Perspectives | Health

Health Insurance plans will deepen privatization of social rights

By - 05.06.2018

Implementation will work against those most economically disadvantaged

The implementation of the Law on Health Insurance will deepen the privatization of Kosovo’s public sphere. With it, the position of private health care institutions will strengthen in the long term, whereas wages in the public sector will automatically increase by around 20 million euros. These prospects are damaging for the economic position of society’s poorer population groups.

The model

If, as expected, Kosovo starts to collect contributions from employers and employees, and to compensate for health care services by 2019, it will join its neighbors in the Western Balkans, which all follow the Health Insurance Model. This model is also prevalent in Western and Central European countries (e.g. France, Germany, Austria) and, with a few differences, it was also the model applied in the former Yugoslavia, including in Kosovo before 1989.

Through this model, the right to health insurance is obtained by means of formal work contributions and self-financing, or by being considered poor through official means testing from the state. In this way, it differs from the National Health Insurance model that is applied in northern and southern Europe (e.g. Sweden, UK, Spain), where the right to health care is given universally, through citizenship.

Kosovo has experienced the greatest privatization of social rights in all of the region during its post-socialist transition of the last few decades. Therefore, in Kosovo’s context, the introduction of this model based on the nuances of the Law on Health Insurance — which came into force in April 2014, with almost unanimous support from parliamentary groups at the time — could improve the social situation in some aspects, but it also comes with serious deficiencies and risks.


Naturally there are some benefits to the Law on Health Insurance. Its clearest advantage is that it would avert the so-called “perverse redistribution” that has been present up until now. Namely, the poor — who are officially recognized as such, through their participation in the social assistance scheme — have often had to pay for medication and medical services.

Since their insurance would now be covered by the national budget, access to medication and health care services (including in the private sector) would improve; meaning that the real value of social assistance would increase. The more qualitative the coverage through social assistance (the quality of which has decreased in recent years), the better the coverage for poverty-stricken people through health insurance.

The expected interconnection between the quality of contracted services and compensations from the Health Insurance Fund could also further contribute to overall increasing quality of health care services, from which more people would equally benefit.

Another advantage is that the insurance contributes to an increase, albeit a modest one, in the level of social solidarity. Although the rate that all employers and employees will pay into the fund will be flat (3.5 percent) rather than progressive, the fact that the overall finances gathered from the workforce will increase creates a form of solidarity of the richer towards the poor.

Moreover, since insured people can automatically insure their family members, this contributes to wider health insurance coverage across the population. The wider pooled risks might also motivate people to seek formal employment, especially those with low wages.

Yet, at the same time, this provision for families also bears the inherent risk of discouraging women from working. If the latter would prove true, this would only exacerbate another existing problem, the low employment rate amongst women which stood at under 17 percent in 2015.

Risks and deficiencies

While most of the above aspects are welcomed as they would contribute to more redistribution and social equality, the law does have its contextual risks and deficiencies.

The biggest risk is the possibility of seriously shrinking public health care services and institutions. Based on article 31 of the law, the Health Insurance Fund would contract “licensed health care institutions” for offering these services. As such, just like in other Balkan countries, this would create the possibility to contract private health care institutions.

But, when considering various factors in Kosovo — indicators of high levels of corruption in public administration, the weak heritage of the public health care system in the whole post-war period, and the greater prospects of reform and response from the private market — it is likely that private health care institutions will benefit more from implementing the health insurance scheme.

If this happens and public institutions are pushed to the margins through a lack of committed reforms by the government, it is possible that the cost of healthcare services will increase with time (as the authority of the private sector increases), implying more costs for citizens. Considering the high level of privatization of rights in Kosovo, it is not unthinkable to expect to see many public institutions made entirely bankrupt.

The risk of much of society being excluded from the benefits of the Health Insurance Fund is also high due to the low rate of formal employment which remains under 30 percent.

In the short term, the start of the implementation of the law would come with indirect costs for the poor, especially because in the last decade workers in the public sector have been favored by the government regarding worker rights — namely through payments and job security, often in exchange for votes.

