A Model for settlement of health insurance organizations' debt to health service delivery institutions.

Background: Sukuk is a type of financial instrument backed by balance sheet and physical assets. This applied and descriptive study aimed at providing solutions to the problems faced by insurance companies in the health sector.
Methods: In this study, we achieved operational models by reviewing the release nature and mechanism of any of the securities and combining them.
Results: According to the model presented in this study, 2 problems could be solved: settling the past debts and avoiding future debts. This model was deigned based on asset backed securities.
Conclusion: Utilizing financing instruments (such as Sukuk), creating investment funds, and finding a solution to this problem, this study was conducted in 2 aspects: (1) models that are settling old debts of the organization, and (2) models that prevent debts in the future.

↑ What is “already known” in this topic:

14 types of Sukuk have been designed that among these the lease Sukuk has mostly used in the world.

→ What this article adds:

Provide a model for resolving the debt of the health insurance organization to health care providers.

Introduction

Health systems not only play an important role in improving health, but also are responsible for protecting individuals against the financial costs of illnesses and diseases (1). World health organization (WHO) emphasized fair financial contribution as one of the 3 fundamental goals of health systems. The main aim of financial protection is to ensure that every member of the society has equal access to healthcare services (2, 3).

Due to the rapid increase of healthcare costs compared to incomes in many countries, the health sector is faced with many financing problems (4). Without an appropriate finance system, only a limited number of population would have timely access to health services. In fact, financing a health system determines whether individuals can purchase the services or whether the services are available when they are needed (5). In general, different countries use one or more of the 4 main methods of health systems financing, which are as follow: (1) tax-based systems, (2) out-of-pocket payments, (3) social health insurance, (4) private insurance programs (6). These methods have affected the functional indices of the system, such as equity. Therefore, during the final decades of the 20th century, health researchers have come to realize the necessity of introducing and using new instruments to assess and investigate equity in healthcare financing (7).

Financing has created some problems for individuals in the costs of using health services. Some of the consequences of governing unfair conditions in the health system include degradation of welfare qualifications by providing access to healthcare costs, reduction in national production in the wake of reduction of savings, and its allocation to treatment costs, and thus pushing people under the poverty line due to catastrophic healthcare costs (8). On the other hand, methods of insurance companies were changed from reimbursement of costs spent for patient care in hospitals into separated reimbursement systems. Hence, hospitals try to be active within the scope of each patient's financial ability, which is very similar to commercial activities of organizations that try to operate in accordance with the budget of each project (9).

Ministry of Health and Medical Education as a health proctor in Iran has begun conducting health-related studies considering the Fifth Development Plan of implementing health reform program in 2014 and taking into account the general duties, missions, and upstream documents, especially the 20-year vision document, and general health policies notified by the Supreme Leader. The transformation of health system is executed with 3 approaches; namely, financial protection of people, equity in access to health services, and improving quality of services to understand the expected objectives and improvements in our health system.

In this project, a health insurance organization was formed to realize the unification of the insurer units. The main securement source of this organization was from central government funds, annual budget of the Ministry of Health and Medical Education, and insurance premiums. According to the Act enacted by the parliament and legal frameworks, it is anticipated that the sources be obtained from decreasing the subsidies and the value added tax (VAT) sources, as government resources have to be allocated to health system reform plan.

In recent years, coinciding with the reform plan, economic challenges of the country (budget deficits, difficulty in oil sales, oil price fluctuations, etc.) prevented the full implementation of the reform plan in such a way that cessation of receiving the budget approved by health insurance created a huge debt for health centers in the country. Therefore, it is anticipated that the existing debt will increase, unless the problems are solved. In 2015, debt levels of the organization with a 50% growth rate have reached to 80 000 billion Rials, which increased to 120 000 billion Rials in 2016, with a growth rate of 70% (10). The literature indicates that Islamic financial system is a network of financial instruments, markets, and institutions that has the task of allocating resources based on the Islam principles. The Islamic financial system fairly defines the relationship between economic institutions, and its main purpose is capital utilization to achieve efficiency and avoid the hoarding of capital resources. One of the most important sectors of the Islamic financial system is the services and financial instruments that have been developed over time.

In recent years, the use of a new tool called Sukuk has been the focus of attention by Islamic countries, which can be classified among the securities, and plays an important role in absorbing liquidity, enforcing monetary and fiscal policies, and budget deficit of the government (11).

Sukuk is a type of financial instrument backed by balance sheet and physical assets. The companies demanding issuance of Sukuk are the applicants for borrowing based on their physical assets, and on the other hand, lenders and investors attempt to grant loans based on the company's physical assets. To date, 14 types of Sukuk have been designed, among which the ‘lease Sukuk’ has been mostly used worldwide (12). From 2006 to the end of 2014, 607 billion dollars of Sukuk papers have been issued, and the largest volume has been related to Malaysia, UAE, Indonesia, and Bahrain (13).

Model for settlement of health insurance organizations’ debt

Definition of Sukuk (Islamic bonds) is Islamic bonds structured in such a way that generates returns to investors without infringing Islamic law, which prohibits interest ‘riba’. Sukuk represents undivided shares in the ownership of tangible assets relating to particular projects or special investment activity (14).

With regard to issuance of the first Sukuk papers in March 2011 (the first 3 months of 2011) in Iran, which was made possible by the efforts of Novin investment bank and the guarantee of Eghtesad Novin bank for financing Mahan Air company for 291 500 million Rials, Sukuk market prospered in Iran like other Islamic countries.

According to the latest information, Sukuk volume issued in Iran in 2015 has been equal to 7270 billion Rials and 960 billion Tomans in the first quarter of 2016. The greatest type of issued Sukuk has been related to lease bonds and Murabaha bonds.

In this study, by taking advantage of Islamic bonds, it has been tried to provide a model for settlement of health insurance organizations’ debt to health centers.