|Delegation of Government-Managed Health Insurance|
|Implemented in this survey?|
After the formal establishment of the Japan Health Insurance Association in 2008, the Government published a new rule for setting premium rates for the insured at local branches. The current single countrywide rate will be replaced by different rates varying with local health expenditures, demographic structures and incomes. After discussions with local representatives of the JHIA, the Government decided to introduce a measure to mitigate drastic increases in the financial burden of the insured.
Establishment of the Japan Health Insurance Association
As reported in a previous HPM report in survey round 10, the Government established a statutory body, the Japan Health Insurance Association (hereafter abbreviated as the JHIA; Note: In the previous report, the author used the term "National Health Insurance Corporation" as the English name of the organization, but in this report the formal English name announced by the Association itself, "Japan Health Insurance Association", is being used), and delegated the operation of public health insurance for employees of small and medium-sized firms and their dependents to this new body (JHIA-Managed Health Insurance). More than thirty-five million people are covered by the insurance operated by the JHIA.
In this follow-up report, the formal establishment of the JHIA is reported with a particular focus on the new rule for setting premiums rates.
The JHIA is a statutory public organization in charge of operating the JHIA-managed health insurance, developing business plans, paying cash benefits to the insured and fees to health care providers, and promoting health of the insured. It is under the supervision of the Government.
The managerial structure of the JHIA has been established according to the rules set by law. The Minister of Health, Labour and Welfare appointed the chief executive officer, who in turn appointed directors of the JHIA and heads of its branches. The CEO appointed some directors who have managerial expertise in the private or public sector. A public health doctor who has expertise in health promotion is also appointed as a part-time director. The national council of the JHIA, representing employees, employers and experts, is established to discuss business plans and other important issues on the management of the JHIA and health insurance in its charge. The members of the national council are appointed by the Minister.
The JHIA has formed forty seven branches, each of which is in charge of operating, accounting, and monitoring health insurance for those working at small and medium-sized firms and their dependents in a prefecture. All branches made their business plans. Each branch organizes a local council that represents local employees, employers, and experts. Local councils are responsible for making annual business plans, analyzing the financial situation for setting premium rates, and discussing principal issues at local branches. All members of local councils are appointed by the heads of branches.
A New Rule for Setting Premium Rates
The Health Reform Act 2006 stipulates that the JHIA shall set a premium rate for the insured at each branch within a year after its establishment. Before new premium rates are being established, the current premium rate - 8.2 percent of employees' salaries - will be used across the country for the JHIA-managed health insurance.
The 2006 Act established the following principles for setting premium rates:
The act lays down a procedure for setting premium rates at branches. A detailed rule or a formula for setting premiums according to the above mentioned principles is to be issued as an ordinance by the Government. The JHIA determines premium rates in accordance with the ordinance, but it can modified them to mitigate increases in the financial burden on the insured for the first five years after the establishment of the JHIA.
The act also requires the JHIA to elicit opinions of the heads of the branches concerned before changing their premium rates. Finally the JHIA must get authorization from the Minister for the premium rates that it determines.
The Government proposed a formula to calculate premium rates for the branches. According to the formula, premium rates increase with more health expenditure because a branch must balance expenditures with revenues. But branches with more aged and less well-off populations get cross-subsidies from other branches. In this sense, premium rates are adjusted by demographic structures and income at branches. A trial calculation of premium rates showed that they would vary between 7.84 and 8.88 percent. The JHIA uses premiums for financing the JHIA-managed health care insurance, the long-term care insurance and the Health Care Insurance for the Aged.
The Government and the JHIA discussed possible measures, which had been laid down by the Health Care Reform Act 2006, aimed to mitigate increasing financial burdens on insurees resulting from the introduction of the new premium rates. Hearing from heads of branches and negotiating with the ruling party, the Government finally decided to narrow the difference between the lowest and highest premium rates for at least one year. Detailes of the financial mitigation are described in the section on "Adoption and Implementation".
|Degree of Innovation||traditional||innovative|
|Degree of Controversy||consensual||highly controversial|
|Structural or Systemic Impact||marginal||fundamental|
|Public Visibility||very low||very high|
Degree of Innovation - innovative: Setting a premium rate for the insured at branch level is a quite new in the public health insurance for employees of small- and medium-sized companies.
Degree of Controversy - controversial: Branches have different opinions and the Liberal Democratic Party tried to make the controversy minimal, as described below.
Structural or Systemic Impact - fundamental: Because the new rule makes branches accountable for their health expenditures.
Public Visibility - high: Because changes of premium rates have direct impacts on post-tax income of employees.
Transferability - system dependent: Partially - if a health care system has a decentralized mechanism, it can learn something from this case in the future.
|Implemented in this survey?|
The Ministry of Health, Labour and Welfare developed possible measures to mitigate drastic increases in the financial burden on insurees. Opinions from the business sector and labour union as well as academics were expressed in the discussion of the national council of the JHIA. Also, local business people and members of labour unions participated in discussions at local councils of the JHIA.
