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WT/BFA/W/543  
 
25 February  2021 
(21-1627) Page: 1/8 
Committee on Budget, Finance and Administration    
 
 
UPDATE ON WTO MEDICAL INSURANCE PLAN AND ASHI LIABILITIES  
 
1  OVERVIEW OF THE MEDICAL PLAN COSTS  
The WTO Medical Insurance Plan is a key part of the benefits package offered to current and 
former employees (retirees) and their dependents. WTO staff and former employees residing in 
Switzerland are exempted from the mandatory participation in the Swiss Health Insurance scheme 
(LAMal) by virtue of the WTO Headquarters agreement, provided the WTO medical plan offers a 
coverage at least equivalent to that of LAMal.  
The WTO medical plan provides for staff members, retirees and their dependents  a combination  
of high -quality base sickness and accident coverage as well as health insurance benefits which are 
typically covered by optional complementary insurance plans. In addition, the WTO Medical 
Insurance Plan provides worldwide coverage with a free choice of m edical provider, which ensures 
that retired staff and dependents are covered in their respective country of residence.  
The principle of the WTO plan is to provide access to an affordable and at the same time quality 
medical coverage for eligible stakehold ers in a cost -efficient way. Therefore, the goal of managing 
the plan will prioritize cost consciousness and efficiency as the foundation of a sustainable Medical 
Plan, while also bearing in mind the need to maintain quality of coverage.  
The WTO medical pl an is a pay -as-you-go plan, with t he medical insurance premiums WTO 
beneficiaries  pay every year determined based on an adjustment formula that includes: the amount 
of reimbursements made during the previous year, an estimate of the medical cost inflation,  the 
Incurred but Not Reported claims (IBNR) as well as the average ratio of the claims paid to any 
insured person in excess of CHF 90,000. The formula also considers  the premiums paid, as well as 
a profit fee for the WTO medical Plan Administrator. The administration contract  signed by the WTO , 
however, contains a  protection which limits the maximum premium increase in any given year to 
15%.  
In years when total premiums paid exceed reimbursements, a mechanism within the annual 
premium adjustment formula al lows for the accumulation of funds which, in turn, are used to offset  
future increases to the premium . 
The cost of the WTO medical insurance  premium is split between the plan members and the 
WTO. Dependents are only subsidized if they are a child or if the  staff member or retiree receives a 
dependency allowance for that person. At the end of 20 20, out of 2286 total participants, 
182 participants (or approximately 8%) are unsubsidized and pay the full premium themselves.  
These unsubsidized participants include non-dependent and divorced spouses and adult children . 
Overall , the WTO bear s 60% of the costs of the Plan with 40% borne by the participants. This rate 
varies individual -by-individual depending on the grade of the staff member or the pension benefit  of 
the retiree.  
The premiums increase d by 5% in 2020. In 2021 the premiums remained stable, but this is at 
least partially attributable to the COVID -19 pandemic and the resulting short -term changes in 
behavior related to how people consume medical services.  
The table below illustrates the evolution of the premium index between the WTO and the Swiss 
Medical Insurance premium. Overall, it should be noted that the WTO premium index remains below 
the Swiss index . WT/BFA/W/543  
 
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  Table 1 Swiss Medical  Insurance Index  Comparison  
 2015  2016  2017  2018  2019  2020  
Swiss medical insurance 
premium Index1 100 103 107 112 112 113 
WTO premium index  100 100 100 100 105 111 
2  ON-GOING COST CONTAINMENT MEASURES  
Reimbursements  are capped at the "reasonable and customary" limit for the Country of 
treatment but cannot, in any case, exceed the rates applicable in Geneva. As medical costs are often 
lower outside of Switzerland, plan Participants are, however, encouraged to seek treatment in lower 
cost areas when feasible.  
Prior approval requirement for  planned  hospitalizations  and numerous  medical procedures and 
treatments  are an opportunity for the Plan Administrator to ensure costs are reasonable and 
whenever possible obtain ad ditional discounts . The prior approval process also allows the Plan 
Administrator to reimburse beneficiaries for a second opinion or assess whether other treatment 
options would be available that would reduce hospital stays or unnecessary expenses.  
The Pla n Administrator has also negotiated special discounted rates and direct payment 
agreements with many hospitals, doctors and specialists.  
In 201 9, through Allianz's active management of the WTO Plan, the following savings have 
been reported:  
• Inpatient netw ork in Switzerland: CHF 404,000;  
• Inpatient network in the USA: CHF 175,000; and  
• Active  case management: CHF 135,000.  
The WTO is actively engaging with plan participants to remind and thank  them for being 
conscious of, and conscientious about, their medical  consumption and its impact on our Medical Plan 
and future premiums.  
3  MANAGEMENT OF THE MEDICAL PLAN  
The responsibility of the management of the Medical Plan falls under t he Director -General . 
Operationally, the management of the plan is allocate d to the Human Resources Division. In addition,  
a joint advisory body, t he Medical Insurance Management Committee (MIMC) , advises the     
Director -General on any proposed changes to the medical plan. It is composed of representatives of 
the Director -General, the St aff Association and the Association of  Retired GATT/WTO Staff Members.  
The MIMC has the following responsibilities : 
a. Keeping under review the working and the financial status of the Plan, taking account of 
the provisions of the group contract concluded with  the Plan Administrator.  
b. Recommending the total premium for each year to the Director -General.  
c. Analysing, and where necessary, renegotiating the insurance premiums and benefits 
considering the specific needs of staff members and retired staff members and t heir 
dependents.  
d. Analysing and recommending to the Director  General the policy for subsidizing the total 
premiums per insured person.  
 
