On 2 April 2007, the Commission received a complaint from privately-owned health insurer Dôvera zdravotná poisťovňa, a. s. (‘Dôvera’ or ‘the complainant’) on an alleged State aid measure to State-owned health insurer Spoločná zdravotná poisťovňa, a. s. (‘SZP’) in the form of an increase on 26 January 2006 of its registered capital by SKK 450 million (approximately EUR 15 million).

The Commission sent a request for information to the Slovak Republic on 21 August 2009. After an extension of the deadline to reply, the Slovak authorities provided the requested information by their submission dated 24 September 2009.

By letter of 26 February 2010, the Commission requested the Slovak Republic to provide further information about this capital injection and asked for clarifications regarding the Slovak Risk Equalisation Scheme (RES), another measure that could possibly be classified as State aid. By letter of 25 March 2010, the Slovak authorities requested an extension of the deadline to reply to this request, which was accepted by the Commission by letter of 31 March 2010. After the Commission had reminded the Slovak Republic on 16 June 2010 to submit the information, the Slovak authorities responded to the request by letter of 9 July 2010. As requested by the Commission in its letter of 4 November 2010, the Slovak Republic submitted a non-confidential version of that reply on 3 December 2010.

On 1 January 2010, SZP merged with the other State-owned Slovak health insurer Všeobecná zdravotná poisťovňa, a. s. (‘VZP’). From 1998 up until at least 2005, those two State-owned joint stock companies received the insurance portfolios of other health insurance companies.

In two meetings between the Commission and Dôvera held on 10 October 2010 and 15 March 2011, the subject of the complaint and the functioning of the health insurance sector in Slovakia were discussed. In its submission of 15 July 2011, Dôvera provided additional information on the nature of the health insurance sector in Slovakia and extended the scope of its complaint by including three new measures allegedly granted in favour of SZP and VZP: (i) the discharge of SZP's debt by the State-owned company Veritel' a. s.. in 2004-2005 through two payments of EUR 52,7 million and EUR 28 million; (ii) a subsidy of EUR 7,6 million granted in 2006 to SZP by the Ministry of Health; and (iii) a State-financed capital increase totalling EUR 65,1 million granted to VZP on 1 January 2010. Consequently, the Commission invited the Slovak authorities to comment on the extended complaint with its new allegations. After an extension of the reply deadline, the Slovak authorities provided their comments by letter of 11 November 2011.

After a meeting with the Commission's services on 15 December 2011, Dôvera provided further information about the nature of the national health insurance sector by letter of 16 January 2012.

By letter of 24 July 2013, the Slovak authorities requested an extension of the deadline to submit their comments on the opening decision, which was accepted by the Commission by letter of 30 July 2013. By letter of 27 August 2013, the Slovak Republic submitted its observations on the opening decision.

The Commission received comments on the opening decision from five third parties: from the Institute for Economic and Social reforms (INEKO) by letter of 15 October 2013; from Union zdravotná poisťovňa, a. s.. (‘Union Health Insurance’) by letter of 25 October 2013; from the Health Policy Institute (‘HPI’) by letter of 28 October 2013; from Združenie zdravotných poisťovní SR (‘ZZP’, the Association of Health Insurance Companies in Slovakia) by letter of 28 October 2013 and from Dôvera by letter of 11 November 2013.

Those comments were forwarded to the Slovak authorities by letters of 20 November and 20 December 2013. On 20 December 2013, the Slovak authorities requested an extension to the deadline to respond to those comments until 31 January 2014, which was accepted by the Commission on the same day. By letter of 29 January 2014, Slovakia replied to the comments submitted by third parties on the opening decision.

On 2 April 2014, a meeting took place between the Commission's services and the Slovak authorities.

On 11 April 2014 and 25 August 2014, the Commission sent additional requests for information to which Slovakia replied, respectively, by letter of 15 May 2014 and 27 August 2014.

In its opening decision, the Commission expressed doubts about determining the economic or non-economic nature of the activity concerned and indicated that, in light of the particularities of the case, SZP/VZP and the other companies offering health insurance in the compulsory system in the Slovak Republic may have been engaged in an economic activity as from 1 January 2005. It considered that the mixture of economic and non-economic features of the Slovak compulsory health insurance system made it necessary to perform an in-depth analysis of its different elements and their respective importance within the scheme to determine whether the activity of compulsory health insurance, in the way it is organised and carried out in Slovakia, is to be considered as economic (as from 1 January 2005) or non-economic in nature.

The Commission also indicated that — in case the activity would need to be considered as economic in nature — it did not have enough information at its disposal to determine whether the measures under scrutiny provide SZP/VZP with a selective advantage.

Having concluded that it could therefore not exclude the existence of State aid at that stage, in the absence of specific arguments or clear indications as to their compatibility with the internal market, the Commission also expressed doubts as to whether those measures could be considered compatible with the internal market under Article 106(2) or Article 107(3)(c) of the Treaty, in the event it would conclude that those measures qualify as State aid.

