Slovakia ready to eject private health insurers

By bne IntelliNews November 1, 2012

bne -

Prime Minister Robert Fico is set to act on his threat earlier this year to forcibly push the private sector out of the Slovak health insurance system, resurrecting worries that Smer's large parliamentary majority poses a risk to the country's investment climate.

Following his claim in July that private health insurers merely drain money that should go towards patient care, Fico insisted on October 31 that Slovakia will return to a single state-run system, and nationalise the country's two private insurers, whether they like it or not.

"The government that I head rejects the notion of private health insurers making profits from taking public money and then using those profits to realise their ideas of a luxurious lifestyle," Fico told reporters, saying the newly unified insurance system would be in place by 2014, reports Reuters. "We think if will be more efficient because no money will flow into the private coffers of the owners of private insurers."

A forced buyout would be unprecedented in Slovakia and Fico said the government would prefer to negotiate acceptable terms with shareholders of Dovera - controlled by Slovak-Czech private equity group Penta Investments, and Union - a unit of Dutch insurer Achmea, by the end of 2013. According to the Slovak constitution, expropriation is only allowed if deemed in the public interest and if adequate compensation is paid.

The PM offered no indication of how much the state would pay for the businesses, saying an international consultancy would be brought in if no agreement is reached and expropriation is carried out. Fico said the government will sell unspecified state assets to fund the acquisition rather than tap the 2013 budget.

The government is struggling to keep up with fiscal consolidation targets, with analysts criticizing it for relying almost exclusively on revenue raising measures that are exposed to the slowing Eurozone economy. The opposition has suggested the state would have to pay hundreds of millions of euros.

With fresh memories of Fico's last administration in 2006-10, which saw populist policy mix with scandal, markets were alarmed by Smer's landslide victory in March's snap elections. However, the PM was swift to commit to the previous centre-right government's budget targets, calming the worries to a significant extent.

However, his latest move is a stark reminder of Fico's propensity to have the state take the lead in certain sectors. Private health insurers have long been a bugbear. During his last term, the PM introduced a profit ban on them, but it was overturned by the Constitutional Court.

Health insurance payments are mandatory in Slovakia, with people currently able to choose three options for where their premium heads. Dovera has 1.4m clients; Union has 400,000. Two-thirds of the 5.4m population remains with state-run VsZP.

Dovera reported a post-tax profit of €39.3m in 2011, TASR newswire reported in June. However, Fico told Hospodarske Noviny in the summer that nobody knows how much money the murky Penta group is able to make via a circle it has created in health care which consists of hospitals, health insurance and the sale of drugs. Union reported a post-tax profit of €1m in 2011. VsZP closed 2011 with a profit of €5.7m, according to SITA.

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