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Session: Competition in Insurance
Room: Main Hall
Time: Fri 11:45-13:00

Presenter: Andreas Werblow (Technische Universität Dresden. Center of Health Economics)

Abstract

Objective:
A large share of Germany’s residents (88%) is insured within a statutory health insurance (SHI). Previous to 1996 all insured were automatically assigned to SHI according to place of living or profession. This compulsory enrollment system changed in 1996 into open enrollment. The insured has since the choice between most of the funds independent of type (local health care funds (AOK), Company Health Insurance Funds (BKK) and the Guilds Health Insurance Fund (IKK)).
Our objective is therefore to identify and to explain the implications of the open enrollment act itself as well as the effects of the resulting increase in the market concentration, in terms of efficiency of SHI management. We analyze the efficiency of management for the major sickness funds in Germany, aggregated on a federal state level (16 federal states) covering around 65% of all insured within our observation period 1999-2005.
Methodology:
We apply a two-step approach: Firstly to measure management efficiency, the Data Envelopment Analysis (DEA) is used. As inputs the number of employees is used and as well as total cost for non-personal administration. The administration of a SHI has three major outputs: support of the insured (1), handling of the insurance cases (2), management of the insurance assets (3). The output is represented by (1;2) the number of insured people, and the management of assets (3) is represented by the total assets amount of the balance sheet. To verify our efficiency scores we apply the statistical bootstrap method of Simar and Wilson.
In a second step, we explain the SHI management inefficiency scores by standard regression. As explanatory variables we employ characteristics of sickness funds as well as variables of the SHI environment. Variables belonging to the first set are: the structure of the insured and the type of SHI. Regional differences between East and West as well as North and South Germany are factors belonging to the second set of explanatory variables.
Results:
Our results show that the efficiency scores with an overall average of 80% are remarkably high. But they show also that the inefficiency varies considerably between the individual SHI’s on an aggregated level and during the time. Apparently not all SHI adapted equally to the system change. For example the local health care funds (AOK) decreased its inefficiency level on the other hand the Company Health Insurance Funds (BKK) increased slightly it. The Guilds Health Insurance Fund (IKK) showed the highest level of average inefficiency which did not change much over the observation period. We were able to prove that the composition of the insured has little or no influence on the efficiency, in contrast to the SHI type which influence was significant. Our estimations showed furthermore, that there is a difference in efficiency level between the SHI in East and West Germany.

Key Terms

DEA, Statutory Health Insurance (SHI), Efficiency of management

Authors:

Alexander Karmann (Technische Universität Dresden. Center of Health Economics) , Thomas Topf (Technische Universität Dresden. Center of Health Economics) and Andreas Werblow (Technische Universität Dresden. Center of Health Economics)

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