is expected to drive GDP growth back toward 3% p.a. by 218. Consumer spending in current dollars is forecast to rise an average 6.4% per year from 217 to 221, providing ample resources for spending on health services. 15 1 5 21 211 212 213 214 215 216 217 218 219 22 221 9 Global analysis of health insurance in The Gulf Region

A snapshot of Oman Growth rates, per annum 211 16 Forecast of 217 21 Total population Population 65+ 1.3% 7.5% 7.7% 6.8% Consumer spending Total health spending 3.3% 4.6% 6.4% 1.1% Total government spending 2.2% 7.6% Government health spending 2.2% 11.3% Private health insurance 5.8% 5.6% Spending, US$b 21 216 Forecast of 221 1.3 Government 2.5 3.4 Out-of-pocket.2.3.1.4 Private insurance.2.2 1.6 Total health 3. 4. Global analysis of health insurance in The Gulf Region 1

Health insurance in Qatar At the end of 215, Qatar shut down its national health insurance program. The sudden announcement came amid an economy slowed by falling oil prices. The suspension suggests that the government intends the private sector to play a larger role in offsetting the government s spending. Reports suggest a new government-operated insurance plan may be in the offing, but details have not been released as of yet. Qatar health care spending Qatar composition ofoftotal health spending Figure 1: Qatar composition total health spending US$bn Forecast 7 6 5 4 3 2 1 21 211 212 213 214 215 216 217 218 219 22 221 Goverment Private health insurance The government-run, nonprofit health care provider in Qatar, Hamad Medical Corporation (HMC), runs five hospitals and 24 primary health care centers and community clinics. Citizens and residents can access health care at a heavily subsidized rate at HMC clinics and hospitals. For help with services in private hospitals, however, residents must turn to the private insurance market. Public health spending typically has accounted for around 8% of total health spending, and their forecast is for this to persist. The demand for health care services is likely to grow, however, based on the nation s high disposable income rate, rising life expectancy, low infant mortality, and an increase in lifestyle diseases, such as diabetes, high blood pressure and obesity, as in other parts of the GCC s. Out-of-pocket Source: Oxford Economics/Haver Analystics Qatar health insurance premiums Figure 2 US$m 8 Forecast 7 6 5 4 3 2 1 21 211 212 213 214 215 216 217 218 219 22 221 11 Global analysis of health insurance in The Gulf Region Oxford Economics projects private health insurance spending to reach US$64m in 221, up from US$4m in 216, representing baseline growth of 9.1% CAGR. However, if the government fails to move forward with a revised public health insurance plan, revenues for private health insurers could become substantially higher.

A snapshot of Qatar Growth rates, per annum 211 16 Forecast of 217 21 Total population 1.8% 4.3% Population 65+ Consumer spending Total health spending 6.9% 9.5% 12.3% 9.2% 8.6% 9.1% Total government spending Government health spending 6.5% 1.8% 9.4% 9.1% Private health insurance 9.1% 16.6% Spending, US$b 21 216 Forecast of 221 Government 2. 3.5 5.4 Out-of-pocket.4.4.6.2 Private insurance.4.6 2.6 Total health 4.3 6.6 Global analysis of health insurance in The Gulf Region 12

Conclusion Across the GCC, health care is intimately connected to the macroeconomic outlook for oil prices and continuing efforts by governments to improve the delivery of health care services for their people, both local citizens, as well as expatriate workers. As each state seeks to diversify its economic base, the health care industry is poised to expand further, as will the demands for health insurance. In some of the region s larger economies, such as the UAE and the KSA, high premium growth is expected to persist, making the region relatively attractive to health insurance providers. 13 Global analysis of health insurance in The Gulf Region

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