RESTRICTED  
  
WT/BFA/W/582  
 
1 March  2022 
(22-1852) 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  
1.1.  The WTO Medical Insurance Plan is a key part of the social security and 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.  
1.2.  As part of its social security obligation, the WTO  provide s access to an affordable and at the 
same time quality medical coverage for eligible stakeholders . Therefore, the  WTO medical plan 
provides for staff members, retirees,  and their dependents  a combination of base sickness and 
accident coverage  as well as some health insurance benefits such as d ental and optical  coverage  
which are typically provided  by complementary insurance plans. Reimbursements u nder the plan 
are limited to the reasonable and customary costs applicable for the location of treatment.  
1.3.  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 f ormula 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  
contains a  protection which limits the maximum premium increase in any given year to 15%.  
1.4.  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 . 
1.5.  The cost of the WTO medical insurance  premium is split between the plan members and the 
WTO. The ratio varies individual -by-individual depending on the grade of the staff member or the 
pension benefit  of the retiree.  Overall , the WTO bears 60% of the costs of the Plan with 40% borne 
by the participants. Family members  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 2021, out of 2,281 total 
participants, 179 participants (or approximately 8%) are unsubsidized and pay the full premium 
themselves.  These unsubsidized participants include non-dependent and divorced spouses and adult 
children  (between 25 and 30 years old) . 
1.6.  The premium  paid to the Administrator of the WTO medical plan  did increase  by 5% in 2020 
and remained unchanged in 2021 and 2022  The recent  stability is at least partially attributable to 
the COVID -19 pandemic and the result ing short -term changes in behavior related to how people 
consume medical services.  
1.7.  The table below illustrates the indexed evolution of the premium comparing the WTO and the 
Swiss Medical Insurance premium  since 2015. Overall, it should be noted that the W TO premium 
index remains below the Swiss index . 
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  Table 1 Swiss Medical  Insurance Index  Comparison  
 2015  2016  2017  2018  2019  2020  2021 
Swiss medical 
insurance premium 
Index1 100 103 107 112 112 113 113 
WTO premium index  100 100 100 100 105 111 111 
2  ON-GOING COST CONTAINMENT MEASURES  
2.1.  Reimbursements  are capped at the "reasonable and customary" limit for the location 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.  
2.2.  Prior approval requirement s 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 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.  
2.3.  The Plan Administrator has also negotiated special discounted rates and direc t payment 
agreements with many hospitals, doctors and specialists.  
2.4.  In 20 20, through Allianz's active management of the WTO Plan, the following savings have 
been reported:  
• Inpatient network in Switzerland: CHF 404,000;  
• Inpatient network in the USA: CHF 302,000; 
• Active  case management: CHF 103,000; and 
• Claims adjudication: CHF 1,113,000 . 
2.5.  The MIMC actively reviews proposals for ways to increase cost consciousness and monitor the 
use of benefits as well as to ensure overall alignment  with L AMal. 
2.6.  The WTO is engaging with plan participants to educate them on how the plan is designed, the 
evolu tion of costs, specific benefits and to  bring their attention to the need to be conscious of, and 
conscientious about, their medical consumption and its impact on our Medical Plan and future 
premiums.  
3  MANAGEMENT OF THE MEDICAL PLAN  
3.1.  The responsibility of th e 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.  
3.2.  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.  
 
1 Source: Office fédéral de la statistique, IPAM . WT/BFA/W/582  
 
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  c. Analysing, and where necessary, renegotiating the insurance premiums and benefits 
considering the specific needs of staff members and retired staff members and their 
dependents.  
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 contract with the assistance of representatives of 
the Plan Administrator and Human Resources Division and making decisions on cases 
referred to it.  
3.3.  The MIMC, in coordination with  HRD and  the medical plan administrator engages in a 
continuous  review of the benefits table with an emphasis on sustainability of the plan . 
3.4.  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 the COVID -19 pandemic  these recommendations will 
be reviewed by the MIMC and submitted to the Director -General.  
4  POPULATION OF INSUREDS  
4.1.  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 2021. 
4.2.  The following graph illustrates the evolution for selected years of the WTO's main insured 
categories of population . The activ e population increases slowly , whereas the retirees' population 
shows a sharper  increase.  
Graph 1 Evolution of Insured Population ( 2015  and 2021 ) 
 
 
 
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  5  BROAD FINANCIAL OVERVIEW OF OUR MEDICAL PLAN  
5.1.  The graph below shows the trends of net premiums and reimbursements over the past 6 years.  
Graph 2 Evolution of claim reimbursements and net premium  
 
 
5.2.  The higher level of reimbursement as compared to the total net premium paid led to the 
increase in  the Plan premium 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 h ospitalizations, the WTO 
plan experienced a temporary 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  
5.3.  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 2021.  In 2021, the contribution increased by 
approximately  CHF 160,000 and stands at 4.23% of the overall WTO b udget . Increased costs and a 
larger share of the overall budget are to be expected in a zero nominal growth budget environment. 
Cost increase s remain modest and below general medical inflation  in Switzerland . 
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  Table 2 WTO contribution to the WTO Medical Plan premium  (CHF)  
Year 2015  2016  2017  2018  2019  2020  2020  
WTO 
budget  
in CHF  197,203,900  197,203,900  197,203,900  197,203,900  197,203,900  197,203,900  197,203,900  
WTO cost of  
Medical 
Plan in CHF  7,534,820  7,882,878  7,397,624  7,832,600  8,109,942  8,189,556  8,347,634  
WTO cost of  
Medical 
Plan in %  3.82%  4.00%  3.75%  3.97%  4.11%  4.15%  4.23% 
Year -on-
Year 
Change in 
cost in CHF  34,548  348,058  -485,254  434,976  277,342  79,614  158,078  
Year -on-
Year 
Change in 
cost in %  0.46%  4.62%  -6.16%  5.88%  3.54%  0.98%  1.93% 
 
