Ensuring a long-term balanced social security fund and an annually balanced health insurance fund by effective, responsible, and regulated management
Communist Review - Social security and health insurance are one of the important policies of the Party and State, the main pillar of the national social security system that help to ensure social progress and equity, and stabilize people's lives, thus demonstrating the humanity of the regime. The regulated, transparent, and effective management and use of the Social Security Fund and the Health Insurance Fund for the right purposes contribute to building the trust of the people and the social community in the Party and State.
1- The viewpoint of the Party and legal framework on the management and use of the Social Security Fund and the Health Insurance Fund
Established in 1995, Vietnam's social security industry has been assigned by the Party, State, and Government to implement social security, health insurance, and unemployment insurance policies. As the sector that directly carries out important tasks of the Party and State on social security, the Social Security Fund and the Health Insurance Fund are always properly and effectively managed by the Vietnam Social Security to ensure a long-term balanced social security fund and an annually balanced health insurance fund. Clause 4, Article 3 of Decree No. 89/2020/ND-CP, dated August 14, 2020, of the Government, stipulates the functions, tasks, power, and organizational structure of Vietnam Social Security as follows: “Managing and using social security funds, including pension and survivor fund, occupational accident and diseases insurance fund; Sickness and maternity fund; unemployment insurance fund; health insurance fund under the principle of centralization, consistency, publicity, transparency as prescribed by law; organize the accounting of social security, unemployment insurance, and health insurance funds according to the provisions of law; annually formulating and organizing the implementation of investment plans for the social insurance, unemployment insurance, and health insurance funds once approved by Governing Body of Vietnam Social Security; managing investment risks of social insurance, unemployment insurance, and health insurance funds under the law”.
To ensure resources for the implementation of social security and health insurance policies and make an important contribution to social progress and justice, socio-political stability, and national sustainable growth, the current law on social security and health insurance stipulates that the management and use of social security and health insurance funds must obey laws and regulations to ensure safety and efficiency. On November 22, 2012, the Politburo issued Resolution No. 21-NQ/TW on "Strengthening the Party's leadership in social security and health insurance from 2012 to 2020" which explicitly states: “It is required to safely use and ensure a long-term balanced social security fund; manage and use effectively and ensure the balance of health insurance fund”. The resolution also sets out four groups of tasks and solutions to achieve goals in social security and health insurance in which "strengthening the leadership and management of social security and health insurance funds to ensure the balance between revenue and expenditure and achieve effective and safe growth following the law" is one of the specific solutions of the fourth task group on "Strengthening public management in social security and health insurance".
Regarding the Social Security Fund: Social security funds shall be managed in a centralized, unified, public, and transparent manner, used for the right purposes, and independently accounted according to component funds. Their use is regulated by Article 84 of the Law on Social security and Clause 3, Article 57 of the Law on Employment. Specifically, the Social security Fund is used to pay social insurance benefits to employees; health insurance premiums for the insured prescribed by law; cover managerial costs of social security institutions; costs of medical examination to assess the working capacity of employees who are entitled to the social insurance regime as prescribed by law; invest to preserve and grow the fund according to regulations.
Regarding the health insurance fund: Articles 34 and 35 of the Law on Health Insurance defines: The health insurance fund shall be managed in a centralized, unified, public, and transparent manner under the decentralized management of the health insurance system. The health insurance fund is used to cover costs of medical care and treatment for the insured; costs of administrative management of the health insurance system according to specific regulations applicable to public agencies; invest to preserve and grow the health insurance fund under the principle of safety and efficiency; establish a reserve fund for medical care and treatment covered by health insurance.
An important content in the management and use of the Social Security Fund and the Health Insurance Fund is investment activities. Therefore, the principles and forms of investment of these funds are regulated by law, and the investment activities are placed under the supervision of public agencies in charge of social insurance, Governing Body of Vietnam Social Security, the Government, and the National Assembly to ensure coherence and transparency. Specifically, on April 28, 2016, the Government issued Decree No. 30/2016/ND-CP guiding investment activities from the Social Security, Health Insurance, and Unemployment Insurance Funds, which is of significant importance for Vietnam Social Security.
