From subsidiarity to complementarity.

A few years ago French health insurers would observe American HMO thinking that this health care system operators could teach them methods useful for the future.

They could have gone less far, since Spain for a long time has a private health insurance system which substitutes to Social Security. Thus one can learn a lot today from the Spanish market practices, which is developing its products in a competitive environment where the marketing specialists listen, if they do not precede them, the customer needs. But today we perceive the limits of the system, and some insurers are beginning to experiment complementary solutions between public and private sectors, in products, but also in the management of healthcare supply.


In Spain there is a universal social security system in favor of any person living in the territory. Funding is provided by taxes and not by contributions based on labor income. Treatments are free in all cases, except for dental is not supported. Some drugs are covered by Social Security, some not, and there are more generous supported mechanisms for certain fragile social groups, such as pensioners. The downside of this is that Social Security assigns each beneficiary to a general practitioner who acts as a gate keeper for access to examinations, hospitals and specialists.

This is a perfect example of a medicine organized like the NHS that creates queues typicla of this type of state managed health systems. The patient in emergency or under a treatment against cancer is perfectly treated, as Spain has inherited its Arab invaders an advanced medicine of the highest quality. If a patient suffers flu in a large city, the flu will be treated on its own before the patient could get an appointment with his assigned doctor.

To meet this need for speed and convenience, as well as comfort during hospitalizations a private health insurance has been implemented. Since the late nineteenth century existed igualatorios created by physicians, funded by capitation, that treated for "free" the inhabitants of a village or the employees of a company like the first American HMO did. Either the boss was paying for his workers, or every villager paid his mite to the local doctor. Some of these igualatorios still exist funded in a more or less crude way, since the insurance supervisory bodies consider that capitation cannot be used as a method of financing health insurance.


In this market where current health companies do not look at all like the old igualatorios two types of guarantees are offered, the asistencia sanitaria which is by far the dominant formula and a formula called reembolso, which is a contract that reimburses medical expenses. We shall spend more time on asistencia sanitaria as it is the system which is more original. The insurer provides the insured a network of doctors, laboratories, hospitals, chiropractors and in some cases dentists. These networks consist of many practitioners and in principle cover the whole territory, so that the client can find a doctor when he is travelling in the country. The companies have between 20 and 35 thousand doctors referenced and the size of the network is a major selling point. The mother wants to find the pediatrician she trusts and the lady the gynecologist she regularly consults. As there are in the Peninsula has 173 000 physicians, it is normal that the same practitioner works for several companies. He consults frequently for Social Security in the morning, and on a private basis in the afternoon.

If the customer consults a doctor of the network, in principle, it does not pay the visit. He pays nothing. With a magnetic card, the doctor is paid directly by the insurer. There are contracts with a deductibles, what we would call a co-payment. They are obviously less expensive since the cost of the visit is less for the insurer, and especially because the very presence of the deductible reduces medical consumption. In some of these contracts the amount of deductibles is limited on an annual basis, so that in case of real health problem the customer is fully supported. Despite the fact that products with deductibles clearly obey an economic logic, they do not have the success one could expect. The explanation usually given is that if a customer has the economic capacity to pay for a health contract, he wants to be covered for all and everything and without paying anything. This principle of gratuity when using the service applies to the doctor, and also, for examinations or hospitalizations in the clinics of the insurance company's network.

