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Fitch Says Limited Rating Impact for German PHIs from New Tariffs

ID: 180
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(businesspress24) - Fitch expects that the credit quality of German private health insurers will not be affected by the rearrangement of refund of expenses tariffs (Kostenerstattungstarife). These new tariffs will create additional competition but have only very limited consequences for private health insurers in the foreseeable future. Even private health insurers that operate mainly or exclusively within the segment of supplementary insurance are not expected to face negative rating pressure due to the rearrangement of refund of expenses tariffs.
From 1 April 2007 statutory health insurers (SHI) are allowed to introduce numerous supplementary tariffs. Some of these new tariffs are allowed to contain characteristics that were previously limited to the sphere of private health insurers. Following the implementation of the "Act for the Reinforcement of Competition" (Wettbewerbsstaerkungsgesetz), refund of expenses tariffs offered by statutory health insurers may include chief physician treatment, accommodation in one or two bedrooms during hospitalisation and full coverage for dental prosthesis. Fitch believes the German private health insurance market may experience further revisions to refund of expenses tariffs. These revisions could include the refund of expenses for further benefits settled at rates higher than those of other members of the SHI scheme.
"Fitch believes that these new refund of expenses tariffs provide only limited competition to supplementary tariffs of private health insurers", says Tim Ockenga, Director in Fitch''s Insurance Group. This is due to the small proportion of ''insureds'' within the statutory scheme that have chosen refund of expenses tariffs. Fitch expects that refund of expenses tariffs are likely to play a secondary role for the foreseeable future.
This change enables statutory health insurers to offer products that are in direct competition with private full value health insurance products. All benefits within the scope of the statutory scheme can be upgraded to the same level of benefits as provided by private health insurers. It is only for benefits exceeding the scope of the statutory scheme that private health insurers still provide superior services. Fitch believes that these changes mean a further step towards a uniform health care system in Germany.

Background Information:
As consequence of the "Act for the Reinforcement of Competition" statutory health insurers can offer a wide range of supplementary tariffs. Among those are refunds of expenses tariffs. The amendment of section 53 sub-section 4 Sozialgesetzbuch V (SGB V) allows statutory health insurers to offer higher priced versions of statutory benefits within a refund of expenses tariff. Consequently the level of expense refunding can vary whereas higher levels of expense refunding are covered by higher premiums. Refund of expenses tariffs enable statutory health insurers to offer upgraded benefits compared to standard tariffs. These tariffs compete directly against supplementary insurances of private health insurers.
Insureds of refund of expenses tariffs cannot be identified by doctors as members of the statutory health scheme. Therefore doctors can generate benefits for that group that exceed the scope of the statutory scheme and charge their benefits at higher rates than eligible for the statutory scheme. Within the context of refund of expenses tariffs the patient is the contractual partner of his doctor and therefore obliged to settle bills. Subsequently the insured can submit his bills to his statutory health insurer and subsequently receives refunds for bills paid. So far refunds have been limited to the amount that would have been charged for ordinary members of the statutory scheme.
Additional costs created by benefits that exceeded the scope of the statutory scheme or that were charged at higher rates than accepted for members of the statutory scheme had to be paid by the insureds. Private health insurers offer supplementary insurance products that cover this gap.

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Date: 05/02/2007 - 17:30
Language: English
News-ID 180
Character count: 0
Firma: Fitch Ratings
Ansprechpartner: Christian Giesen Feedback to about Pressrelease-id:
Stadt: Frankfurt/Main

Meldungsart: Financial
Versandart: send
Freigabedatum: 02 May 2007

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