Legal Regulation of Medical Expense Insurance: International Experience and Prospects for Development in Ukraine

Current status of medical expense insurance and challenges arising from insufficient legal regulation

Consideration of this issue in the context of our study should begin with an understanding of the very concept of medical expense insurance. Medical expense insurance is a certain system of financial protection that, by its very nature, provides for the coverage of existing expenses directly related to the provision of medical services. Under this procedure, the insurance company is obliged to assume all obligations to reimburse the costs of diagnostics and direct treatment, or other medical needs that are included in the insurance policy, in the event of an insured event. An insured event is usually defined as an injury or illness.

On the other hand, for the insurance company to reimburse the insured, the policyholder is obliged to make regular insurance premiums.⁶ In Ukraine, health insurance is aimed at reducing the share of out-of-pocket payments, which currently exceed 50% of total healthcare costs, and creating conditions for stable financing of the healthcare system, including both voluntary and promising mandatory models. As noted earlier, the current legislative framework lacks an official definition of “health insurance” or “medical insurance.” The Law of Ukraine “On Insurance”⁷ only mentions this concept in the types of insurance and lists its subtypes. However, the very process of amending the legislation by adopting the new Law “On Insurance” is a positive step towards EU integration.⁸

In the context of the study of this issue, it is worth noting attempts to regulate the issue of medical insurance, as in 2016, draft laws were registered that were intended to address internal gaps. The first of these was draft law No. 4981 “On Compulsory Social Health Insurance in Ukraine”,⁹ which stated that insurance companies would receive and accumulate insurance premiums on separate bank accounts. The draft law clearly states that the insurer is the Health Insurance Fund of Ukraine, with the Supervisory Board performing control functions.¹⁰ The provisions of the draft law also contain characteristics of the types of medical care for which the state allocates funds.

The next draft law, No. 4981-2 “On Compulsory State Social Medical Insurance in Ukraine”,¹¹ contains provisions on raising funds for the healthcare sector by transferring targeted revenues from citizens' incomes to the relevant account. Already in 2020, another draft law, No. 3464 “On financial provision of healthcare and compulsory medical insurance in Ukraine”¹² was submitted for consideration. At the same time, it was envisaged to introduce the State Guarantee Programme, which in turn includes the Basic Healthcare Programme, the Programme for Combating Severe, Rare and Socially Dangerous Diseases, and the Compulsory Health Insurance Programme. The main difference between all these draft laws is the definition of the entities that will directly provide insurance.¹³

As of today, the legal regulation of insurance relations is comprehensively carried out by the provisions of the Civil Code of Ukraine, as well as the Law of Ukraine “On Insurance,” the Commercial Code of Ukraine, the Law of Ukraine “On financial services and state regulation of financial services markets,” and other bylaws. As for the principles of health insurance, they are defined in the Law of Ukraine as “Fundamentals of the legislation of Ukraine on compulsory state social insurance.”¹⁴ However, it should be noted that despite the existence of this law, there is currently no comprehensive legal act that would regulate the issue of medical insurance. Therefore, it is quite obvious that the legislative support for medical expense insurance requires a balanced approach and promising steps to improve it.

It is also worth noting that as of today, in the course of the above-mentioned unresolved issue of medical expense insurance and the context of active military operations, the following challenges are faced by citizens and the state. Significant expenditures on medical care for citizens - in the aggregate, this is a direct reflection of the lack of sufficient legal mechanisms to regulate the costs intended for medical care under insurance. It is not uncommon to see unregulated costs for diagnosis, medicines or outpatient consultations. In this case, medicines mean those medicines that are not covered by the Affordable Medicines program. This, in turn, causes several financial difficulties and barriers to treatment, especially for low-income citizens.¹⁵

High inflation - funding often does not adapt to inflation rates, and therefore creates corresponding problems in medical care, placing an additional burden on service providers, local budgets, and citizens themselves.¹⁶ Regional disparities - decentralisation has led to uneven cost-sharing as local governments take on the costs of utilities and healthcare infrastructure. In war-affected or poor regions, these costs often remain uncovered, increasing reliance on patient payment and undermining the goal of universal coverage as envisaged by some provisions of special legislation.¹⁰