Regarding coverages the market is completely free. The only requirement is that the contract should cover critical emergencies without waiting period. According to company policies and the price of the product, guarantees are more or less complete but the differentiation is done mainly by some marginal benefits, since all contracts offer immediately very good basic guarantees. Psychologist sessions can be offered, chiropodist, homeopathy visits or support to medically assisted reproduction. Logically there are fads, as now the storage of stem cells from umbilical cord.
Technically, the management of this type of insurance is quite different from that of a traditional health insurance. The first point is that we are dealing with the health of the insured and his family which explains high customer sensitivity at the time of claims management. When a mother calls because her child is sick, it is the medical platform of the insurer that decides whether to send an ambulance and go to the hospital emergency, or if it can wait for the GP visit the next morning. Another difficulty is that the service is not provided by the insurer but by an external service provider. One must be able to control the quality of service but also control the service provider itself. If the customer pays a fixed premium it the insurance company, the doctor or the laboratory are paid by a fee. Neither in France nor in Spain doctors are not pure spirits and the insurer must verify that the consumption generated by a practitioner does not deviate too much from that of his confreres in the same region. One last point where the difference with traditional insurance is obvious is that the cost of claims depends on the company size. A very powerful company that can promise a doctor sending many clients get for that doctor better conditions than a smaller operator. The companies do not communicate about what they pay their doctors, but a market estimation is that for a general visit, the gap can be from 5 to 20 € depending on company size.

The other type of product is simpler. This is what is called reembolso.. In almost all cases, 10 to 20% of the price of the visit is paid by the patient who is free to viist the doctor of its choice. However this deductible is removed if the patient consults a provider who belongs to the medical insurer network. Given the size of these networks, it is very common that the customer of this type of contract consults within the network. Certainly it does not support the deductible but the insurer pays the doctor at the agreed price for all its services. As these contracts of reembolso are sold significantly more expensive than conventional contracts, and that, in fact, the insured uses them as a traditional contract, this method gives better technical results to the insurance company.


The total revenues of health insurance in 2014 is 7.175 billion from € 23.5% of turnover IARD.

  • 78.5% is the asistencia sanitaria
  • 6.7% reembolso
  • 14.7% daily allowances*

Number of insured 10.4 million or 22% of the population.

27% of health costs are borne by the private sector.

loss ratio:

  • 80.7% in asistencia sanitaria
  • 69.8% in reembolso.

The market is highly concentrated: the top 5 players account for 71.4% of the market.

* Insurance of daily allowance has no specificity in the Spanish market and has not been taken into account in this article.


We have seen that the technical results in asistencia sanitaria, where most of the portfolio is located, are not really good while premiums, higher in absolute value, can hardly be increased. Of course there is a total pricing freedom and as contracts are more or less comprehensive, we find all prices on the market. To give an order of magnitude to aFrench player, for a comprehensive “classic” contract, the monthly premium for a person aged 40 will be between 40 and 50 €. On a yearly basis this means between 500 and 600 € for each family member, representing a total of between 1,500 and 2,000 € per year, depending on the number of children. Rates are now unisex although women consume more, and they vary naturally with age, becoming economically unsustainable for an elderly person. In fact if you compare these prices with those of the French complementary health system you see that they are in fact quite modest, since in Spain the insurer replaces completely Social Security. The client of the private insurer costs nothing to Social Security. The only exception being the very heavy treatments where the Spanish prefer advanced medicine of the large public hospitals, even though the comfort of the room is less than in a private hospital.

Each year these rates increase by a few points to reflect the evolution of medical techniques. Health is even the only branch that grows in the Spanish market hit hard by the economic crisis that pushes customers to reduce their guarantees. The high level of this premium in absolute terms, in a country where every citizen can have free access to Social Security is the main challenge for health insurers when they project themselves into the future. They fear that citizens end up refusing to pay twice - first by taxes and then by private insurance - the cost of their health.

On the commercial side, there are for years almost a stagnation in the number of policyholders, as insurers are engaged in a fierce battle to conquer customers. In fact customers move from one insurer to another, without growth in the overall market. It is as if those who already have a health contract wanted to keep him, if possible by paying less at a rival insurer, as companies fail to ensure people who are not already insured.


This has led several companies to offer products that do not substitute completely for Social Security and, therefore, are much cheaper. Thus appear contracts that cover only outpatient treatments. They aim customers living in large cities where access to medical Social Security is very long. For all common health problems the customer is taken is charge rapidly. If he has to be hospitalized, he must use the Social Security. Other products are positioned exactly in reverse. They target people in small towns where the doctor often for Social Security is more accessible, but where the local hospital is inadequate. The contract only covers hospitalization leaving the patient to choose the most convenient hospital. Today the market share of these new products is marginal compared to the traditional portfolio of contracts, but many insurers see it as a future solution. It's the same contracts with deductibles, which has said before do not develop as expected, but which will experience significant growth in the coming years.