1 Source: Office fédéral de la statistique, IPAM . WT/BFA/W/543  
 
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  e. Informing the Director -General and the plan participants of any change in the terms and 
conditions of the contract with th e Plan Administrator, in contributions or in the practices 
of the Plan Administrator.  
f. Interpreting the provisions of the group contract with the assistance of representatives of 
the Plan Administrator and Human Resources Division and making decisions on ca ses 
referred to it.  
The MIMC, in coordination with the medical plan administrators engages in a  continuous  review 
of the benefits table with an emphasis on sustainability of the plan and reasonable cost control 
measures  will be undertaken moving forward . 
In 2020 several recommendations from the Human Resources Division were reviewed by the 
MIMC and forwarded to the Director -General. Due to the unexpected departure of the last  Director -
General  and the turmoil created by t he COVID -19 pandemic  these recommendations remain pending 
consideration by the new Director -General.  
4  POPULATION OF INSUREDS  
Active staff and their dependents represented approximately 7 1% of the total insured 
population, whereas retired staff and their dependents represented 2 9% at the end of 20 20. 
The following graph illustrates the evolution for selected years of the WTO's main insured 
categories of population . The active population increases slowly , whereas the retirees' population 
shows a sharper  increase.  
Graph 1 Evolution of Insured Population ( 2015  and 2020) 
 
 
5  BROAD FINANCIAL OVERVIEW OF OUR MEDICAL PLAN  
The graph below shows the trends of net premiums and reimbursements over the past 6 years.  
 
1594
5261632
654Number  of  insured  personsEvolution of insured population (2015 and 2020)
200
92015201520202020
Active staff and dependents Retired staff and dependentsWT/BFA/W/543  
 
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  Graph 2 Evolution of claim reimbursements and net premium   
 
 
The higher level of reimbursement as compared to the total net premium paid led to the 
increase in Plan premiums for 2019 as well as  for 20 20. In 202 0, however, due to the COVID -19 
pandemic, leading to the postponement of many planned consultations and hospitalizations, the 
WTO plan experienced a temporarily drop in reimbursements . There can be variability from year to 
year in the experience of the plan. Periods of stability can be followed by jumps in costs. The overall 
trend is likely to be that premiums increase over  time due to medical inflation and evolving 
demographics among the Plan's Participants . The overall goal , therefore,  is to manage the rate of 
increase responsibly  over the long term.  
5.1  WTO contribution to the WTO Medical Plan premium  
The table below shows the evolution of WTO's contribution to the Plan premium of active  staff, 
retirees and eligible dependents between 201 5 and 20 20. The collective increase in the contribution 
to the Medical Insurance Plan from 201 5 to 2020 is CHF 654,736 or 8.7%. In 20 20, the contribution 
increased by approximately  CHF 80,000 and stands a t 4.15% of the overall WTO budget.  
13,000,00013,350,000
12,050,00012,450,00014,350,00015,200,000
12,000,00012,250,00013,100,00013,800,00014,900,000
14,050,000
2015 2016 2017 2018 2019 2020Trends in net premiums and reimbursements
in CHF (2015 -2020)
Total net premium available to cover expenses Total reimbursementsWT/BFA/W/543  
 