6  REIMBURSEMENTS RELATIVE TO PREMIUMS BY INSURED CATEGORY IN 20 21  
6.1.  Active staff and their dependents represent 7 1% of the total insured population, contribute 
67% of the premiums and receive 5 0% of the total amount of reimbursements under the Plan. 
Retirees and their dependents represent 2 9% of the total insured population, contribute 33% to the 
premiums and receive 50% 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 
representing an increasing share of the overall cost of the Plan in the  future.  
Table 3 Reimbursements relative to premiums by insured category in 2021 
Population  Percentage of total 
reimbursements  Percentage of 
overall amount of 
premium 
contribution  Percentage of the 
insured population  
Active staff including 
dependents  50% 67% 71% 
Retired staff including 
dependents  50% 33% 29% 
Total  100%  100%  100%  
 
7  AFTER SERVICE HEALTH INSURANCE (ASHI) LIABILITY  
7.1.  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.  
7.2.  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 . 
7.3.  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 
benefit2. The risk that the benefit promise may cost more , or less , than anticipated resides with the 
 
2 the provision of after -service health insurance is also reflective of the international character of the 
WTO Secretariat and the likelihood that staff members are not eligible to participate in national health schemes 
in their home countries after retirem ent. WT/BFA/W/582  
 
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  Organization. If the benefit costs less , the Organization realizes a gain. If the benefit costs more, 
the Organization realizes a loss. 
7.4.  In most organi zations  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 organi zations  have underestimated the 
eventual impact of these benefit promises on their financial situation. It is for this reason that IPSAS 
requires that t he full estimated cost of benefit promises be disclosed even if those costs do not 
constitute a cash payment in the current period.  
7.5.  Under IPSAS , the WTO must recognize the full liability for employee benefits at the end of each 
financial year in its financ ial statements. 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.  
7.6.  The provision of After Service Health I nsurance (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 in 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 yea r. 
7.7.  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 again in 2020 and is likely to 
increase again in 2021 .  
• 31 December 201 6: CHF 226.3 m illion. 
• 31 December 2017 : CHF 228.9 million . 
• 31 December 2018 : CHF 283.7 million . 
• 31 December 201 9: CHF 277.2 million . 
• 31 December 20 20: CHF 295.5 million . 
7.1  Projected Evolution in Long Term ASHI Liabilities  
7.8.  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 . 
7.9.  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 as sumptions to project costs into the future . This kind of analysis was  
first undertaken 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 costs was launched in 
2021 and has just been finalized . 
7.10.   It is important to recognize that these projected liabilities and costs  are estimates . They will 
change as we accumulate information that will allow the refinement of  specific assumptions . The 
estimates  will also certainly change over time as circumstances evolve. For example, changes in 
actuarial projections of life expectancy will impact the long -term estimates. That is the case in the 
most recent 2021 report. Nonetheless , these estimates  give a reasonable indication of the outlook,  
and they will continue to be periodically updated and reported to Members as part of future ASHI 
updates.  
7.11.   Based on 20 21 population data the long -term outlook for the ASHI liability is for it to grow 
steadily in to 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 reach an equilibrium  in about 30 years i.e. in the mid 2 050's . The current liability of WT/BFA/W/582  
 
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  around  CHF 300 million is expected to exceed CHF 1 billion  by 2050 based on conservative 
assumptions about the discount rate. If interest rates return to more historically normal ranges, the 
liability estimates would decreas e. 
7.12.   The 2021 estimated ASHI Liability for 20 50 is higher  than what was estimated in 201 8, the 
last time a long -term projection of liabilities was undertaken  but similar to what was originally 
estimated in 2014 . In 2018  the liability in 20 47 was estimated to  be CHF 850 million. The  recent  
increase  can be explained by lo nger life expectancy particularly among the younger cohorts. 
However, there are several relevant variables and even modest changes in these  variables  over 
30 years can have a significant  impact  on the estimates.  
7.13.   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 requir ed to retire the liability that matures each year that has 
direct budget implications.  
7.14.   Currently, the cashflow required to fund the ASHI liability is somewhat below CHF 4 million 
per year. Like the liability, this will be expected to grow steadily for the  foreseeable future. The 
current estimate for annual cashflow in 20 50 would be over CHF 1 3 million. This is an increase of 
more than 3 times the current amount. However, t his 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 1 Forecast Development of Total ASHI B enefit Costs between 2021 and 2050  
 
 
7.15.   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. For example, a decrease in  medical inflation from the current 
best estimate of 3.1% annual inflation to an annual rate of 2.0% would reduce the annual cash flow 
projection by about CHF 3 million . Alternatively, a further increase in life expectancy of one year 
would increa se the an nual cash flow projection by almost CHF 1 million.  
8  SPECIAL RESERVE ACCOUNT MEDICAL PREMIUMS (ASHI) LIABILITY  
8.1.  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 
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  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 exclusiv ely 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.  
8.2.  As of the end of 20 21, the medical plan SRA had an accumulated balance o f CHF 6.5 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. This assessment 
has contributed an additional CHF 1.6 million  to the SRA.   
 
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