Health Insurance Implementation Requires Health Tax

Mandatory and comprehensive health insurance could soon become a reality in Armenia. This is proposed to be achieved through the establishment of a health tax. The Ministry has developed and submitted for public discussion the 'Concept for the Introduction of Comprehensive Health Insurance,' according to which all working and self-employed citizens of the Republic of Armenia will pay a health tax.

For 59% of workers earning over 150,000 AMD, this tax will amount to 4-6% of their salary, which will be softened by a reduction in the income tax starting from 2021. It is expected that the health tax will not have a significant negative impact on the incomes of this group of workers. For those earning around 150,000 AMD (41%), the draft states that the health tax will not be an additional burden.

In response to a question from 'Armenian Time' on how the income loss for this group would be mitigated, the Ministry of Health replied: 'In the proposed draft, the tax rate is set at 6%, and as a result of the flat income tax alignment, the income tax threshold will be reduced to 20%, thereby softening the health tax's impact on those earning up to 150,000 AMD.' Additionally, the average nominal salary has increased by about 6% over the past year, which also indicates the mitigation of income loss in the case of health tax implementation.

The compensation for the required insurance coverage expenses will be conducted from two main sources: the total revenues of the state budget and the health tax. The concept proposes a mechanism whereby all members of the population, regardless of social status, including socially vulnerable groups, will have the same health insurance package. There will be no difference in the conditions for receiving basic services for the rich and the poor or socially disadvantaged, in terms of medical assistance and the quality of services provided. When health issues arise, people will no longer have to think about raising money, taking loans, borrowing, or selling personal property.

The calculated and projected annual insurance coverage cost per beneficiary is set to be 77,274 AMD. The tax code provides for exemptions for organizations, allowing a deduction from taxable income for the amount spent on medical insurance packages, up to 120,000 AMD annually.

According to the draft, the insurance will include the following services:

• For children under 18:
  • Outpatient medical assistance and care services, including consultations from local physicians and referrals to specialists when necessary, as well as diagnostic examinations based on medical indications.
  • Specialized consultations and mandatory laboratory-tool diagnostics during pregnancy monitoring.
  • Emergency medical assistance services, including air ambulance.
  • Dental medical assistance.
  • Care services for children with mental and physical issues.
  • Provision of essential medications listed by the local physician for illnesses.
  • Health services under state care, including immunization, preventive medical assistance, mandatory medical examinations, and diagnostic inquiries for infectious diseases.
  • Services for tuberculosis and HIV/AIDS medical assistance.
  • Mental health and addiction-related medical assistance.
  • Hemodialysis services.
• For the population over 18:
  • Outpatient medical assistance and care services as listed above.
  • Emergency medical assistance services, including dental emergencies.
  • Provision of essential medications for chronic illnesses.
  • Health services under state care, as described.

Hospital treatment and care services will include necessary measures and medical services, including consultations, laboratory investigations during inpatient treatment, provision of necessary medications and supplies by the hospital, therapeutic interventions, and ensuring the patient has a hospital room (except for the cost of preferred individual paid rooms).

Strict penalties and fines are proposed for breaches of contract conditions for both medical organizations and doctors, potentially leading to contract termination and application for license withdrawal from the Ministry of Health.

It is also noted that the justifications for the health insurance project indicate existing issues in the healthcare system, revealing that inadequate funding has led to poor targeting of the socially vulnerable population, low reimbursable prices compared to actual costs, and the absence of medical specialists in the regions. Furthermore, low financial affordability leads to a 20.1% share of the population not visiting primary healthcare providers due to financial reasons.

Financial shortages hinder system development and quality of care improvements. Approximately 9% of the population spends over 25% of their consumer expenditure on healthcare costs, leading to around 6% falling into poverty – the highest rate in the region.