The impact of the war and the disruptions it has caused - more than 300 healthcare facilities have been damaged by hostile shelling, with related supply chains disrupted and various operational costs increased (eg, generators for power outages). In turn, the legislative framework was not adapted promptly, and therefore the allocation of resources and funding was not sufficiently ensured. Under such conditions, the issue of legal regulation of health insurance was not sufficiently addressed, and thus provoked further problems in providing the population with affordable healthcare services.¹⁵

Insufficient oversight and weak enforcement, which can be traced from the financing and procurement process to the insurance process itself, when military operations and risks are excluded from the insurance contract as such. In contrast to many countries where medical costs are regulated through compulsory insurance, Ukraine relies on voluntary insurance (which covers only 2-3% of the population) and public funding.¹⁷ Therefore, it is clear that the absence of such a legal mandate for universal insurance significantly limits the possibilities for cost-sharing and reinforces financial inefficiencies.¹⁸ Thus, the legal regulation of health care costs in Ukraine reflects a system in transition, with small steps towards transparency, but the challenges we have analysed confirm the importance and necessity of regulating the insurance system as such and health care costs as such.

International experience in legal regulation of medical expense insurance

The legal regulation of health insurance and medical expenses is a central issue of effective healthcare systems around the world while offering models that Ukraine, which is experiencing certain difficulties and challenges in the healthcare sector due to the war and economic instability, can adapt to address its problems. Given the analysis of the current situation in the country and the understanding that the regulatory framework needs to be updated, the experience of leading countries such as the UK, Germany, and France will allow us to take specific leading approaches and insurance mechanisms as a basis. The comparative analysis of these countries will help to shape further steps to improve the legal regulation of health insurance in Ukraine and is justified by their economic comparability, systemic diversity, and practical applicability. Moreover, these 3 countries represent different relatively mature and progressive healthcare systems, each with its positive aspects and challenges that we can take into account to prevent a similar situation in Ukraine.

A characteristic feature of the UK healthcare system is the presence of centralised regulation through the single-payer model, which is carried out within the framework of the National Health Service.¹ This system is based on guarantees that everyone has universal access to healthcare, which is financed by general taxation. The costs themselves are regulated by an authorised body - the National Health Service.¹⁹ Medical costs are controlled through standardised tariffs and national procurement agreements, which guarantee minimal out-of-pocket expenses. Moreover, a small part of the population uses additional private insurance, which guarantees access to an additional range of medical services, but remains optional as of today.

Since 2020, there have been some improvements to the system in terms of telemedicine and domestic policy, which underscores the desire to adapt to modern conditions. The system demonstrates high levels of equity and cost containment but faces challenges such as long waiting times and budget constraints, which have been particularly prevalent in recent years. Taken together, however, this healthcare model highlights the effectiveness of centralised cost control and universal coverage.²⁰

The National Health Service subsidises many areas of healthcare, including dentistry (a person pays a fee ranging from $33 for a dental check-up or cleaning to $392 for a major dental procedure); optometry (general eye examinations are free of charge, including prescriptions for glasses and their cost); mental health (mental health examinations are free of charge with a referral from a general practitioner); physiotherapy (free of charge with a referral from a general practitioner); prescription medicines are subsidised by the National Health Service, but there are also medicines for which you have to pay a fee. As for alternative healthcare, the NHS generally does not cover such costs.¹⁹

France is characterised by a hybrid system of social healthcare. It should be noted that the French healthcare system is considered one of the best in the world, as it can offer accessible and affordable medical care to both its citizens and long-term residents. France annually spends more than 10% of its GDP on healthcare.²¹ This, in turn, has positively contributed to an increase in the number of doctors and other medical staff and stimulated the introduction of innovations, which in combination improves the level of healthcare services.¹

It should be noted that healthcare services are not free in France, while health insurance is compulsory. Public health insurance (L’Assurance Maladie) is available to all expats after the first 3 months of their stay, so individuals can register for it without the need to obtain private health insurance. Public health insurance is financed through monthly payroll deductions. The French healthcare system is open to self-employed individuals who make contributions, as well as pensioners, in addition to expats.²² To make monthly contributions, you need to register with your local Social Security office. Often, such actions are carried out by employers themselves, but the responsibility for the receipt of payments lies with each individual.

