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WT/BFA/W/511  
 
21 February  2020 
(20-1368) Page: 1/8 
Committee on Budget, Finance and Administration    
 
UPDATE ON WTO MEDICAL INSURANCE PL AN AND ASHI LIABILIT IES 
 
1  OVERVIEW OF THE MEDI CAL 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 le ast 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 medical provider, which ensures 
that retired staff and dependents are covered in their respective country of residence.  
The princi ple of the WTO plan is to provide access to an affordable and at the same time quality 
medical coverage for eligible stakeholders in a cost -efficient way. Therefore, the goal of managing 
the plan will prioritize cost consciousness and efficiency as the fou ndation of a sustainable Medical 
Plan, while also bearing in mind the need to maintain quality of coverage.  
The WTO medical plan 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 CH F 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 yea r to 
15%.   
In years when total premiums paid exceed reimbursements, a mechanism within the annual 
premium adjustment formula allows for the accumulation of funds which, in turn, are used to offset  
future increases to the premium . 
The cost of the WTO medic al 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 2018, o ut of 2230 total participants, 
159 participants (or approximately 7%) 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 P lan with 40% borne by the participants. This rate 
varies individual -by-individual depending on the grade of the staff member or the final average 
remuneration of the retiree.   
After 6 years without an increase, the premiums increase d by 5.8%  in 2019. The long-term 
stability in the premium has been positive given the +33%  medical inflation experienced in the Swiss 
market since 2010 where the major proportion of the Plan's expenses are  incurred . Therefore, the 
2019 increase was not unexpected  and whilst the 2020 premium increase d by a further  5%, the 
WTO plan is doing well in containing cost increases while provid ing quality  coverage at a contained 
cost. WT/BFA/W/511  
 
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  Table 1 Medical Inflation Comparison  
 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 
Swiss 
LAMal 
premium 
Index1 100.0 105.5 107.6 108.4 110.6 114.5 119.6 125.1 129.5 133.0 
WTO 
premium 
index 100.0 100.0 103.9 103.9 103.9 103.9 103.9 103.9 103.9 105.6 
2  ON-GOING COST CONTAI NMENT 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 tre atment in lower 
cost areas when feasible.  
Prior approval requirement for  planned  hospitalisations and numerous  medical procedures and 
treatments  are an opportunity for the Plan Administrator to ensure costs are reasonable and 
whenever possible obtain additional 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 Plan Administrator has also negotiated special discounted rates and direct payment 
agreements with many hospitals, doctors and specialists.  
In 2018, through Allianz's active management of the WTO Plan, the following savings have 
been reported:  
• Inpatient network in Switzerland: CHF 812,000 ; 
• Inpatient network in the USA: CHF 284,000 ; and  
• Administrator for medical case management: CHF 84,000.  
The WTO is actively engaging with plan participants to remind and thank  them for being 
conscious of, and co nscientious 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 Staff Association and the Association of  Retired GATT/WTO Staff Members.  
The MIMC has the following responsibilities : 
a. Keeping under review t he 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, renegotia ting the insurance premiums and benefits 
considering the specific needs of staff members and retired staff members and their 
dependents.  
 
1 Source: Office fédéral de la statistique, IPAM . WT/BFA/W/511  
 
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  d. Analysing and recommending to the Director  General the policy for subsidizing the total 
premiums per insured person.  
e. Informing the Director  General and the plan participants of any change in the terms and 
conditions of the contract with the Plan Administrator, in contributions or in the practices 
of the Plan Administrator.  
f. Interpreting the provisions of the group contra ct with the assistance of representatives of 
the Plan Administrator and Human Resources Division and making decisions on cases 
referred to it.  
3.2  Recent changes in Plan Rules and Benefits  and Ongoing Assessment  
Since 2016 there have been several changes in t he internal rules and benefits tables , most of 
which have already been reported to Members. For example, the Director  General agreed, that as 
of 1 January 2017 staff members are no longer allowed to add secondary dependents to the Plan , 
reducing medium and  long-term costs under the plan . 
In 2019 several recommendations from the Human Resources Division were reviewed by the 
MIMC. These recommendations are currently under consideration by the Director  General.  
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 .  
4  POPULATION OF INSURE DS 
Active staff and their dependents represented approximately 73% of the total insured 
population, whereas retired staff and their dependents represented 27% at the end of 201 8. 
The following graph illustrates the evolution for selected years of the WTO's main insured 
categories of population . The active population remains stable, whereas the retirees' population 
shows  a progressive increase.  
Graph 1 Evolution of Insured Population (2009, 2014 and 2018 ) 
 