On May 23, 2018, the 7th Congres of the 12th Central Committee of the Party approved Resolution No. 28-NQ/TW on "Reforming social security policies" which reforms fund investment activities: “Diversifying the portfolio and investment structure of the social security fund under principles of safety, sustainability and efficiency; prioritizing investment in Government bonds, especially long-term Government bonds; gradually expanding into areas that can help drive profitability, establishing a roadmap to invest part of unused funds with investment trusts in domestic and international markets".
On 8-10-2018, the Government issued Resolution No. 125/NQ-CP and the Government's Action Plan to implement Resolution No. 28-NQ/TW of the 12th Central Committee, by which one of the key tasks and solutions to improve the effectiveness and efficiency of public management in social security is: "Strictly managing the investment of the social security fund to ensure safety, sustainability and efficiency". The resolution points out: “The Ministry of Finance shall coordinate with the Vietnam Social Security and relevant ministries and branches in formulating and submitting to the Government a scheme to improve the efficiency of management and investment of the social security fund by diversifying the portfolio and investment structure under principles of safety, sustainability and efficiency; prioritizing investment in Government bonds, especially long-term Government bonds; gradually expanding into areas that can help drive profitability, establishing a roadmap to invest part of unused funds with investment trusts in domestic and international markets to ensure safety and sustainability".
Currently, the management, organization, and implementation of social security, unemployment insurance, and health insurance regimes and policies of Vietnam Social Security are placed under the close supervision and direction of public agencies in charge of social security, Governing Body of Vietnam Social Security, the Government and the National Assembly. In addition, the Social Security Fund is also audited every 3 years (this is defined in Clause 2, Article 16 of the Law on Social Security 2014). Annually, the National Assembly supervises the implementation of social security and unemployment insurance regimes and policies and the management and use of funds according to the provision of law.
2- Ensuring effective management and use of the Social security fund and the Health Insurance Fund
First and foremost, the management and use of social and health insurance funds shall consistently follow legal regulations.
After 27 years of establishment and development, the Social security fund has become the largest social security fund that is run under the principle of “Premium contribution - insurance coverage” and sharing among employees of the same generation and between insureds. The health insurance fund has affirmed the important role in covering legal costs in the health care of the insured. The number of insured has continuously increased over the years; The rate of population covered by social and health protection benefits has risen sharply. Accordingly, by the end of December 31, 2021, the population covered by social insurance is more than 16,547 million, of which 15,097 million are insured by compulsory social insurance (an increase of nearly 6.6 times compared to 1995) and 1.45 million covered on voluntary social insurance (6.65 times higher than in 2015), reaching 2.96% of the labor force in the age group who are farmers and workers in the informal sector, exceeding 1.96% of the target fixed by Resolution No. 28-NQ/TW. The number of insured in health insurance reached 88.837 million (1.27 times higher than in 2015), reaching the coverage rate of 91.01% of the population.
The payment of social insurance, unemployment insurance, and health insurance benefits to each insured is fully and legally done, thus promoting the role of social protection for employees; Moreover, managers use information technology to replace manual processing so that the settlement of social and health insurance benefits is based on digital data of the insured and follows the principle of " Premium contribution - insurance coverage”. Vietnam's social security industry has been renewed by deploying electronic transactions and public services to shorten the processing time, reduce the troubles, and ensure the rights and interests of workers and individuals.
Especially, amidst the complicated and challenging COVID-19 epidemic in 2020 and 2021, Vietnam Social Security has adapted quickly and flexibly to the pandemic situation to effectively deploy solutions and ensure the best interests of insured. From 1995 to the end of 2021, Vietnam Social Security has settled nearly 135.7 million turns of people enjoying sickness, maternity, convalescence, and health care benefits (over 5 million people per year on average); from 2010 to the end of 2021, over 8.7 million people have been entitled to unemployment insurance benefits; by the end of 2021, the total number of people entitled to monthly pensions and social insurance benefits was about 3.3 million (increasing by 179% compared to 1995); from 2003 to 2021, it has cooperated with medical institutions to cover costs of medical examination and treatment for over 2,217 million people. In the context of the COVID-19 pandemic affecting all aspects of the economic and social life of employers and workers and people's health, policies in social protection benefits have demonstrated their effectiveness, helping workers and individuals stabilize their lives and overcome difficulties.
