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Health insurance shake-up for care in Northern Emirates

Northern Emirates health insurance Reuters/Ahmed Jadallah
Workers in the Northern Emirates have been subject to compulsory health insurance from January 1 this year
  • Compulsory cover for $87 a year
  • Pressure on clinics likely
  • Thin margins for insurers

Mandatory health insurance in the poorer Northern Emirates of the UAE is likely to lead to an expansion of healthcare facilities and increased M&A activity, experts have said. 

In March last year the UAE announced a plan to introduce mandatory health insurance for all workers in the Northern Emirates – Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah – from January 1. 

Workers in Abu Dhabi have had to be insured since 2006, and in Dubai since 2014.

The federal health ministry has now launched a basic package for private sector employees and domestic workers who are not covered at present and are renewing their work visas. 

The new mandate does not apply to employees with work permits issued before January 1, 2024. Cover will only become mandatory when their residency permits are due for renewal. 

A basic package costs AED320 ($87) per year, which can be topped up by AED120 for an enhanced plan. The basic health plan offers a maximum cover of AED50,000 a year for inpatient care and AED10,000 for outpatient. 

Around a quarter of employees in the UAE are categorised as blue-collar workers, so the new demographic for health insurance purchasers has implications for the local insurance industry, which will have to scale up on volumes and provide services quicker to make them viable.

The UAE’s insurance market is expected to grow at an annual rate of about 5 percent, reaching $18 billion in premiums by 2028, the financial advisory company Alpen Capital said, with the extension of mandatory health insurance one of the drivers of growth.

Rohit Walia, CEO of Alpen Capital, said the increased demand presented opportunities for insurers, including international reinsurers.

“While insurers will benefit from economies of scale, the affordable basic plans could have thinner profit margins,” Walia said. However, digital platforms were likely to improve efficiency and reduce costs, he said.

While the new initiative is starting with a basic plan for all workers, Toshita Chauhan, head of health and motor insurance at policybazaar.ae, said new plans were likely to be launched. 

“Insurance companies and aggregators like Policybazaar.ae will see a surge in inquiries and policy purchases, leading to more competitive and tailored offerings in the market,” she said.

Companies such as Aster DM Healthcare and NMC have set up dedicated affordable care businesses, but the propositions are based on volume, to try to make revenues similar to the premium segment. 

Gireesh Kumar, associate partner for the Middle East and Africa at Knight Frank, said the new scheme was likely to affect the bottom lines of insurance providers, but only “marginally”. 

“It won’t be major, but the difference is that there’s going to be more volumes to generate the same revenue, because insurance rates are much less than cash-paid patients,” Kumar said. 

With a growing number of patients expected to use hospitals and clinics in the coming months, greater pressure on existing healthcare facilities is likely. 

Kumar said that the smaller clinics are likely to see the biggest changes, which could lead to some M&A activity in the sector. 

“You will probably see a lot more mergers happen, in terms of these outpatient facilities, because it might be difficult for standalone clinics to survive,” he said. 

Established groups in the sector “will definitely consider expanding more,” Kumar said. Some had started expanding their outpatient setups from when the mandatory health plan was first announced last March. 

A year ago, Arabian Healthcare Group announced plans to open new community clinics in underserved communities in the poorer northern emirate of Ras Al Khaimah, including Al Dhait, Al Maried and Al Ghail. It will relocate an existing clinic in Al Hamra to a larger facility.

Al Ahlia Group, based in Abu Dhabi, is investing $100 million in a 120-bed hospital in Sharjah that is due to start construction this year. 

At Alpen Capital, Walia said the Northern Emirates were a relatively untapped market compared to Dubai and Abu Dhabi, which could encourage investors to seek out opportunities in hospitals, clinics and diagnostic centres.