MGEN, an Actor in the French Mutualist Movement

Isabelle RONDOT – May 20101

MGEN, an Actor in the French Mutualist Movement

Isabelle RONDOT

Isabelle RONDOT – October 20102

Healthcare expenditure in France


Items of current healthcare expenditure in 2008

Healthcare services and goods:€170.5 billion (79%)

Prevention, research, training, etc.:€26.8 billion(12%)

Care for institutionalised older people:€6.4 billion (3%)

Per diem allowances:€ 11.3 billion(5%)

Current healthcare expenditure: €215 billion

Source: National healthcare accounts, 2008

Healthcare services and goods: €170.5 billion

Total 100% = CHSGTotal 100% = CHE

Isabelle RONDOT – May 201040 2 4 6 8 10 12 14 16

Turkey

Poland

Czech Republic

Hungary

Slovakia

Finland

Spain

Italy

Sweden

Iceland

Denmark

Portugal

Canada

Germany

France

Current expenditure

Gross fixed capital formation

Sources: Drees, OECD

France is in second place within the OECD in terms of total expenditure on healthcare.

Total healthcare expenditure (THE)

DTS = CHE – per diem allowances – part of prevention, research and training expenditure + capital expenditure for healthcare sector + expenditure for handicapped and dependent people

United States: 16% of GDPFrance: 11% of GDP


The years when there was significant economic growth enabled a major increase in healthcare expenditure.

“The 30 glorious years”

Sources: Drees, Insee - Processing and analysis: MGEN

“The 30 glorious years”Period of strong economic growth between the end of the Second World War and the 1st “oil crisis” (1945-1974)

Growth rate of Consumption of Healthcare Services and Goods (CHSG) versus GDP


The financing of healthcare expenditure in France


Paid by households

The health insurance system in France since1946

COMPULSORY health insurance(Social security system)

OPTIONAL health insurance

(“complementary” insurance)

Private financing(voluntary contributions and direct payments by households)

Public funding (social security contributions, taxation)


Public funding(Social security system, State, etc.)

76.9%

Breakdown of healthcare expenditure, 2008(consumption of healthcare services and goods: €170.5 billion)

Proportion of publicly funded healthcare services and goods, 1950-2008

Source: Insee, National healthcare accounts, 2008

Since the creation of the social security system, by far the largest proportion of healthcare expenditure is financed by the public sector.

Private funding(households, “complementary” insurance)

23.1%

Public funding of CHSG v. total CHSG (as %)


€131 billion

€39.5 billion



NB: To simplify the reading of the data, the item“patient transport” is not included in this breakdown. Given the small amount involved, this does not significantly change the analysis.

Breakdown of healthcare expenditure between fund providers(in %)

The breakdown between fund providers varies depending on the nature of expenses. (Breakdown in %)



Breakdown of healthcare expenditure between fund providers(in %)

Some items are funded privately for the most part (i.e. under complementary schemes or directly by households): optical care, dental care, etc.


In recent years, the rise in healthcare expenditure has been increasingly transferred to the complementary insurance schemes and private households.

Source: National healthcare accounts, Insee - Analysis: MGEN

In 2008, more than 21.4% of the annual increase in healthcare expenditure was financed by households and 19.2% by the complementary insurance schemes…

…i.e. more than 40% of the increase in expenditure was borne by the private sector (in comparison with 20% in 2000).

Breakdown of annual increase in consumption of healthcare services and goods between fund providers (in %)


Mutual insurance societies



Insurance companies

Social welfare institutions

Complementary insurance market shareLe

ader

ship

Of the three types of private operators present in the are of social protection in France, mutual insurance societies are the specialists in health insurance and the leaders of the sector.

Share of health insurance in turnover

Specialisation in healthcare

Source: ACAM , Report of Budget Ministry to Parliament 2009 - Processing and analysis: MGEN

Market share: 58%Healthcare turnover: 75%




Since their origin, mutual insurance societies have covered a large proportion of private expenditure.

Benefits paid by different private fund providers (in millions of current euros)

Before 1995, national accounts did not distinguish between benefits financed by insurance companies or social welfare institutions, on the one hand, and

those paid directly by households, on the other.

15,7%

33,8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Source: Insee, National healthcare accounts, 2008 - Processing and analysis: MGEN

Share of mutual insurance societies In private funding

19502008


What is a mutual insurance society?

• Voluntary membership

• Solidarity and social development

• Non-profit oriented: the mission of the leadership of a mutual insurance society is both to ensure long-term financial equilibrium and to uphold the interests of the members of the association.

