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Art83 WG Meeting

Art83 WG Meeting. Dependence Insurance Item 9 of the Agenda. Content. Introduction Definition Insurance terms Underwriting Concerned population Degree of reliance Funding Benefits Reimbursement method Criteria strictness Methodological aspects. Introduction.

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Art83 WG Meeting

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  1. Art83 WG Meeting Dependence Insurance Item 9 of the Agenda Art83WG / Doc.20060619 Art83_09

  2. Content • Introduction • Definition • Insurance terms • Underwriting • Concerned population • Degree of reliance • Funding • Benefits • Reimbursement method • Criteria strictness • Methodological aspects Art83WG / Doc.20060619 Art83_09

  3. Introduction • EU staff benefit from sickness insurance (Joint Sickness Insurance Scheme, JSIS) • EU staff insured against disability via the Pension Scheme of European Officials (PSEO) • Long-term care risk not properly covered by JSIS : • some expenses, like stays in convalescent homes, nursing attendance and care, partially reimbursed by JSIS • these reimbursements more intended to skilled medical services after an illness or injury for a limited period • The invalidity insurance linked to the PSEO : • designed to replace a portion of the income you lose if you’re unable to work due to accident or injury • provides no additional benefits to specifically pay for long term care expenses Art83WG / Doc.20060619 Art83_09

  4. Introduction • DG Admin and the Commissioner are considering a long-term care (LTC) insurance to propose to EU staff→ major improvement of the social coverage of the staff and their family • Eurostat was contacted to perform an actuarial study on the subject Aims of this presentation= to give the context and some key elements about LTC insurance= to ask the Delegates to present the situation in their country Art83WG / Doc.20060619 Art83_09

  5. Definition • According to Council of Europe "Dependence is a state in which persons, by reason of lack or loss of physical, psychological or intellectual autonomy, require significant assistance or help in carrying out their usual day-to-day activities" • Long-term care = care that a person need if he/she can no longer perform everyday tasks by himself or herself due to a chronic illness, injury, disability or the aging process • Includes supervision needed due to a severe cognitive impairment (such as Alzheimer’s disease) • Long-term care can be received at home, in a nursing home or in another long term care facility, such as an assisted living facility • Not intended to cure people : chronic care that might be needed for the rest of the life • Provided care period is minimum 6 months Art83WG / Doc.20060619 Art83_09

  6. Definition • Long-term care must be distinguished from disability or short-term medical care as it is not : • care received in the hospital or in a doctor's office • care needed to get well from a sickness or an injury • short-term rehabilitation from an accident • recuperation from surgery • Long-term care services assist people with the activities of daily living : • eating, drinking, dressing, bathing, transferring (moving from bed to chair) • Dependence may afflict any section of the population and not only elderly people, even though dependence tends to increase with age • Objective of LTC insurance = to provide a fixed amount of financial support to defray some of the expenses incurred if an insured party's autonomy becomes seriously impaired on a long-term basis and he/she therefore requires help to carry out everyday activities • LTC insurance complementary to JSIS Art83WG / Doc.20060619 Art83_09

  7. Insurance terms: Underwriting • Two main orientations concerning LTC insurance underwriting : • compulsory • voluntarily • First case : same population covered as in PSEO (actives officials, temporary and contract agents, invalids and pensioners of European Institutions and Agencies) ; as for PSEO, contract staff could choose to underwrite the insurance or not • Second case : whole staff (not only contract staff but also officials, temporary staff, invalids and pensioners) would be voluntarily insured on an individual basis • Compulsory underwriting requires a modification of the Staff Regulations, while voluntary does not Art83WG / Doc.20060619 Art83_09

  8. Insurance terms:Concerned population Population concerned by LTC insurance depends on the chosen type of underwriting : • Compulsory underwriting : covered population =- all employees (officials, temporary and contract staff)- all former employees (invalids, pensioners) - their spouse, children and assimilated persons- people already in a state of dependence • Voluntarily underwriting : covered population =- only interested people from this population- it would be very difficult to integrate reliant persons and give them access to underwrite the insurance No age limitation for underwriting Art83WG / Doc.20060619 Art83_09

  9. Insurance terms:Degree of reliance • Several degrees of reliance determined according to medical criteria : • low or medium reliance • high reliance • very high reliance • complete reliance • Public medical criteria applied in Member States (for example Germany, Austria and Luxemburg) and in other International Organisations, like European Patent Office, could be used Art83WG / Doc.20060619 Art83_09

  10. Insurance terms: Funding • Type of underwriting also determines LTC scheme funding : • Compulsory underwriting : scheme could be funded by staff and Communities according to the same repartition as for PSEO(1/3 staff – 2/3 Communities) • Voluntarily underwriting : would imply a complete financing (100%) by staff • Contribution amount could be determined : • as a certain percentage of the salary, pension or allowance • as a fixed amount whatever received salary, pension or allowance is • First option : principle of solidarity between membersSystem implemented at EPOWith voluntarily underwriting, implementation not appropriate Art83WG / Doc.20060619 Art83_09

  11. Benefits: Reimbursement method Two main reimbursement modes : • to reimburse bills presented by insured people • each bill must be processed by insurance administrators • represents huge administrative work and requires important human resources • involves considerable administrative burden for reliant persons, especially for those who are retired and not resident in Brussels • linked to a uncontrolled inflation as we ignore how will evolve on the long term the cost of long-term care • to give lump sum benefits • administrative simplification: not necessary to process each bill paid by insured people • cost control : amount reimbursed to each beneficiary is fixed and predictable • individual liberty : insured people can organize more freely their expenses Art83WG / Doc.20060619 Art83_09

  12. Benefits: Reimbursement method • Allocated lump sum can be directly linked with the degree of reliance • Amount could be paid monthly and could correspond to a fixed percentage, according to the reliance degree, of a reference salary from EU pay scale • For example, following reimbursements could be applied: • low or medium reliance : nothing • high reliance : 50% of the basic salary of grade AST2/1 • very high reliance : 75% of the basic salary of grade AST2/1 • complete reliance : 100% of the basic salary of grade AST2/1 Art83WG / Doc.20060619 Art83_09

  13. Benefits: Criteria strictness • Benefits amount is directly and inversely linked to strictness of medical criteria corresponding to covered reliance degrees • Large medical criteria chosen → only limited and low benefits amounts can be provided, unless explosion of LTC schemeBenefits would be insufficient to cover incurred expenses • Preferable to focus on high reliance degrees Via a stricter selection, allowed benefits could be higher • Aim = to target people with real difficulties and to help them in efficient way Art83WG / Doc.20060619 Art83_09

  14. Methodological aspects • Methodology of LTC insurance close to pension scheme actuarial assessment methodology • Principle of future payments estimation and principle of discounting to the present the expected amount necessary at due date remain valid • Demographic and economical actuarial assumptions must be expressed • Some of them, like probability of being married, average age difference between men and women, discount rate and general salary growth, are the same as for the pension scheme assessment • Important differences appear however and must be taken into account • Supplementary actuarial assumptions must be built, like the probability to reach a certain degree of reliance on the activities of daily living • But main difference between the 2 systems = rights to the long-term care benefits do not increase with time and seniority, contrary to pension rights Art83WG / Doc.20060619 Art83_09

  15. Conclusions Delegates are invited to give their comments on the planned LTC insurance and to draw up a list of the cover offered in their country to officials as well as to private company employees Thank you for your attention Art83WG / Doc.20060619 Art83_09

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