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R 020754Z APR 09
FM AMEMBASSY TBILISI
TO SECSTATE WASHDC 1302

UNCLAS TBILISI 000656 
 
 
DEPT FOR EUR/CARC 
 
E.O. 12958: N/A 
TAGS: ECON PGOV GG
SUBJECT:  GEORGIA: PRESIDENT SAAKASHVILI'S NEW HEALTH INSURANCE 
POLICY COMES INTO FORCE 
 
¶1. Summary/Comment:  On March 1, Georgian President Mikheil 
Saakashvili's new government initiative to provide inexpensive 
health insurance to a wider circle of the population was officially 
launched.  Registration for the program will remain open until July 
¶1.  The Ministry of Labor Health and Social Welfare has reported a 
surge of interest from the population, with insurance companies 
taking more than 15,000 calls on the program.  How ultimately 
effective the initiate will be is unclear, but it is evidence that 
the GoG is committed to working on issues that affect ordinary 
citizens.  At a minimum, the measure addresses the issue of lack of 
quality health care for the poor and attempts to modestly improve 
the social standing of the least fortunate in Georgia society.  End 
Summary/Comment. 
 
GEL Five Package - Minimum Service 
---------------------------------- 
 
¶2. According to President Saakashvili, the new insurance initiative 
is targeting the portion of the population not eligible for fully 
state-funded health insurance which is available for those living 
below poverty line.  The new plan is offered for a monthly payment 
of GEL 5 (USD 3), from which the state will co-fund GEL 3.35 (67 
percent) and remaining GEL 1.65 will be contributed by insurance 
policy holders.  GEL 15 million has been allocated in the state 
budget for the program, but the overall sum will be further 
specified based on the number of enrollees.  The goal of the program 
is to make health insurance affordable for every citizen and provide 
basic risk protection. 
 
¶3. More specifically, the new plan will include primary services 
such as accident coverage (up to GEL 5,000 annual limit with no 
co-payment requirement), urgent in-patient care (up to GEL 2,000 
annual limit with 50 percent copayment plan), urgent out-patient 
care (up to GEL 300 annual limit with no copayment requirement), 
primary health care services, including unlimited visits to 
physician and nurse and some basic, limited laboratory test and 
diagnostics (no medicines included).  Enrollment is voluntary and is 
open for application from March 1 through July 1, 2009.  In 
comparison, the LES health care package envisages a USD 642 per 
person annual payment made by the employer; an annual ceiling of 
costs to be covered at USD 25,000; the insurance holder's copayment 
is set at 20% for visits to physicians, in and outpatient care, lab 
tests and diagnostics, medications, dental and eye treatment, and no 
copayment for hospitalization. 
Insurers to Compete for the New Plan 
------------------------------------ 
 
 
¶4. Ten insurance companies signed memorandums of cooperation with 
the Ministry of Health and Social Welfare to take part in the 
program.  These are Aldagi BCI, GPI Holding, Irao, Imedi-L, 
Sakhalkho Dazgveva (People's Insurance), Archimedes Global Georgia, 
West, Partner, Tao and IC Group.  These companies will offer 
beneficiaries the same 5-lari standard policies. However, as 
representatives of the insurance companies announced, they will 
offer additional service policies that would allow beneficiaries to 
upgrade for a higher fee.  While the initial profit to the insurance 
companies seems minimal, according to Georgia's Association of 
Insurance Companies, the companies see this as an opportunity to 
expand operations in Georgia. 
 
¶5. The program improves the affordability of health care for the 
Georgian public above the poverty line but who are not currently 
covered by any kind of insurance plan.  It also increases health 
insurance awareness in the general public and might lead to 
expansion of the regular, full-scale private voluntary insurance. 
Insurers welcomed the state's decision to abandon past practices of 
QInsurers welcomed the state's decision to abandon past practices of 
giving a direct cash allowance to vulnerable groups and instead 
diecting funds to the insurance business, thus achieving two goals 
simultaneously: promoting insurance business development and 
providing needed protection for the needy. 
 
¶6. There is concern that the initial inflow of clients will be 
largely comprised of those with preconditions, leading to cost The 
insurers believe, however, that the ultimate effect of the program 
will be positive, promoting both health care provision and insurance 
businesses.  The project is envisaged for nearly 500,000 clients 
besides those 1.4 million persons, already insured with state 
assistance (vulnerable populations and government employees). 
 
 
Insurance market 
---------------- 
 
¶7. According to the press, thirteen insurance companies currently 
operate in Georgia's insurance market.  Georgian banks are majority 
shareholders of Aldagi- BCI (Bank of Georgia) and Cartu (Cartu Bank) 
and minority shareholders of two companies - GPIH (TBC Bank) and IC 
Group (TBC Bank), and EBRD acquired 34% of share of Imedi L.  Due to 
rapid economic growth and emerging opportunities in the health 
insurance market, five new insurers entered the market in 2007 with 
investments from Azerbaijan, Ukraine and Israel, as well as through 
local sources.  Three companies - GPIH, Aldagi-BCI and Cartu - 
account for about 85 percent of the health insurance market. 
 
¶8. According to the organization "Association of Insurance 
Companies" in 2006, the number of insured people was estimated at 
200,000.  By the end of 2008 this number increased to 1.5 million, 
mostly due to state programs (1.2 million approximately), as the 
government decided to include health insurance in its economic 
assistance package to the vulnerable.  State-insured groups includes 
the poor - up to one million in 2008; policemen - approximately 
20,000; military personnel - up to 40,000; prisoners and employees 
of the penitentiary system - approximately 30,000; and teachers - 
around 80,000 (the 2009 state budget allocated GEL 19.5 million for 
80,000 beneficiaries, while in 2008 GEL 13 million was allotted for 
83,600 beneficiaries).  About 300,000 citizens of Georgia have 
privately funded health insurance. 
 
¶9. In 2008, the government completed a transition of health service 
to private insurance companies.  The beneficiaries of government 
health programs get insurance vouchers from the GOG, which they then 
use with the insurance agency of their choice. 
 
¶10. The government has declared an increase in funding for private 
insurance a priority.  In 2006, funding for these programs stood at 
15 million GEL, by 2007 it was up to 46 million GEL, and reached GEL 
100 million in 2008.  However, the entire insurance system in 
Georgia is relatively new.  Major risks are related to 
sustainability of the government policies that expanded tremendously 
the private health insurance market in Georgia.  The insurance 
companies have to invest their own resources (which they say are 
very scarce) to enhance public knowledge and build confidence in the 
system.  Without a doubt, development of a Health Insurance Mediator 
(Embassy Note:  The new system was implemented with USAID assistance 
to allow disputes to be handled by mediation rather than in civil 
litigation which was how previous insurance disputes were resolved. 
End Note.) by the association of Health Insurers was an important 
step forward in this direction. 
 
 
TEFFT