The introduction of mandatory insurance in Dubai is expected to inject fresh investment into the UAE’s health sector
The recent introduction of mandatory health insurance for citizens, residents and visitors to Dubai is expected to inject extra cash and investment into the healthcare system in the UAE, according to medial practitioners and insurance experts. It is also expected to help the government achieve its aim of bringing facilities and patient care up to international standards.
Dubai’s health insurance law, which was introduced in February, reflects a growing regional trend. Saudi Arabia made health insurance mandatory for expatriates in 2005; Abu Dhabi introduced a similar regime in 2006; and Qatar launched its own scheme in 2013.
For low-income workers, health insurance will now allow them to access medical care or better medical care. For healthcare providers, it will assure them of a steady flow of income from a wider patient base. And, for the government, it will reduce the financial burden it currently shoulders in paying for healthcare. “We believe the introduction of mandatory health insurance will result in significant benefits: Firstly, we anticipate an enhancement of the insurance industry; secondly, a development of the healthcare sector at large and; thirdly, we believe that it will improve public health, and in turn the economy on a macro level,” says Sarah Kadhum, associate at law firm Bin Shabib & Associates.
Of the estimated 3 million people currently living in Dubai, only half of those have heath insurance. The “1.5 million people who are new to the health insurance system will inevitably increase the market size for healthcare facilities to serve”, says Sven Rohte, chief commercial officer at National Health Insurance Company (Daman). “Premiums are expected to grow [in a way] similar to what has happened in 2006 when Abu Dhabi introduced mandatory health insurance.”
In the five-year period between 2008 and 2012, health insurance premiums had a compound annual growth rate (CAGR) reaching about 20 per cent, Rohte says, citing UAE Insurance Authority figures. “While this was UAE-wide, it is safe to assume that most of it came from Abu Dhabi given the implementation of health insurance,” he says.
In addition to government investment, population growth, the rise in chronic diseases and medical tourism have further helped generate growth in the UAE healthcare market in the past five years. “There are certain macroeconomic factors supporting the healthcare sector,” says Asjad Yahya, senior vice-president of research at Shuua Capital. He tracks the UAE’s publically traded medical companies including Al-Noor and NMC Health.
“Population growth, the relatively young population — this is generally true for the UAE and the GCC — and there is obviously the factor that the government is, in the case of Dubai, for example, looking to drive medical tourism.”
The GCC healthcare market is forecast to jump to $69.4 billion by 2018 from about $39.4 billion in 2013, according to Alpen Capital, an investment bank. While Saudi Arabia is expected to remain the largest market in the GCC, Qatar and UAE are forecast to be the fastest growing markets, Alpen predicts. In the short term, however, the increase of health insurance coverage and subsequent demand may put a strain on a system that is already short of beds and qualified medical staff.
The GCC has 21 hospitals beds per 10,000 people, lagging the 30 beds per 10,000 people in the US and UK, and the 82 beds per 10,000 people in Germany, according to Alpen. In terms of medical staff, the GCC has 1.05 physicians and 2.21 nurses for every 1,000 people, trailing the global average of 1.4 physicians and 2.8 nurses per 1,000 in 2010, according to a separate report by Frost & Sullivan.
Al-Noor and NMC Health, the UAE’s largest healthcare providers after the government, are stepping up to address these challenges and are both pursuing expansion plans in the Emirates and across the GCC.
NMC Health listed its shares on the London Stock Exchange in 2012 to raise the cash needed to fund its expansion. Since then, it has completed three new medical facilities in the UAE and expects to open a fourth in the first half of 2015.
“There may be a temporary mismatch in the system,” says Azad Moopen, the chairman of Aster DM Healthcare, which operates clinics and hospitals in the UAE and has an “aggressive” expansion plan. “Everybody will have to increase — the government as well as the private sector — the number of beds and clinics and healthcare personnel. But I am sure this will be taken care of; it’s only a temporary thing. But the benefits are going to be huge.”
The insurance sector is also braced for additional changes that will likely increase administration and training burdens once Dubai enacts its insurance law. From the end of the year, all brokers will have to register with the Dubai Health Authority to be able to market, advise on and sell medical insurance. In time, training and competence schemes and complaints processes are also likely to be introduced, according to Peter Ellen, chief operating officer in Dubai at Nexus Insurance Brokers. “In the round, this has to be a good thing,” Ellen says. “But coming from a low base of competence, it will present quite a challenge.”
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