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  Table 2 WTO contribution to the WTO Medical Plan premium  
Year 2015  2016  2017  2018  2019  2020  
WTO budget  
in CHF  197,203,900  197,203,900  197,203,900  197,203,900  197,203,900  197,203,900  
WTO contribution 
to the Medical 
Plan in CHF  7,534,820  7,882,878  7,397,624  7,832,600  8,109,942  8,189,556  
WTO contribution 
to the Medical 
Plan in %  3.82%  4.00%  3.75%  3.97%  4.11%  4.15%  
Year -on-Year 
Change in 
contribution to 
the Medical Plan 
in CHF  34,548  348,058  -485,254  434,976  277,342  79,614  
Year -on-Year 
Change in 
contribution to 
the Medical Plan 
in %  0.46%  4.62%  -6.16%  5.88%  3.54%  0.98%  
 
6  REIMBURSEMENTS RELATIVE TO PREMIUMS BY INSURED CATEGORY IN 20 20  
Active staff and their dependents represent 7 1% of the total insured population, contribute 
68% of the premiums and receive 5 5% of the total amount of reimbursements under the Plan. 
Retirees and their dependents repres ent 29% of the total insured population, contribute 3 2% to the 
premiums and receive 45% of the total amount of reimbursements under the Plan. As noted above, 
the excepted evolution of the  demographics of the Plan population will lead to ASHI costs 
represen ting an increasing share of the overall cost of the Plan in the  future.  
Table 3 Reimbursements relative to premiums by insured category in 20 20 
Population  Percentage of total 
reimbursements  Percentage of 
overall amount of 
premium 
contribution  Percentage of the 
insured population  
Active staff including 
dependents  55% 68% 71% 
Retired staff including 
dependents  45% 32% 29% 
Total  100%  100%  100%  
 
7  AFTER SERVICE HEALTH INSURANCE (ASHI) LIABILITY  
Since 2012, the WTO has used International Public -Sector Accounting Standards (IPSAS) to 
guide its financial reporting. Under IPSAS, organizations must report full estimated liability at the 
end of a reporting period for employee benefits, including the long -term lia bilities associated with 
defined benefit plans.  
The WTO Medical Insurance Plan constitutes a defined benefit plan with long term liabilities 
because, like the pension plan, it promises to make a payment on behalf of eligible staff members 
at some point in the future for a benefit that is defined today but whose cost is not  yet known . 
This is a form of deferred compensation. In exchange for foregoing some current compensation, 
employees accept that they will receive compensation in the future in the form of a pre -defined 
benefit. The risk that the benefit promise may cost more , or less , than anticipated resides with the 
Organization. If the benefit costs less , the organization realizes a gain. If the benefit costs more, the 
Organization realizes a loss.  WT/BFA/W/543  
 
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In mo st organizations the cost of these benefit promises has been more than expected. This 
can be attributed to rising life expectancy and a general misunderstanding of the difference between 
current costs (pay -as-you-go) and full costs (pay -as-you-go plus the accrual of the costs of future 
benefits earned in the current period). Therefore, most organizations have underestimated the 
eventual impact of these benefit promises on their financial situation. It is for this reason that IPSAS 
requires that the full est imated cost of benefit promises be disclosed even if those costs do not 
constitute a cash payment in the current period.  
Under IPSAS , the WTO must recognize the full liability for employee benefits at the end of each 
financial year in its financial stateme nts. The WTO 's obligation is to provide agreed benefits to current 
and former employees and any risk that benefits will cost more than the revenue derived from 
contributions would fall on the Organization.  
The provision of After Service Health Insurance (A SHI) to retirees and their dependents is such 
a liability and is recognized in our financial statements. The WTO recognized this liability for the first 
time as part of the opening IPSAS adjustments at January 2012. Under IPSAS, the calculation of the 
ASHI liability is based on the Projected Unit Credit actuarial methodology, which requires recognition 
each year of the change in the total of a defined benefit obligation. The variation in the liability will 
impact the financial statements each year.  
The reported amount of the  "ASHI liability " had been relatively stable for the past few years . 
However, due primarily to falling interest rates the liability increased in 2018 . The 2019 liability 
decreased slightly but  was largely stable compared to the prior year . 
• 31 December 2015 : CHF 245.5 million  
• 31 December 201 6: CHF 226.3 million  
• 31 December 2017 : CHF 228.9 million  
• 31 December 2018 : CHF 283.7 million  
• 31 December 201 9: CHF 277.2 million  
7.1  Projected Evolution in Long Term ASHI Liabilities  
The reporting of the After-Service Health Insurance (ASHI) liability as recognized in the 
financial statements  (and as reported above)  shows the accrual of benefit obligations as of the date 
of the reporting .  
A more practical view of the liabilities for the purposes of on -going management of the Plan 
estimates how the liabilities are projected to evolve and when the actual costs will impact the 
organization's budget. This financing valuation requires a different kind of analysis than the IPSAS 
calculations and uses differe nt assumptions to project costs into the future . This kind of analysis was  
first undertaken was in 2014  and revised  in 2018 . It is normal that these projections are updated 
only every 3 -4 years.  An update of the long -term projected evolution in liability c osts will be launched 
in 2021.  
It is important to recognize that these projected liabilities and costs  are preliminary and still 
under review with the actuaries. They could change modestly as we review the specific assumptions 
and they will certainly chang e over time as circumstances evolve. However, they give a reasonable 
indication of the outlook and they will be periodically updated and reported to Members as part of 
future ASHI updates.  
Based on 201 8 population data the long -term outlook for the ASHI li ability is for it to grow 
steadily into the foreseeable future if the WTO stays on a pay -as-you-go approach. This will primarily 
be driven by an increasing number of retirees over the next 30 years. The number of retirees is 
expected to stabilize in about 30 years around 2047. The current liability of below CHF 300 million 
is expected to exceed CHF 850 million by 2047 based on conservative assumptions about the 
discount rate. If interest rates return to more historically normal ranges, the liability estimat es would 
decrease.   WT/BFA/W/543  
 
