Business Cycle Sensitivity of Statutory Health Insurance: Evidence from the Czech Republic

Since the Czech healthcare system financing is based on Statutory Health Insurance scheme, it relies heavily on wage-based contributions from employers and employees and thus may be prone to business cycle fluctuations. This turned out to be a problem after the 2008 financialcrisis when the government had to issue loans to the insurance funds in order to cover the loss of revenue from the economically active population. This paper examines how the insurance funds' revenues react to economic downturns and expansions, and whether the effect is visible immediately or with a lag. The data from Ministry of Health, Czech Republic, are used, as well as several macroeconomic variables representing the business cycle. The static and lagged regression models on log differenced data are employed throughout the analysis. Significant pro-cyclicality in total health insurance funds' revenues and contributions from employers/employees is found, with the lagged effect being slightly stronger. On the contrary, contributions from state on behalf of economically inactive people do not display a significant relationship with business cycle. These results imply the need to increase state contributions during economic downturns in order to compensate for the loss of health insurance funds' revenues from economically active individuals.