The critical issues in the discussion since autumn 2008 were the extent and the method of financial mitigation because the Health Care Act 2006 had already determined a basic rule for setting premium rates at branches: premium rates reflect health care expenditures with adjustment of demographic structure and collective income.
Local branches expressed different opinions according to their financial situation as well as requested the national decision maker to consider practical issues in changing premium rates and inform branches of possible policy measures as fast as possible. National actors, however, developed their opinions in a rather consensual way. The ruling party finally decided the extent of financial mitigation.
|Ministry of Health, Labour and Welfare||very supportive||strongly opposed|
|Labour Unions||very supportive||strongly opposed|
|Private Sector or Industry|
|Private Sector||very supportive||strongly opposed|
|Liberal Democratic Party||very supportive||strongly opposed|
By law, the Minister of Health, Labour and Welfare has the power to decide on a rule for setting premiums with the due procedures of elicitating opinions of branches of the JHIA. How the Minister decided the rule is described below.
|Ministry of Health, Labour and Welfare||very strong||none|
|Labour Unions||very strong||none|
|Private Sector or Industry|
|Private Sector||very strong||none|
|Liberal Democratic Party||very strong||none|
An original computation with the formula, using available statistics on health care expenditure, demography, and standard monthly salaries, provided premium rates at branches between 7.84 and
The Government, or the Ministry of Health, Labour and Welfare developed four possible plans to mitigate drastic increases in the financial burden of the insured by modifying the original premium rates given by the formula.
According to the four plans, the differences between the highest and lowest premium rates would be 0.17, 0.21, 0.31, and 0.46 percent, respectively.
The Ministry of Health, Labour and Welfare discussed the four plans with some heads of branches. As anticipated, the heads of the branches had different opinions according to the projected premium
rates: the heads of the branches where premium rates would increase supported plans that would provide smaller changes in premium rates; while, those coming from branches where premium rates
will decrease supported plans that would bring larger changes.
The Ministry voted for the second plan with the support of the national council. Finally, the ruling party decided the final plan, a modified version of the second plan, to lessen financial burdens. According to the final plan, modified premium rates are 8.2% plus/minus one-fifth of the difference between 8.2 % and the original premium rates.
The new premium rates will be valid from September 2009.
By law the Japan Health Insurance Association must publish a five-year financial outlook every two years. On the other hand it has been unclear when the formula will be revised. But because the Health Care Reform Act 2006 requires that measures to mitigate financial burdens shall be abolished in September 2014, debate on the formula will probably continue toward that moment.
Setting different premiums at branches is a controversial policy. It may enhance local awareness on health care expenditure as well as health care system, but may undermine national solidarity.
The new rule combines different principles in one formula. On the one hand, premium rates increase or decrease in response to health care expenditure at specific branches. This means that the funding mechanism will shift away from the ability-to-pay principle toward the benefit principle. On the other hand, premium rates are adjusted by demographic structures and collective income of the insured. This adjustment can be seen as an expression of national solidarity, i.e., if branches have more people with health care needs and less income, other branches shall help them.
Opinions expressed by the heads of branches clearly suggest that they are worrying about increased premium rates. Local concern with health care expenditure, therefore, is apparently increasing. The JHIA and its local branches will take measures for cost containment within the current system such as promoting healthy behavior and increasing utilization of generic pharmaceuticals. However, whether these measures will result in making local health care provision more efficient has been unclear.
Also, local branches shall be accountable for health expenditure because high health expenditures lead to high premium rates at branches. They are beginning to analyze local health expenditure more seriously. However, since the formula balance all local accounts in the long run, differentiated premium rates are expected to work as non-financial or political incentives, rather than financial incentives for local branches. Because the JHIA and its branches have no power to directly control provision of health care, this will presumably lead to local debate involving providers, insurers, local governments and other relevant groups.
The financial adjustments between branches influence equity in financing health care. Geographical equity in financing, therefore, will become a matter to be considered in health policy making with the new rule for setting premiums. But since there have been little normative and positive arguments on the issue in Japan, it is difficult to anticipate its impacts.
|Quality of Health Care Services||marginal||fundamental|
|Level of Equity||system less equitable||system more equitable|
|Cost Efficiency||very low||very high|
Impact on quality of health care services - neutral: This policy is primarily concerned with financing health care.
Level of equity - neutral or unclear: As to equity in financing, the policy is controversial as described above.
Impact of cost-efficiency - high: Branches will become more concerned with local health expenditure and increase pressure to make health care cost-efficient. But whether they will successfully make local health care delivery efficient or not is unclear.
Presented papers and minutes of the National Council of the Japan Health Insurance Association. Available at the website of the JHIA www.kyoukaikenpo.or.jp.
|Delegation of Government-Managed Health Insurance|
Process Stages: Implementation, Policy Paper, Legislation
Ryozo Matsuda is a professor in health policy at the College of Social Sciences, Ritsumeikan Univerisity. He also serves as an executive board member of the Institue of Human Sciences, Ritsumeikan University.