Czechia mulls merging health insurers amid persistent financial struggles

The Czech government is considering merging some of the country’s health insurance funds to improve efficiency and address financial challenges in the public healthcare system.

Czech Health Minister Vlastimil Válek (TOP 09, EPP) argues that the current setup is unsustainable and that fewer insurers would better serve the country’s 10 million inhabitants. However, stakeholders warn that consolidation alone will not solve deeper structural issues.

Válek has suggested that two of the country’s seven public health insurance funds have long been financially mismanaged and that merging them with other funds could improve the system’s sustainability.

“With ten million inhabitants, it is rational to have five insurance funds. I am convinced that if an insurer has fewer than half a million clients, its financial management becomes very complicated and difficult,” Válek told Czech news site Novinky.cz.

The proposal comes less than a year before the country’s parliamentary elections, adding a political dimension to the debate.

While Válek did not specify which funds he believes are struggling, he emphasised that structural changes are needed to ensure the long-term viability of public healthcare financing.

Unlike in previous years, it will now be easier for insurers to merge under new rules introduced by the current government.

Previously, a struggling insurer had to fail to meet its financial obligations for six months, and the finance ministry had to approve any merger. Now, a merger can proceed based on a decision by the insurers’ boards and approval from the health ministry.

Stakeholders warn against over-simplifying

Despite the government’s push for consolidation, stakeholders argue that merging insurers will not address the root causes of financial instability in the system.

“All health insurance funds are running at a deficit – last year, it was around CZK 8 billion (€320 million). Some funds covered the deficit from their reserves, while others slightly extended invoice payment deadlines,” said Martin Balada, president of the Czech Health Insurance Association, representing six employee-based health insurers.

According to preliminary data, the country’s largest insurer, General Health Insurance Company (VZP), also operated with a CZK 5 billion (€200 million) deficit last year. However, the loss was planned in its budget and covered by reserves from previous years.

“Merging funds does not resolve the overall imbalance between revenues and expenditures. If the trend of excessively high expenditures continues, all reserves will eventually be depleted,” he added.

Balada also warned that reducing the number of insurers could weaken competition, which plays a role in negotiating healthcare costs.

Instead of focusing on mergers, the health insurance association suggests tackling inefficiencies within the system.

“We can try to reduce expenses by improving efficiency, giving insurers more leverage in price negotiations, and at least partially moving away from the rigid state reimbursement decree, which is overly generous in terms of expenditures,” Balada said.

One issue he pointed to is the financial performance of hospitals. According to Balada, the country’s 14 largest state-run hospitals ended 2023 with a surplus of approximately €200 million, and older data indicate that the total surplus across all hospitals could exceed €400 million. “These are exactly the funds that are now missing,” he stated.

Balada also called for a broader discussion on public health financing.

“We need to revisit the scope of public health insurance and explore ways to increase revenues, whether through higher premiums or increased state contributions for insured persons. This is, of course, a politically sensitive issue, but it cannot be avoided by distracting discussions about merging insurance funds,” he said.

Rising healthcare costs put pressure on the system

The debate over health insurance reform comes at a time when healthcare spending in the Czech Republic is rising rapidly. Over the past decade, health insurance expenditures have more than doubled, increasing from €10 billion in 2015 to a projected €21 billion this year.

The Czech Republic operates a mandatory public health insurance system where citizens and residents contribute to state-approved health insurers. These funds negotiate prices with healthcare providers and reimburse services under a state-regulated framework.

While competition between funds was intended to drive efficiency, critics argue that excessive regulation limits their ability to function effectively.

[Edited by Vasiliki Angouridi, Brian Maguire]