As a result, the collection of social and health insurance funds continuously increased every year: Social insurance revenue increased from 788.5 billion VND in 1995 to 49,914 billion VND in 2010, 148,375 billion VND in 2015, and about 395,742 billion VND by 2021, an increase by 500 times compared to 1995. Health insurance revenue increased from VND 2,110 billion in 2004 to VND 59,669 billion in 2015, and VND 109,259 billion in 2021. The rate of late payment of insurance premiums entitled to failure-to-pay penalty gradually decreased over the years, reducing the long-overdue social and health insurance ratio to below 3.67%.
Therefore, the Social and Health Insurance Fund has become the largest social security fund used for the right purposes and managed publicly and transparently under the close supervision of the National Assembly, the Government, the governing body of Vietnam Social Security, and related agencies. The results of annual inspections and audits have demonstrated that the management and use of the Social and Health Insurance Fund comply with the law. Since 2019, the Vietnam Social Security has implemented inspection management software; In 2021, the software was upgraded with data processing and warning functions in inspection work (121 signs of 77 acts of violation in social and health insurance and 141 signs of operational errors have been identified). Electronic inspection has increased productivity, efficiency, and reduced human resources, and shortened processing time compared to direct contact (decreased by about 48% of processing time, from 20 hours to 10.5 hours). Besides, Vietnam Social Security has stepped up inspection and supervision of medical examination and treatment expenses covered by health insurance on the electronic health insurance assessment information system; thereby, promptly detecting abuse of the health insurance fund, reducing the expenditure of the health insurance fund by trillions of dong over the years.
Secondly, the management and use of social and health insurance funds are transparent and effective.
The financial management mechanism of the insurance fund and the industry as well as administrative costs of social, health, and unemployment insurance are regulated by the National Assembly and the Government, making management and use of resources more transparent and efficient; technology has been applied to reform administrative procedures; communication has been promoted to increase the number of insured, collection and payment of insurance benefits have been done; inspection has been strengthened to collect debts; facilities and working equipments have been invested. In particular, despite the serious impacts caused by the COVID-19 epidemic that increased the workload, the whole insurance industry has cut from 10% - 15% of administrative costs.
Investment activities of insurance funds comply with the provisions of law and resolutions of the Governing Body of Social security under the principle of safety and efficiency. The scale of investment has increased as the growth rate, the investment balance, and the return on investment achieved absolute percentage growth. The average rate of return on investment is always positive and higher than the inflation index. By the end of 2021, the accumulated investment balance of insurance funds reached VND 983,060 billion, an average increase of about 24% from 1995 to 2021. The accumulated balance as of December 31, 2021, increased by more than 131 times compared to 1995.
Most investments focus on Government bonds (accounting for over 85% of the total investment balance), the rest is invested in commercial banks as defined by Decree No. 30/2016/ND-CP and the Resolution of the governing body of Social Security to ensure liquidity to pay costs covered by social, health, and unemployment insurance. As the largest financial fund after the state budget, Vietnam Social Security has significantly contributed to the development of the Government bond market in Vietnam, helping the Government safeguard macroeconomic stability, and successfully mobilize domestic capital for socioeconomic growth and national social security.
Performances achieved in the field of social and health insurance during the past 27 years show that financial reform in managing social security and health insurance funds is an adequate policy. These funds are run separately from the state budget under the principle of uniformity of public financial management to ensure objectivity, democracy, publicity, and transparency, and are used legally for the right purposes. The two reforms of social and health insurance policies have provided us with valuable practical lessons that will accelerate the inclusive reform of social policies in the coming time. The proportion of expenditures from the social security fund is increasing while the spending from the state budget is in decline, confirming the clear-sighted leadership of the Party in encouraging the population to improve their capacity to cover themselves with insurance benefits. The scale of insurance funds increases year by year, proving their sustainability and long-term balance. As a result, Vietnam Social Insurance can build and gain the trust of the National Assembly, the Government, the Governing body, employees, and the people.
3- Some challenges to face and solutions to take in the coming time
In addition to the above achievements, the management and use of social and health insurance funds are facing the following challenges:
First, insurance abuse and profiteering still occur in some localities and units. The Vietnam Social Security is assigned to manage and use these funds, including their income and spending. However, in fact, it assumes only the function of the inspector in insurance premium collection. And for spending activities, it can not conduct the inspection. Its duties are limited to checking and giving recommendations so that its sanctions are not strong enough to prevent abuse and violations.
