Israel: Private medical insurance reforms — part II

Employer Action Code: Act

The government approved two private medical insurance (PMI) reforms in 2023. The first, effective October 2023 (after some delays), intends to help consumers make informed decisions on the purchase of commercial PMI by standardizing three important coverages and providing information and tools to help compare PMI policies (see our Global News Brief: Israel: Private medical insurance reforms). The second reform, currently being implemented, is intended to curtail redundant insurance coverage and premiums. Specifically, double insurance is prevented by restricting group and individual PMI policies from providing “first shekel” coverage of healthcare services that are also covered under supplemental healthcare insurance offered by the four nonprofit health funds under the National Health Insurance system. (First-shekel coverage allows insureds to undergo surgery in Israel without the need to first go through their health fund.) It’s estimated that about 80% of the adult population purchase supplemental insurance from their health fund, and 40% have both this supplemental insurance and individual PMI. In addition, a substantial portion of the workforce is covered under group PMI policies arranged by employers. Employers in Israel will need to decide whether to maintain “first shekel” private medical insurance for their employees as policies are automatically switched to prevent double insurance coverage.

Key details

• Commercial PMI policies purchased by individuals since 2016 that provide first-shekel coverage were automatically switched on June 1, 2024, to policies that only cover surgery costs not covered by the health funds’ supplemental insurance (i.e., complementary rather than first-shekel coverage), unless the individual policyholder instructed otherwise. This change has affected more than 2 million individuals who have both supplemental insurance from their health fund and PMI.
• The same change applies to group PMI arranged by employers for their employees. At their next policy renewal date on or after October 1, 2023, such policies will automatically be switched to ones providing complementary rather than first-shekel coverage for surgery unless the employer chooses to maintain first-shekel coverage.
• Due to the change in regulations, renewal premiums for first-shekel PMI are increasing significantly.
• The change is expected to result in much longer waiting times for surgeries within the health funds — waiting times that were already substantial before this move.

Employer implications

Of companies surveyed by WTW, 46% offer some level of group PMI for most employees, typically covering surgery and outpatient care for employees and dependents. (Employer-paid premiums for PMI are taxable as a fringe benefit to staff.) As PMI policyholders, these companies will want to consider and decide which type of policy to arrange for their employees when their current policy expires. Premiums for the much more limited complementary PMI coverage will be lower than those for existing first-shekel PMI policies, while premiums for continuing the existing first-shekel PMI coverage will become much more expensive at the next renewal date.