Health insurance models vary from country to country. As highlighted in our first series of articles on international health markets, governments often dictate the role of private and public health insurance within any country. Milliman has produced a new series of blogs focused on the medical underwriting and risk adjustment practices of eight countries: Australia, Ghana, Ireland, New Zealand, Saudi Arabia, South Africa, Spain, and United Arab Emirates. This is the seventh article in our series.

Background to healthcare in the Middle East
The Middle East is going through rapid health reform with the transformation of a historical publicly funded health system into a hybrid public-private insurance model. The governments in these countries are facilitating the development of the provider community through the legislation of compulsory health insurance coverage, thus shifting the onus of the development of healthcare from the public sector to a public-private partnership, with the help of the private provider community and insurance industry.

Though no more than 10% of the population of any one Gulf Cooperation Council (GCC) country is currently covered by insurance, this is expected to change quickly. Workers covered under these plans can choose care at either public or private institutions, a system that has the benefit of ensuring that public providers must learn to generate claims in order to be reimbursed by the government. Once private health insurance takes hold, patient volumes for private providers will rapidly increase, as patients are allowed to pursue reimbursed care at private institutions.

Depending on the country, the health insurance opportunity could either be to enter as a stand-alone private player, or to form a joint venture with the government to establish and manage a national insurer.

Saudi Arabia
The healthcare network within the Kingdom of Saudi Arabia compares well with its counterparts in the West, and its health systems have been ranked in the top 30 in recent World Health Reports from the World Health Organization. Moreover, Saudi Arabia has been ranked as the largest among 17 healthcare markets across the Middle East and Africa, establishing it as one of the most valuable healthcare markets in the region.

Health services in the Kingdom are delivered through both the public (approximately 80%) and private (approximately 20%) sectors.

Public healthcare system
The provision of free healthcare is enshrined in the constitution of Saudi Arabia. Free healthcare is provided to all nationals and expatriates working in the public sector and to all pilgrim visitors (two million to three million pilgrims, or more, visit the Kingdom every year from all over the world). These services are delivered through the Ministry of Health (MOH) and other government agencies.

The healthcare system has two tiers. The first is a network of primary healthcare centers and clinics that provide preventive, prenatal, emergency, and basic services. These are supplemented by mobile clinics that visit remote rural areas dispensing vaccines and performing basic medical services. The second tier comprises the hospitals and specialized treatment facilities that are located in major urban areas throughout the country so as to be accessible to all.

Funding the free public healthcare services is an ever increasing challenge faced by the government, driven in particular by the rapid growth in population, the high price of new technology, and the growing awareness about health and disease among the community. Many large employers are already purchasing group medical expenses insurance for both their Saudi and expatriate staff, in order to avoid discontent among the Saudi staff members when only expatriate staff have access to private treatment.

Private healthcare system
The rapidly growing private sector accounts for approximately 20% of health services delivered in the Kingdom. The private sector provides health services through its health facilities, including hospitals, dispensaries, laboratories, pharmacies, and physiotherapy centers throughout the Kingdom. Expatriates are not permitted access to government hospitals or clinics.

The private health sector is supervised and regulated by the Council for Cooperative Health Insurance (CCHI), which was established in 1991 to meet the challenges of the Kingdom's rapidly rising health costs and to introduce a health insurance strategy for the Kingdom. Supervision of insurers transacting medical expenses insurance is the responsibility of the Saudi Arabian Monetary Agency (SAMA) within the framework of the Cooperative Insurance Companies Control Law.

The implementation of a cooperative health insurance scheme was planned over three stages, with only the first stage having been implemented to date:

- Stage one: Employers have to pay for health coverage costs for expatriates and Saudi nationals working in the private sector, as well as their spouses and children (usually between the ages of 10 days and 18 years), as long as the employee is resident on married status. This was introduced in 1999 but did not come into force until 2006. Currently there are approximately 9 million expatriates in the Kingdom and residence permits (iqamas) are no longer issued to expatriates without proof of the requisite medical insurance.
- Stage two: Government to fund cooperative health insurance for Saudis and non-Saudis working in the government sector. No firm dates, deadlines, or details have yet been published, but the scheme and the methods of implementation may be similar to the existing expatriate insurance provisions.
- Stage three: Cooperative health insurance to be applied to other groups, e.g., a seasonal health insurance for all international pilgrims. This also has not yet been implemented.


Underwriting, risk selection, and risk adjustment
The Saudi health insurance market is characterized by intense competition. Premium rates for employee group schemes have been declining on average in the market in the last two years. However, in October 2012, the Saudi Arabian Monetary Agency conducted an actuarial review of medical underwriting in the Kingdom, which resulted in a number of insurers being forced to raise their prices because they were not charging enough for their products.

The CCHI specifies a unified policy wording (without variation to group and individual business) with a standard minimum of SAR 250,000 (USD 66,667) annual coverage policy for expatriates with benefits including inpatient (hospitalization), outpatient (including prescription medicines and physician visits), maternity, dental, and optical benefits. Preexisting ailments are covered, but in cases of voluntary purchases the waiting period for preexisting ailment coverage can be 12 months.

Clients purchasing group or individual medical expenses insurance can choose to extend the unified policy by providing for larger coverage limits than the mandatory or by opting for medical, dental, or maternity coverage extensions.

Approval for treatment is usually required in respect of claims exceeding between SAR 500 and SAR 1,000 (USD 133 and USD 267). In most cases, approval can be made by insurance companies or their mandated third-party administrators (TPAs) within 15 minutes of receipt of a request, but standards of administration do vary. No prior approval is required for emergency cases, but insurance companies usually require notification within 24 hours of occurrence.

For groups, it is usual for a unified rate to be applied. Underwriters arrive at a group rate by considering size of group, loss experience, gender, nationality, age bands, scope of coverage, and limits and deductibles, among other factors.

For individuals, rating will take into consideration the age, gender, and medical history of the proposer together with the scope and limits of coverage required (including geographic area and deductible selected).

Managed healthcare
There are some companies that provide managed care programs for self-insured clients and third-party administration services, though they cannot own any hospitals in the Kingdom. Services these companies may provide include product design and support, underwriting, pricing, medical management, network management (policyholders may not go outside the network), reinsurance, and operations management (policy issue, claims, membership cards, directories, and membership package), among others.

Comment
Despite admirable progress in the healthcare sector, the Kingdom of Saudi Arabia faces numerous challenges to maintaining and developing its healthcare system. These include a shortage of local healthcare professionals, financing and expenditure demands resulting from the high provision of free services, changing patterns of disease, the absence of a national health information system, privatization of public hospitals, utilization of electronic health (e-health) strategies, and the poor coordination and communication between the various health service providers in the Kingdom, resulting in a waste of resources and duplication of effort. However, it has made significant progress over the past 10 years and continues to improve on the status quo.