Around 85 percent of revenue from taxes in 2018 was raised by tax on consumption. This means that Kosovo relationally takes more from the poor (regressive tax) to fill the national budget. From this budget, almost 600 million euros are spent on administration wages.

In accordance with the law for health insurance, employers are obliged to pay 3.5 percent of contributions. This will also apply to government, who are currently the employer of nearly 88,000 people, meaning spending on wages in the public sector is expected to rise automatically by around 20 million euros as a result of the contributions — a raise that would be financed more by the poor. Due to the disproportionality in the rights of workers in the public sector, social disparities have increasingly bureaucratic origins and this raise will add to that tendency

The law also leaves space for the government to “test” all beneficiaries of public fund transfers — such as pensioners, veterans and former political prisoners — to see if they qualify for insurance without pay. Considering what happened with veterans’ rights (which bestowed the status of a veteran of war on nearly 50,000 people, many of them becoming suspiciously eligible for cash benefits), one cannot exclude the possibility that social rights, even through health insurance, will create further social structuring (the crystallization of inequality) based on particular rights, and not universal rights.

The risk of much of society being excluded from the benefits of the Health Insurance Fund is also high, due to the low rate of formal employment, which remains under 30 percent.* During the socialist self-governing period (1953-1989) the rate of social exclusion regarding insurance in Kosovo was between 40-50 percent, since the rate of employment in the province was also low.

In general, the law doesn’t introduce innovative instruments for encouraging formal employment. For example, in Serbia, sick leave from work is covered through insurance, contributing to the rational economic interest of reporting work. The government could have also taken the example of Albania, which for many years during the transition period paid contributions for farmers from the national budget. This would increase the level of coverage and the quality of measurements of individual employment in agriculture.

The law has not been accompanied by detailed public debate, despite the fact that almost two decades have passed since the war. Like most social rights in Kosovo, the health insurance scheme is designed almost in full by the World Bank, with little local inclusion.

Compared to countries in the region, Kosovo demands the least from employers regarding contributions, but this still does not translate into a clear increase in the level of employment. Mainstream economic expectations dictate that less pay-roll demands for employers leads to an increase in employment whereas in fact, as Kosovo shows, more active and innovative measures from the government are needed to increase employment.

As shown by the example of obligatory pension savings in Kosovo, the obligatory health insurance scheme is expected to similarly reduce the need and interest for voluntary insurance in the market. According to data provided by the Kosovo Statistics Agency, in 2015 there were 128,950 persons with private insurance. With the introduction of obligatory health insurance, the need for voluntary insurance will decrease, at least in the short term. This might make for a situation in which a number of jobs will be lost in the private sector.

In general, budgetary spending is higher in the Health Insurance model than it is in the National Health Insurance model. This is expected to be the case in Kosovo as well.

Up until now, Kosovo has spent under 3 percent of its GDP on health care. According to planned spending for the Hospital Service and the Ministry of Health, Kosovo’s spending for 2018 is expected to be around 2.2 percent of its GDP. After the start of the implementation of the health insurance law, spending will increase as service providers will seek higher funds.

Another serious deficiency is the fact that this law has not been accompanied by detailed public debate, despite the fact that almost two decades have passed since the war. Just like most social rights in Kosovo (except particular or clientelistic rights), it is designed almost in full by the World Bank, with little local inclusion.

So, despite the advantages mentioned above, the start of the implementation of the health insurance law will deepen privatization (or marketization) of social rights in Kosovo, will increase spending, and will increase the level of individual financial responsibilities. As such, the economic position of the most disadvantaged population groups in the market will generally weaken.K

*Calculation based on pension savings data from the Kosovo Pension Savings Fund for 2017 and the projection of the working age population by the Kosovo Statistics Agency (medium variant), minus pensioners who are permanently unable to work.

Feature image: Besnik Bajrami / K2.0

Edited by Leurina Mehmeti and Jack Robinson.

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