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The battle is not over yet

Is a health insurer subject to a tendering obligation or not?

On 12 May 2015, the Court of Appeal of 's-Hertogenbosch ruled on the question of whether CZ should be regarded as a contracting authority. After the preliminary relief judge of the Court of Zeeland-West Brabant on 19 June 2014, on the basis of undisclosed reasons, ruled that health insurers are contracting authorities, the preliminary relief judge of District Court of The Hague in the judgment of 16 September 2014 concluding that this is not the case. One may wonder whether great value should be attached to this judgment, since insufficient substantive arguments have been put forward on the basis of which a judicial judgment could be given. More than a month later, on 27 October 2014, the provisional relief judge of the District Court of Gelderland also ruled (case 14-482, not published) that health insurers are not contracting authorities. This is remarkable, because this judgment refers to the factually non-substantive judgment of the preliminary relief judge in The Hague.

Partly due to the prevailing lack of clarity, people waited anxiously for the judgment of the Court. After all, a major interest is at stake for health insurers: should they or should they not tender in accordance with national and European procurement law?

Judgment Court 

The Court ruled in favor of the health insurers. The conclusion of the Court is that health insurers meet needs in the general interest of a commercial nature and that they are therefore not institutions governed by public law as referred to in Article 1.1 of the Public Procurement Act 2012. However, to assess whether a health insurer is subject to a tendering obligation, on the basis of European jurisprudence should not only look at the legal, but also at the factual situation.

As the Court of Appeal in The Hague ruled, it is not in dispute whether health insurers meet needs in the public interest. The question is whether they meet needs in the public interest that are of a commercial nature. To answer this question, it must be assessed whether a health insurer operates under normal market conditions, has a profit motive and bears the economic risk of its activities. For example, strong competition can be an indication that the public interest is of a commercial nature. However, that competition must actually be there. The Court ruled that the existence of social preconditions in the Health Insurance Act does not prevent health insurers from operating in a climate of competition.

The legal and factual situation is a different reality 

In order to answer the question of whether CZ operates under normal market conditions, one may wonder whether the Court has sufficiently looked at the factual situation. If one looks at the principles of free competition, such as entry, low barriers to entry and influence on price, it appears that in fact there are hardly any switchers (less than 10%), and that, furthermore, under the Health Insurance Act, these switchers are allowed to switch at a fixed time and that the market share of four major health insurers is 90%. There is therefore hardly any competition under these circumstances.

In addition, Dutch citizens can claim a contribution to reduce the premium burden under a separate law, the Healthcare Allowance Act. A contribution like this, based on solidarity, is lacking in a commercial system. In addition, pursuant to Article 13 of the Health Insurance Act, health insurers are faced with a restriction of contractual freedom. This article stipulates that health insurers are obliged to also reimburse a large part of non-contracted care. A bill, which was intended to give health insurers more freedom to only reimburse contracted care, was recently rejected in the Senate.

It appears from the foregoing that health insurers have limited freedom under the Health Insurance Act to determine the amount of the premium and to draw up contracts. There is therefore no question of real competition, nor of operating under normal market conditions. In addition, the prohibition of premium differentiation ensures that no distinction may be made on the basis of age, gender and health status. Health insurers therefore have a very limited opportunity to distinguish themselves from each other. That is one of the reasons why less than 10% of the policyholders switch each year.

With regard to the profit motive, it should be examined whether management is based on the criteria of return, efficiency and profitability. Whether a health insurer has a profit motive differs per institution and can be found in the articles of association. According to the Court, the lack of profit motive does not justify the conclusion that there is no question of meeting needs of general interest that are of a commercial nature. In addition, health insurers are bound by the conditions for maintaining the statutory reserves: the Health Insurance Act must be implemented on a non-profit basis and no distributions may be made to shareholders, members or others. Both the government and the NZa supervise and direct the income and its expenditure by health insurers.


With regard to the economic risk, the Court ruled that it is up to CZ to determine how the income is spent, provided it is ensured that the insured receive the insured benefits in time. Moreover, the Court concludes that health insurers can go bankrupt if they do not control their expenses sufficiently. According to the Court, there is no legal regulation that can prevent a health insurer from going bankrupt. However, if one looks at the actual circumstances, the question remains whether CZ actually bears economic risk. Firstly, the obligation to take out insurance ensures that there is a high standard demand for health insurance policies. Due to the acceptance obligation, the supply side hardly fluctuates either. The market is therefore virtually fixed. Are there safety nets when things go wrong with the financial situation of health insurers? Legally maybe not, but actually yes. There is an equalization system based on the Health Insurance Act. All health insurers receive the same compensation for an elderly person, a baby or an insured who is often hospitalized, whether the health insurer is efficient or not. This ensures that the incentive to do business efficiently is removed. Moreover, it is unlikely that the government will allow a health insurer to go bankrupt, given the supervision that is exercised on the financial situation.

And now? 

It is doubtful whether the ruling now provides more clarity for all health insurers. If a functional explanation is given to the concept of public law institution, it cannot be said that on the basis of the above facts CZ operates under normal market conditions. The facts and circumstances of each health insurer are relevant to arrive at a correct judgment. Moreover, the judgment of the Court is a provisional judgment. A different judgment can still be made in proceedings on the merits.

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