Capital Market Authority Advances Major Reform in HMO Long-Term Care Insurance
The Capital Market Authority is promoting a major reform to replace HMO long-term care insurance with a personal savings model, facing opposition from the Ministry of Finance.
The Capital Market Authority, led by Amit Gal, is advancing a significant reform in the long-term care insurance (nursing care insurance) provided by Israel's health maintenance organizations (HMOs), a product covering approximately 5.2 million Israelis. The core proposal is to abolish the existing mutual insurance model and replace it with a personal long-term care savings model, similar in structure to pension funds. However, the budget department at the Ministry of Finance opposes the move, arguing that the system remains stable following recent tightening of conditions, meaning the final decision will likely pass to the next government.
Transition to Personal Savings and Capital Withdrawal
Under the proposed model, cross-subsidization between younger and older populations will be eliminated. Each individual will save for themselves in the capital market until the age of 70. Only upon reaching this age will an annuity factor be calculated and monthly payments determined in the event of a loss of independence. At age 70, a lump-sum withdrawal of the accumulated funds will also be permitted, subject to capital gains tax, while maintaining limited nursing care rights for one year.
The use of compound interest yields over decades of saving will reduce costs for young people by approximately two-thirds. A monthly contribution of just tens of shekels will be sufficient to reach a savings target of 80,000 to 100,000 shekels, which will secure coverage valued at up to 300,000 shekels.
"The current model suffers from chronic instability due to rising life expectancy, a surge in claims, and the genuine fear that young people abandoning the system will cause it to collapse entirely."
Solutions for the Elderly and Transfer to Institutional Bodies
Alongside cost reductions for the young, the program includes dedicated solutions for the older population and system management. For approximately one million insured individuals aged 55 and over who do not have enough remaining savings years, the state is required to establish a budgetary safety net of about 5 billion shekels.
Additionally, the management of savings portfolios will be transferred from the HMOs to insurance companies and institutional bodies in exchange for management fees. This move receives the support of the Ministry of Health, which seeks to distance the nursing care sector from the health funds.
The immediate trigger for the Capital Market Authority's initiative is the failure of the tender for operating the long-term care insurance of Clalit Health Services, to which only a single company applied.