If we now leave the product level to be at the level of providers, we see connections between the public sector and the private sector that also correspond to a search for complementarity. The oldest example is the insurance of civil servants. They have a special social security scheme managed by a mutual copany - Muface - which receives its funds from the State. Each year Muface organizes a tender offer for private insurers to provide the same services as the Social Security at a price set by Muface. Today four companies participate in this plan that involves more than one and a half million of civil servants and their families. Every civil servant has the choice between staying within the framework of Social Security or use one of these private insurers. Over 80% are choosing private schemes, which says much regarding the bad image of the public sector. This mechanism is similar to a public service concession, the private entity committing to provide a benefit under a specification and a price fixed by the Administration.

Newer and more original is the entry of private operators in the management of public hospitals. Most health insurance companies have hospitals, clinics and care centers. It's a way to give visibility commercially, to provide service to their policyholders and control costs, since in these establishments the staff is on the payroll of the insurer. It's not innovative and it evokes the mutual clinics that exist in France. What is more interesting to observe is that in some regions, we see private insurers managing the entire health of the population.

Health is part of the powers delegated to the autonomous regions and the Levant, whose capital is Valencia, is a leader in this field. Since 1999, Adeslas, the first entity in the market, is managing an hospital created by the regional government. The company is paid by a capitation system and patients are treated free of charge, as they would be in a hospital run by the Social Security. In a part of the same region, Sanitas, a subsidiary of BUPA and second market player, runs a general hospital, 22 medical centers and a long stay hospital for a population of nearly 200 000 inhabitants. Asisa in the same region, a cooperative of doctors and the third company in the market, manages the health of 160,000 people in the Torrevieja area with a hospital and 10 medical centers. The same company manages on behalf of the Social Security two hospitals by merely a manager role, the initial investment being made by the Administration. The German company DKV another big market player also runs a hospital. On a smaller scale, there are few experiences in Catalonia of medical centers where doctors treat a community of insured on behalf of Social Security in return of a lump sum. All surveys show the overwhelming satisfaction of insured persons who are delighted with the service rendered.

If these experiments work to customer satisfaction, one had to make adjustments in the relationship public authority / insurance company. In recent years the remuneration of insurance companies for their management has been revised upwards, as they failed to balance their results. It is also -and especially –necessary to take into account the political dimension. In Spain as in France, health is sacred and it is supposed to have no price. It is no coincidence that these concession experiences of health management to the private sector took place in the Levant, a region governed by the right. In the province of Madrid also governed by the right, there is an hospital run under a public / private plan but the attempt to privatize six public hospitals in 2013 raised such a protest movement that the regional government had to backtrack. Today these cooperation projects public / private despite the success they represent in the Valencia region are paralyzed. Local governments consider that the political cost of any attempt to healthcare privatization is too high and the professionals believe that only an agreement right / left in the spirit of the Pacto de Toledo* allow these mechanisms to thrive.

As Spain is not a field of roses for health insurers that must evolve a perfectly honed model but failing to grow. The future is not in an open struggle between Social Security that would dispense a medicine of the poor and private insurance that would provide every year new and always more expensive guarantees. Clearly the expansion of a private insurance becoming complementary and the contention of the overall cost of health care for an aging population will be the result of a collaboration between public and private. The State will guarantee a basic service and let the private sector freeto supplement or enhance the benefits provided by Social Security.

Jean-Pierre Daniel - February 2015

* Signed in 1995, the Pacto de Toledo in agreement whereby all Spanish political and trade union forces designed what had to be the evolution of the pension system in the coming years. Jean-Pierre Daniel is the commercial vice president of Agrupació, an health insurance insurance company. Is is a mutual insurance company based in Barcelona that, after experiencing difficulties, was demutualized in 2012 and purchased by the Crédit Mutuel Assurances.

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