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  Figure 1 Forecast Development of total ASHI Liabilities between 2017 and 2050  
 
 
The 2018 estimated ASHI Liability for 2047 is lower than what was estimated in 2014, the 
last time a long -term projection of liabilities was undertaken. At that time the liability in 2047 was 
estimated to be more than CHF 1 billion. The decline can be explained by  lower than expected 
premium increases over the past several years and a younger than previously predicted age for new 
entrants to the Plan in recent years. However, there are several relevant variables and even modest 
changes in these  variables  over 30 ye ars can have a significant  impact on the estimates.   
From the point of view of budgetary implications, it is the annual cashflow estimates that are 
more important than the absolute value of the estimated liability when the funding approach is pay -
as-you-go. It is the annual cashflow required to retire the liability that matures each year that has 
direct budget implications.  
Currently, the cashflow required to fund the ASHI liability is somewhat below CHF 3 million 
per year. Like the liability, this will b e expected to grow steadily for the foreseeable future. The 
current estimate for annual cashflow in 2047 would be close to CHF 11 million. This is an increase 
of more than 3 times the current amount. This amount can be manageable over a 30 -year time 
horizo n and is in line with  trends in healthcare inflation and the changing demographic of the Plan.  
Figure 2 Forecast Development of Total ASHI B enefit Costs between 2018 and 2050  
 
 
 
WT/BFA/W/543  
 
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We are continuing to work with the actuaries to unde rtake sensitivity analyses and experiment 
with other changes in assumptions to better understand how changes in key variables are likely to 
impact the projections in the future. This further analysis will be shared with Members in due course.  
8  SPECIAL RESER VE ACCOUNT MEDICAL PREMIUMS (ASHI) LIABILITY  
With the development  of the WTO 's ASHI Strategy in 201 7 the Secretariat proposed adopting 
a partial funding approach to the ASHI liability through the creation of an ASHI Fund to be initially 
funded with the acc umulated budget surpluses from 2012 -2017. The Committee on Budget, Finance 
and Administration  (CBFA) did not accept to create such a fund and decided to stay on a pay -as-
you-go basis  at that time . However, the CBFA did decide to establish a Special Reserve Account  
(SRA)  for the medical plan. This account was established to "ring-fence " savings from the medical 
plan budget lines and retain them exclusively for managing ASHI costs  of the budget when the ASHI 
elements  becom e a material  part of the overall costs . Any decision to use funds from the SRA would 
be subject to CBFA approval.  
As of the end of 20 20, the medical plan SRA had an accumulated balance of CHF 4.5 million  
resulting from savings on the medical plan budget li nes. There is an additional ASHI related source 
of funding derived from a surcharge on the salaries of extra -budgetary funded staff. This assessment 
has contributed an additional CHF 1.3 million  to the SRA.  
 
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