Leadership Owner Client

Stock companies


Source: Adapted from “On the convergence of insurance and finance research”, Clifford W. Smith – Journal of Risk and Insurance (1986)

Directors

Elected members

Shareholders Insured persons

Members / Insured persons


The three founding principles of mutual insurance societies

• Not-for-profit

• Solidarity

• Shared responsibility

In France, the creation and functioning of mutual insurance societies are governed by specific legislation, namely the “Code de la Mutualité” (Code of mutual insurance societies).


Origin in the 17th century, development starting in the 19th century

• In 1823, 148 mutual aid societies existed in France.

• By 1898, there were 11 355 mutual aid societies providing insurance for persons (particularly death insurance).

• By the end of 2008, there were 527 mutual insurance societies active in the healthcare sector (i.e. associations which bear the insurance risk themselves).

• The largest mutual insurance society is the MGEN, which caters for 3.4 million people.


Mutual insurance societies have been helping France over the years to meet major challenges in the social welfare and healthcare sector.

Ageing of population

Retirement age raised

Technological advances

Growing welfare demands

------------------

State withdraws financial commitment

Slow-down of economy…

ReconstructionFounding of Social security system:

1946Development of health system

Increased hardship for families when head of family dies

Era of industrialisation and mechanisation

Major national challenges

Positioning of mutual insurance societies

1850 1946 1950 1970 1980 1990 2000 20101960

Key

Death

Incapacity for work/Disabilities

Health

Dependence

Share of healthcare expenditure in householdconsumption

Life expectancy at birth (men)

Number of employed workers paying contributions per retired person

5.6% 8% 9.7% 11.7% 12.6%

67 years63.4 years 68.4 years 70.2 years 72.8 years 75.3 years 77.6 years (2007)

14.3 4 2.3

Retirement

13.9% (2005)

temps


33,8%

15,7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Share of mutual insurance societies in private expenditure on healthcare services and goods – 1950-2008

Source: Insee, National healthcare accounts, 2008

Mutual insurance societies bear an increasing share of private expenditure on healthcare, thus extending the principle of collective solidarity to part of the risks faced by households.

Funding by mutual insurance societies v. private funding – Consumption of healthcare services and goods (in %)



A balance sheet

• Today, close to three in four people in France are covered by this type of solidarity-based health insurance (and over 92% of the population has health insurance).

In France, joining an optional health insurance plan reduces by half the incidence of patients failing to seek appropriate care.


The economic models of mutual insurance societies


The fundamental principles of mutual aid underlie the adopted economic models, making it possible to adapt health insurance coverage to the evolution of social needs in the long-

term.

• To adapt the services/benefits and level of redistribution

• To reduce costs, to direct the economic results towards the goal of maximising the benefits to members in the long term

• To enable a good balance between the administrators and the association’s managers and professional experts.


The absence of shareholders enables mutual insurance societies to provide more services and benefits to their members than insurance companies.

Source: ACAM, report of the Budget Ministry to Parliament 2009

Costs of insurance services & benefits in 2007 (health insurance)


Although rigorous comparisons are difficult (since sometimes different scopes of activity are involved), the available studies indicate that mutual insurance societies have lower

management costs than insurance companies and the Social security system.

Source: ACAM, Report of Budget Ministry to Parliament 2009

Share of management costs in insurance policies covering bodily injuries in 2007

Source: BIPE

Ratio between management costs and services/benefits provided by health insurers

With actual data provided by health insurers

Based on simulation of services and benefits under compulsory health insurance scheme

Ratio between management costs and services/benefits provided under compulsory health insurance scheme

Administration 7% 1.5%

Management of losses

7% 1.9%

Other technical costs of services/benefits 3.3% 0.7%

Total 17.3% 4% 4% to 5.5%

Comparison of management costs of health insurers and the compulsory health insurance scheme (with scope adjusted)

Depending on whether or not we take into account the financial costs generated by the deficit of the general healthcare regime under the Social security system (financial costs of the CADES, i.e. the government agency that pays off France's social security deficit).


Some examples of solidarity in the guaranteed services and benefits provided by mutual insurance societies

• Absence of selection based on medical check-up

• No exclusions (lifetime guarantees)

• The amount of the contribution is not linked to the level of risk.

• Mutualisation of risks


Expenses reimbursed by mutual insurance societies


Breakdown of expenditure of mutual insurance societies in comparison with public sector(Consumption of healthcare services and goods – 2008)

Social security system + State Mutual insurance societies




Detailed breakdown of amounts reimbursed by mutual insurance societies in 2008

Documents

MGEN, an Actor in the French Mutualist Movement