Last month, the PVZP Insurance Company decided to leave the Czech Insurance Association due to the Act on the Residence of Foreigners, which was enacted during the summer. We discussed this decision and more with Robert Kareš, Chairman of the Board of PVZP.
How long have you been with VZP a.s.?
I have been involved in these activities since right after I graduated, in 1995. Until 2004, I worked for the Public Health Insurance Company (VZP in Czech) of the Czech Republic in the Contractual Insurance Department as a loss adjuster, and later as assistant director, and insurance risk manager. In 2003, I was tasked with establishing an independent daughter company called Pojišťovna VZP a.s. (PVZP) and migrating certain activities to this new entity. I was the CEO for ten years, and as of 2016, I am the chairman of the board, which has three members including myself, Halina Trsková, and Pavel Ptáčník.
What sets PVZP apart from other insurance companies?
Three main aspects. We are a purely Czech insurance company with no foreign ownership, our shareholder is the largest Czech insurance company, and last but not least, I would like to point out that our business has never operated at a loss since 1995. Not even last year, during the pandemic, and I am certain that we will continue in this vein during this very difficult year.
What big advances have you made since 1995?
Initially, our services were very narrowly specialized, we worked in contractual health insurance for foreigners and treatment expenses insurance for foreign travels. We now provide universal, general insurance, and we have managed to increase our starting capital five-fold through our own means and to increase direct insurance premiums ten-fold, to one billion crowns. Among our products is not just health insurance, but also that of property, liability, vehicles, and more. This year marks the second time in history we have been lawfully designated as a temporary sole insurance provider for foreigners.
What effect has the Covid pandemic had on your business?
A dire one, indeed. Over the last two years, our branches have been closed down for a total of nine months, and we have suffered great losses in terms of mobility-related products, namely travel insurance. We have been trying to offset these losses through other products, but it is difficult. The pandemic has also brought about a change in the Act on the Residence of Foreigners, who are temporarily in our care in terms of insurance. This resulted in a lot of back and forth in the media, but also our company leaving the Czech Insurance Association.
What prompted the legislators to make this change?
We have been just such a partner in the past, between the years 1995 and 2006. After things eased up around foreigner insurance, we experienced two extremes. The first one being the immense pressure to include more and more groups of foreigners in the scope of public health insurance. And the second one was the rather wild-west approach to the business of some brokers who saw insurance as simply a formality that people needed in order to be allowed to reside in Czechia, and not a substitute to public health insurance as per Directive 2003/109/EC in case a member state decides to exclude the group of people from public coverage of more than 90 days. Unfortunately, some stakeholders in the insurance market found this way of thinking enticing. Brokers were paid up to 80 percent commission for bringing in a new client. When the insurance cost 10 000 CZK, there was not much money left to insure with. This led to Czech hospitals and healthcare facilities accruing large amounts of debt, as well as other negative market occurrences, such as extreme segmentation (approaching healthy, young, and active clients), which subsequently raised the insurance premiums for more vulnerable groups of people.
We do not feel the same as these insurance companies do when it comes to foreigner health insurance. To them, it is mostly about the usual insurance as regards free movement of capital and services, but we feel that it should be seen as a part of the EU immigration policy, as well as the sectors of safety, law, and justice, including the aforementioned Directive 2003/109/EC. I dare say that we are right in this based on almost thirty years of experience, as well as reports, analyses, opinions, and decisions of EU authorities. This makes for some rather serious regulation. Another key document we base this on is the analysis and decree of the Government from 2014, which concludes with a very resolute NO to extending the coverage of Czech public health insurance to any more groups of foreigners. This analysis points out the huge implied risk and recommends that the law be amended in such a way as to follow the European Commission Directive, but also the decree of the government in regards to contractual insurance. Unfortunately, none of this ever happened, and so this entire unsustainable situation was only discussed during the Act on the Residence of Foreigners negotiations.
How did the PVZP come to be lawfully designated as the sole insurance provider for foreigners for a period of five years?