Second, the management of funds for medical examination and treatment covered by health insurance still faces countless difficulties due to mechanisms and policies, such as the financial autonomy of public hospitals; service tariffs; coverage scope of health insurance; regulations on socialization, inadequate public-private partnership, lack of supervision and control, lack of regulations to assess the reasonableness in using drugs, medical supplies, technical services in medical examination and treatment covered by health insurance...
From that fact, Vietnam Social Security needs to strengthen the effective management and use of social security and health insurance funds in compliance with the law to protect the interests of the insured. To do that, in the coming time, due consideration should be given to the following key solutions:
First and foremost, continue to strictly manage the payment of short-term social insurance regimes, lump-sum allowances, and unemployment insurance benefits; strictly control costs of medical care covered by health insurance; apply technological advances and databases in inspecting, supervising, and preventing fraud, abuse, and profiteering. Along with that, synchronously implement measures to manage funds safely, sustainably, and effectively; strictly and efficiently control insurance funds, protect the interests of the insured and contribute to maintaining macroeconomic stability and socio-economic development of the country.
Secondly, continue to coordinate with the Ministry of Health to implement synchronous solutions to both effectively control the health insurance fund, ensure correct and sufficient expenditure, and protect the interests of the insured, such as: implementing new payment methods for medical examination and treatment covered by health insurance (by using Diagnosis-Related Group (DRG) Payments for Health). Notify the estimated spending budget for medical examination and treatment covered by health insurance to each social insurance agency, People's Committee of provinces, cities, and relevant ministries and branches for closer coordination. Use the electronic health record for health insurance surveillance; strengthen inspection to detect insurance profiteering; resolutely refuse to pay costs for health check-ups and medical examinations that do not require legal regulations. Review, assess, and calculate extra expenditure in medical examination and treatment costs covered by the health insurance by localities and report to the Ministry of Finance that directly submits to the Prime Minister to decide on spending more to promptly remove difficulties for medical institutions...
Thirdly, the governing body should strictly supervise insurance collection and spending, management, and use of social, health, and unemployment insurance funds. Supervision is one of its core functions assigned by the Government to ensure that insurance policies comply with the law to promptly detect and prevent acts of violations and abuses. This supervision also aims to assess whether the regulations, policies, and regimes on social insurance, unemployment insurance, and health insurance are appropriate or not. Thereby, it can make feedback and recommendations to the Government and the National Assembly to adopt appropriate amendments.
In addition, strengthen inspection and checking, ensure flexibility and efficiency; promptly detect and handle illegal acts, wastefulness, frauds, or insurance profiteering. Focus on recovering illegal expenses, and late payment of premiums. Promote using of technology in the inspection; exploit and analyze data to assess and identify signs of abuse, profiteering, and illegal acts.
Finally, improve the efficiency of fund investment by following solutions: 1- Improving legal framework. Study to improve policies and laws on insurance investment in Law on Social Security, Law on Health Insurance, and Law on Employment to issue coherent regulations, avoid overlapping and facilitate public management so that investment activities can be conducted in a professional, transparent manner in conformity with international practices. Regarding investment principles, it is necessary to follow the principles of safety, sustainability and efficiency stated in Resolution No. 28/NQ-TW. Develop long- and medium-term investment plans and approved annual investment plans in association with forecasts of future payment obligations. 2- Continue to carry out fund investment activities to ensure the principles and objectives set out. Accelerate premium collection, expand the coverage of social security and health insurance, and expand the scope of compulsory social security to other subjects. Improve the efficiency of control apparatus, control spending to ensure correct, sufficient, and timely expenditures, prevent profiteering, reduce administrative procedures to cut costs, study the rate of insurance contribution and coverage, develop models and improve the quality of investment forecasting to ensure a balanced fund.
Promoting the achieved results, based on the orientations set forth by the Party's resolutions and under the Government leadership, Vietnam social security will make enormous efforts to well implement policies in social security and health insurance in general and the management and use of social and health insurance funds in particular in the new period, contributing to ensuring social security, serving the people better and better, leading the country to develop quickly and sustainably.
This article was published in the Communist Review No. 997 (November 2022)