WT/BFA/W/511  
 
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  5  BROAD FINANCIAL OVER VIEW OF OUR MEDICAL PLAN  
The graph below shows the trends of net premiums and reimbursements over the past 7 years.  
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. A similar situation occurred in 2012, prior 
to the recent period of stability. In other words, there can be varia bility 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 Participa nts. 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 2 and 201 8. The collective increase in the contribution 
to the Medical Insurance Plan from 2012 to 2018 is CHF 919,70 6 or 13%. In 2018, the contribution 
increased by approximately  CHF 430,000 and stands at 3. 97% of the overall WTO budget.  
WT/BFA/W/511  
 
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  Table 2 WTO contribution to the WTO Medical Plan premium  
Year 2012  2013  2014  2015  2016  2017  2018  
WTO budget  
in CHF  196,003,900  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  6,912,894  7,324,250  7,500,272  7,534,820  7,882,878  7,397,624  7,832,600  
WTO 
contribution to 
the Medical Plan 
in % 3.53%  3.71%  3.80%  3.82%  4.00%  3.75%  3.97%  
Year-on-Year 
Change in 
contribution to 
the Medical Plan 
in CHF  N/A 411,356  176,022  34,548  348,058  -485,254  434,976  
Year-on-Year 
Change in 
contribution to 
the Medical Plan 
in %  N/A 5.95%  2.40%  0.46%  4.62%  -6.16%  5.88%  
 
6  REIMBURSEMENTS RELAT IVE TO PREMIUMS BY I NSURED CATEGORY IN 2 018  
Active staff and their dependents represent 73% of the total insured population, contribute 
68% of the premiums  and receive 5 3% of the total amount of reimbursements under the Plan. 
Retirees and their dependents represent 27% of the total insured population, contribute 3 2% to the 
premiums and receive 47% of the total amount of reimbursements under the Plan. As note d above, 
the excepted evolution of the  demographics of the Plan population will lead to ASHI costs 
representing an increasing share of the overall cost of the Plan in the  future.  
Table 3 Reimbursements relative to premiums by insured category in 2018   
Population  Percentage of total 
reimbursements  Percentage of 
overall amount of 
premium 
contribution  Percentage of the 
insured population  
Active staff including 
dependents  53% 68% 73% 
Retired staff including 
dependents  47% 32% 27% 
Total  100%  100%  100%  
 
7  AFTER SERVICE HEALTH  INSURANCE (ASHI) LI ABILITY  
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 o f a pre -defined WT/BFA/W/511  
 
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  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.  
In most 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 t he 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 estimated 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 sta tements. 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 Insuran ce (ASHI) 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 " has been relatively stable for the past few years . 
However, due primarily to falling interest rates the liability increased in 2018 : 
• 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  
The reporting of the After-Service Health Insurance (ASHI) liability as recognized in the 
financial statements  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 
different 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.  
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 change over time as circumstances evolve. However, they give a reasonable 
indication of the outlook and the y 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 liability is for it to grow 
steadily into the foreseeable future if the WTO stays on a pay -as-you-go app roach. 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 mil lion by 2047 based on conservative assumptions about the 
discount rate. If interest rates return to more historically normal ranges, the liability estimates would 
decrease.   WT/BFA/W/511  
 
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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 t han 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 years 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 l iability 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 be 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 
horizon 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/511  
 
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We are continuing to work with the actuaries to undertake 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 b e shared with Members in due course.  
8  SPECIAL RESERVE ACCO UNT 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 accumulated 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  become 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 2019,  the medical plan SRA had an accumulated balance of CHF 3.4 million  
resulting from savings on the medical plan budget lines . There is an additional ASHI related source 
of funding derived from a surcharge on the salaries of extra -budgetary funded staff. Thi s assessment 
has contributed an additional CHF 0.9 million  to the SRA.  
 
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