We never said we should be the sole insurer. On the contrary, we were trying to make sure that insurance is done according to proper rules that will not lead to illegal practices, doctors being in debt, or healthcare being inaccessible. All of the stakeholders need to be satisfied, meaning the government, clients (the patients), and healthcare facilities and insurance companies (the market), not only the insurance companies. That is why I feel there is a need to regulate the commissions that can be paid out, which will ensure that the majority of the premium goes to actual healthcare coverage, to have in place a network of healthcare facilities to make sure they can also provide non-acute care, to have an online record system where Ministry of the Interior and healthcare facility departments can confirm the legality of the insurance, which will speed up the process, and to provide a systemic solution to the issues of insufficiently insured foreigners or those with low insurability, which will lower, or completely eliminate, the debt burden that healthcare facilities are saddled with. Legislators have ultimately decided to return to how things were prior to 2005 when everything was functioning properly.
Our insurance products are set up in such a way as to be nearly identical to public health insurance in the long term. And that includes contracts with healthcare facilities, of which we have more than 4000. That is another thing we do not see eye to eye on with other insurance companies. We consider having a network of healthcare facilities to be essential in allowing us to provide accessible non-acute care, which is key in stays longer than 90 days, it is not just about acute care, which can be covered by auxiliary services. It is important for foreigners who are staying for longer than 90 days to have access to a doctor’s services in a variety of cases. What is more, even before August 2, 2021, the Act very clearly stated that care must be provided in facilities contracted by the insurance company with no direct coverage, which was of course not the case, specifically with inpatient care. The Ministry of Health was also supposed to publish a decree that would set the requirements for a so-called “minimum-size network”, which never happened.
Then there are the people who cannot get insured because they are a hazard, or they cannot go back to their country to undergo more complicated surgery due to various reasons. For this, we have established the Extraordinary Coverage Fund, which is a thing that would be worth institutionalizing. It is another step towards the financial burden being on the shoulders of insurance companies and not the doctors or healthcare facilities.
Foreigner insurance was the reason why you left the Czech Insurance Association then?
Yes, definitely. We were unable to remain a part of this organization due to the fact that our company was lawfully designated as the temporary sole insurer for foreigners, while the other entities were not. I feel that this situation would not have had to come about if the self-regulating mechanisms worked, if such extreme broker commissions were not being paid out, if the previously valid Act on the Residence of Foreigners was followed, and if healthcare for foreigners was covered without deductibles through a sufficient network of contracted healthcare facilities. And if other insurance companies were not so hesitant when it came to covering healthcare in terms of Covid-19, including vaccinations. I am also not happy about the fact that the Czech Insurance Association is very vocal about this situation and has filed several complaints in trying to make a change, but at the same time is completely fine with two currently foreign entities having a monopoly in employer’s liability insurance or work-related sickness insurance since 1993. Comparing these two insurance products is impossible, but even so, this state of affairs has been criticized by the EU and has also been repealed, but until a new amendment is ratified, the Act will remain in force in its previous form. It would be best to bring both of these matters to the attention of the authorities and find a systemic, conceptional solution.
How specifically, in numbers, has the new amendment affected the PVZP's activities in terms of its clients?
- Changes in contracts with healthcare facilities – until August 2, 2021, we had 4303 contracted healthcare facilities, after this date, there are 4323 contracted healthcare facilities
- The verage number of recorded claims until August 2, 2021, was 6543 per month, after August 2, it is 8392 per month.
- The average number of assessed claims until August 2, 2021, was 5453 per month, after August 2 the average is 6874 per month.
- The average number of received invoices from healthcare facilities until August 2, 2021, was 790 per month, after August 2, it is 955 per month.
- The average number of monthly recorded full occurrences until August 2, 2021, was 2413, after August 2, it is 3433.
- The average number of monthly closed full occurrences until August 2, 2021, was 2300, after August 2, it is 3263.
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