In this case, the state covers a certain percentage of the treatment costs, but the amount that the person has to pay additionally is reduced. It is worth noting that people with chronic diseases such as diabetes and cancer have full reimbursement of all medical expenses, including the costs of surgery, therapy, and medicines covered by the state.²¹ As a general rule, the costs of chiropractors, psychiatrists, and osteopaths are not covered. Also, the costs of certain medicines are not covered by the state, which is why this leads to private health insurance, which can cover the rest of the costs.²³ However, in France, despite the expanded and accessible healthcare and health insurance system, private insurance is still popular. It usually covers the balance of the costs of public healthcare or any additional administrative fees.²² This makes France an example of a balanced integration of public and private mechanisms for effective regulation of medical costs.

In the context of Germany's analysis, it should be noted that the country's social insurance system offers comprehensive protection and is compulsory. As a general principle, each insured person pays the appropriate fees depending on their income - the more you earn, the more you pay.²⁴ However, the contribution rate is still limited to the maximum monthly income (the so-called Beitragsbemessungsgrenze), which means that even if you earn more than this amount, your contribution will not increase and is fixed.²⁵ An important nuance is that all insured persons, regardless of their payments, receive the same benefits. In general, healthcare in Germany is based on the following principles:

• Compulsory insurance - that is, all people living in Germany are required to have health insurance. In general, this is public health insurance, but people with incomes above a certain amount (known as the Versicherungspflichtgrenze) can choose between private and public health insurance.²⁶

• Financing through regular insurance premiums - as has already become clear, the healthcare system is financed through regular payments by individuals and their employers. Employers simultaneously calculate the amounts to be paid for health insurance, long-term care, pension insurance, and unemployment insurance. In addition, the employer deducts the employee's contribution from the salary, adds it to his contribution, and makes the payment. It is also subsidised by taxpayers.²⁴

• The principle of solidarity, ie, all participants in public health insurance and employers bear the costs together. There is a maximum threshold for deductions. However, this does not affect medical care as such, as it is provided regardless of the amount of contributions. This means that the rich help the poor and the healthy help the sick.²⁶

Having analysed the specifics of health insurance in the UK, France and Germany, we can conclude the benefits of such systems and understand what we can use in the future to improve the domestic health insurance system in Ukraine. Some of these steps could be:

• Universal coverage and centralised control (based on the example of the UK) – The UK's tax-funded universal system suggests that extending coverage to a range of services funded by a relative increase in taxes or international recovery funds could reduce Ukraine's reliance on out-of-pocket payments.

• Introduce a system of compulsory state insurance (following the example of France and Germany) – such systems are indicators of the importance and necessity of regulator-y consolidation of insurance mechanisms in Ukraine. A gradual introduction of payroll-based contributions (eg, up to 7%) with additional private contributions could create a sustainable financial base.

• Diversified financing (as in France and Germany) - taxes and contributions from individuals, the state, or employers, as in France and Germany - could reduce Ukraine's complete dependence on the state budget for health insurance, supplemented by additional assistance.

• Free mental health checks (based on the example of the UK) – in the context of martial law and stressful circumstances, this should be the correct vector for free access to mental health services for citizens.

• Determine the range of medical services (based on the experience of the UK, France, and Germany) that are covered by health insurance and additionally that can be covered by private insurance. This will create a sense of confidence in access to healthcare services, as well as guarantee the understanding that other services can be covered by private insurance.

In summary, for Ukraine, a hybrid strategy combining compulsory insurance, strict cost controls, and digital technology offers a viable way to address pressing issues of financial inequality, war-related instability, and limited access.

