At the end of last year, the Financial Supervisory Commission proposed major amendments to the Regulations Governing Use of Insurers’ Funds in Special Projects, Public Utilities and Social Welfare Enterprises (保險業資金辦理專案運用公共及社會福利事業投資管理辦法). The proposed changes would open the door to investments in social welfare enterprises by insurance funds. This move has met with criticism from various sectors of society, saying that instead of making care a public service, the government is commercializing it. The commission is nonetheless determined to amend the law, and its proposed changes include the following four main points:
First, insurance companies are now only allowed to “invest in” social welfare enterprises, but following the amendment, they would be able to “invest in and operate” both the hardware and software aspects of social welfare enterprises.
Second, an insurance company’s investment in any single social welfare enterprise is currently capped at 10 percent of its total investment in that entity, but following the amendment, that cap would rise to 35 percent. This higher stake would give insurance companies greater influence over the enterprises in which they invest.
Third, should enterprises whose main purpose is social welfare work be allowed to issue securitized offerings for their services? Following the amendment, not only would these services be turned into securitized offerings, but insurance companies would also be able to invest in up to 10 percent of the total number of issued securities. This part of their investment would not be included in the calculation of the aforementioned 35 percent, but would be in addition to it.
Fourth, the government has placed limits on loans made by insurance companies. That is, they may only lend money when at least one of the following three forms of guarantee exists: one, a bank or the government provides credit assurance; two, movable or immovable property is available as collateral; and three, negotiable securities are provided as collateral. Following the amendment, insurance companies would be able to request approval from the competent authorities that they be exempted from the aforementioned restrictions on lending. In other words, they would no longer need any kind of guarantee.
These lax investment regulations are designed to make it easy for insurance companies to enter the social welfare sector, and their main target would be the field of long-term care for the elderly, which is urgently needed in Taiwan, but is currently inadequate and of poor quality. This kind of financial manipulation could widen the gap between rich and poor, for the following three reasons.
First, if prior to the government’s implementation of universal long-term care insurance, it first lets insurance companies get involved by investing in and operating long-term care services and insurance, targeting the middle class, then when the middle class’ demand for long-term care has been satisfied by commercial insurers, the government will face obstacles when it eventually tries to implement universal long-term care insurance.
Second, generally speaking, when countries are promoting any kind of outsourcing measure, they will set clear parameters before finding operators through an open tender. Only by so doing can the government monitor and control the quality of service. However, when the government is in control, operators’ profits tend to be very low. In light of this, why does the Taiwanese government want to open up the long-term care sector to operation and investment by commercial insurance companies before establishing operational parameters for long-term care services? Could it be that the government has no intention of managing and controlling the sector? Besides, long-term care is a high-risk business that is labor intensive, and those who provide such services have to be very devoted and patient. Operators can only make high profits by exploiting workers and elderly residents. Where else could they get their profits from?
Furthermore, if the government does not manage and control the quality of service and set norms for fees charged, it is very likely that commercialized long-term care services would become a market in which the seller dictates the price. Even if the government were to subsidize people’s use of care services, it could lead to a situation in which, however much subsidy the government provides, service operators are able to raise their prices accordingly. In effect, the government would be throwing money into a bottomless pit, as has happened in the childcare sector.
The government’s policy of subsidizing free nursery facilities for five-year-old children, under which it just pays the money, but does not control the services, should serve as a lesson. While the government has set aside an annual budget of more than NT$8 billion (US$275.3 million) to subsidize every child’s nursery school fees to the tune of several thousands of New Taiwan dollars, parents still have to pay nursery schools as much as NT$10,000 per month in miscellaneous fees. This situation has prevented the government from extending the subsidy to cover children under five years old in nursery schools, while parents still have to bear a heavy financial burden. The result is the nation’s birthrate has continued to fall.
Given what has happened in the case of the nursery school subsidy, could the same thing happen in future with long-term care services for the elderly? The result this time could be that elderly people end up getting abandoned by their families.
Liu Yu-hsiu is convener of the Universal Care Policies Advocacy Coalition and a professor in National Taiwan University’s Department of Foreign Languages and Literatures. Wang Pin is an assistant professor in National Taipei University’s Department of Social Work.
Translated by Julian Clegg