Beyond the public universal health insurance system: The effect of population aging on insurer’s responses

The establishment of a universal health insurance system has contributed significantly to improving national health standards and increasing life expectancy. In Japan, where a public system was introduced in 1961, many health indicators have improved substantially; however, population aging threatens the financial sustainability of the current system. This study aims to examine how the fiscal burden of population aging affects health insurance finances established by individual companies or corporate groups and induces changes in the insurer’s responses. Using a panel data set of insurers operated by large companies from 2003 to 2018, we find that contributions to healthcare systems for the elderly have a significant negative impact on insurance finances that is almost as large as rising healthcare costs for young members. In addition, the insurers facing financial distress tend to use their own reserve fund without compromising benefits to enrollees. However, they are more likely to dissolve their own health insurance and switch to the other public health insurance plan for small and medium-sized firms when their sustainability deteriorates further. We also find that a large economic shock that severely affects corporate profits has a negative effect on insurance finances. These findings suggest that the design of health insurance policies needs to consider long-term demographic changes after the introduction of universal coverage.