Prospects for the Development of Legal Regulation of Medical Expense Insurance in Ukraine

As Ukraine is currently going through a difficult stage of transformation of internal processes and is engaged in active military operations, the state is making significant efforts to update the current legislation and implement transformational reforms. Based on the best international practices and taking into account the unique challenges of Ukraine, we would like to offer specific legislative proposals and non-trivial strategies that will add novelty and relevance to further discussions and will be important steps toward improving the legal framework for health insurance. Our proposals include the following:

• Introduction of a unified framework for the legal regulation of health insurance in Ukraine – this is because the current state of regulation of this issue is insufficient and unclear. The introduction of unified legislation that would contain provisions on a clear definition of the very concept of health insurance, the grounds for reimbursement, and a clear list of reimbursable medical services would help build trust in the state and confidence in access to medical services as such.²⁷ As part of this step, we also propose to develop a single unified act – the Health Insurance Code of Ukraine – that will contain all provisions on health insurance, including the amount of mandatory contributions, payment mechanisms, and packages of medical services. At the same time, we propose to include a section in the Code that will require a review of the package of medical services covered by insurance within a certain period. It could be 1 or 2 years. As a result, this will facilitate rapid adaptation to the needs of today.

• Enshrine a system of compulsory health insurance in the law – an important component of the reform is the creation of a system of compulsory health insurance (CHI), which is absent in Ukraine's current legal architecture. Unlike the voluntary insurance market, which serves a small number of privileged individuals, a compulsory health insurance system would pool the risks of the entire population, reduce the financial burden, and be in line with European models such as those in Germany or France²⁸. That is, to develop a special law “On compulsory insurance of medical expenses”, which would define the percentage of contributions for employees, self-employed persons, and individual entrepreneurs. At the same time, for institutions, enterprises, and organisations that will be the first to introduce compulsory health insurance, it is necessary to offer benefits for a certain period. In this way, the private sector will be more easily incentivised to speed up the insurance process and distinguish this proposal from standard tax models, which will contribute to Ukraine's economic recovery based on reconstruction.

• Introduce decentralised cost regulation with mandatory regional flexibility - It should be noted that centralised cost control, as in the UK, is not appropriate in the context of decentralisation in Ukraine and the regions affected by the war. The priority is to move towards a hybrid model and grant regional autonomy, which together could make it more appropriate and better to regulate medical costs. Quarterly reporting by service providers on prices for services and insurance reimbursements should become mandatory.²⁹

• Embracing the latest technologies¹⁸ – we propose to create a digital health insurance card that will have a legal status and be available in the Diia app. This card will store insurance status, payment history, and the right to receive reimbursement for medical expenses. This will help speed up the payment of insurance claims and reduce fraud.

• Reducing corruption and transparency in the management of insurance funds – due to the high level of corruption in Ukraine, and the fact that combating it requires significant time and financial resources, we propose to create a relevant body.²⁸ Its main task would be to manage contributions and monitor reimbursement payments, with mandatory public reporting on payments and potential future receipts. This is a mirror image of the Sécurité Sociale oversight in France but adapted to the corruption context of Ukraine. Or, on the Diia portal, create a mechanism based on blockchain technologies, which will allow citizens to independently monitor the use of insurance funds, for example, the amount of sick leave or reimbursement for medicines.) This could be a breakthrough and a new vision for the healthcare system in Ukraine and even the world.

• Focus on post-war resilience, taking into account EU principles – as Ukraine seeks to become an EU member, our healthcare system must become more resilient to crises and the conditions of post-war reconstruction. Steps to rebuild the state after the war are important in terms of priority coverage for veterans and displaced persons (eg, mental health, prosthetics) with funding separate from the Humanitarian Aid Fund. As we noted above, taking into account the experience of other countries, mental health diagnostics should also be free of charge, not only for war veterans but for all citizens. Also, as part of EU integration, it is worth considering insurance models that take into account medical care abroad during travel, business trips, etc. This should be included in the insurance package and covered by insurance premiums.¹

• Work with the sceptical attitude of citizens towards the insurance process itself and other structural barriers – this distrust of health insurance is caused by high levels of crowding in medical institutions and insufficient satisfaction with medical services in public clinics due to lack of funding from the state (including for salaries of doctors, nurses, etc).³⁰ That is why we propose to launch an awareness-raising campaign about health insurance, with the mandatory use of media, social media, and entertainment networks, seminars in higher education institutions and businesses. The sole purpose of these actions is to increase awareness by 50% within 2 years.

For the implementation of the above steps to yield positive results, Ukraine must overcome practical obstacles such as legislative inadequacies, insufficient funding, and lack of public trust. At the same time, accelerated efforts to develop and adopt relevant regulations, gradual increases in funding, and increased public trust will create a springboard for future transformations.