In that context, the Commission noted that the final conclusion as to whether the activity of compulsory health insurance in the Slovak Republic is indeed economic or non-economic in nature, whether the State measures fulfil all the other conditions to constitute State aid and, if so, whether they are compatible with the internal market could only be drawn in a final decision to be adopted after completion of the formal investigation, when all available information (including further Member State's and third parties' comments) have been collected and an in-depth assessment of all information has been made.

The Commission received the following comments from interested parties, as summarised below:

The Slovak Republic submitted its observations on the opening decision and provided comments on the third-party observations.

1. (a)

   The system has a social objective.

2. (b)

   The system is based on solidarity, in particular in view of the following:

   1. (i)

      compulsory enrolment for Slovak residents;

   2. (ii)

      all the insured are guaranteed the same minimum level of benefits;

   3. (iii)

      contributions are unrelated to benefits on an individual level, as contributions are fixed by law (no competition on prices);

   4. (iv)

      there is risk-solidarity among insurers: RES and community rating.

3. (c)

   There is a detailed regulatory framework, subject to supervision by the State: status, rights and obligations of all health insurance companies are established by law.

The Slovak Republic rebuts the assumption that, as a result of 2005 legislative changes, the Slovak health system changed into a commercial system and claims that the system never lost its public non-economic nature. They also draw attention to the fact that the Slovak health insurance system is part of the social security system and point to the competences of Member States under Article 168(7) of the Treaty for the organisation and delivery of healthcare services.

The Slovak authorities further state that the health insurance reform did not replace public health insurance with private health insurance and did not open the coverage of any risk pertaining to statutory social security to private insurers. According to Slovakia, the primary aim of the health sector reform was to set precise rules for dealing with financial resources allocated to health and reorganising, by 30 September 2005, all existing health insurance funds as joint stock companies with clearly defined accounting rules seemed to be an appropriate way of setting those rules. The Slovak authorities consider that all health insurers in Slovakia are involved in managing public funds entrusted to them within the public health insurance system.

According to the Slovak authorities, the fact that the Slovak compulsory health insurance system allows for a limited degree of competition on quality could be seen as an element that encourages health insurance companies to operate economically in accordance with principles of sound management, in the interests of the proper functioning of the system, but not as an element that could influence the non-economic nature of the health insurance system as a whole.

The Slovak authorities also explain that the funds accumulated and redistributed within the structure of the Slovak public health insurance system via the health insurance companies are the sum of public health insurance contributions which are mandatory under the law, and are thus part of Slovakia's public finances. All health insurance companies are therefore tasked with the management of public funds collected from the public in accordance with relevant legal regulations with a view to their use in the coverage of healthcare.

1. (a)

   the introduction of a tax on the profits of health insurance companies;

2. (b)

   the mandatory use of profits to create a reserve fund of up to 20 % of the paid-up registered capital of the insurance company (the reserve fund may be used only to cover losses of that insurance company);

3. (c)

   the mandatory creation of technical provisions to cover the planned healthcare of insured persons on waiting lists (consequently, health insurance companies cannot make a profit at the expense of their clients by placing them on waiting lists instead of promptly covering their healthcare; this is essential for compliance with generally accepted accounting standards in public health insurance).

In this respect, the Slovak authorities explained that, when VZP reported a surplus, it created a healthcare fund to cover the use of healthcare and to finance particularly costly healthcare covered by public health insurance. In addition, in the years in which they reported a surplus, part of the profits of VZP was also allocated to the statutory reserve fund which was subsequently used to reduce accumulated losses. Therefore, according to the Slovak authorities, no profit made by a State-owned health insurance company was ever disbursed to shareholders.

In this context, the Slovak Republic also point to a further restriction on health insurance companies in that they can only borrow funds in accordance with the Act 523/2004 on public administration budgetary rules, subject to prior approval from the HSA.

The Slovak authorities also explain that in 2011, the Constitutional Court declared the ban on profit distribution as from 2007 unconstitutional because it violated Slovak constitutional rights of ownership, but that it did not share the view that the Health Insurance Companies Act restricted the principles of a market economy. They also point to the fact that the Constitutional Court further observed, in this regard, that legislation on health insurance excluding or significantly restricting the impact of market-economy tools and hence restricting competition is constitutionally acceptable.

In addition to their claim that the activity of compulsory health insurance in Slovakia falls outside the scope of competition rules, the Slovak authorities claim that the measures do not fulfil the other State aid elements under Article 107(1) of the Treaty. In this context, they claim that the 2006 and 2009 capital injections were not aid as they respected the market economy investor principle. They further deny that there was unjustified discriminatory treatment in the debt-discharging process by Veriteľ and maintain that no subsidy was granted to VZP in 2006, but rather that this operation involved a normal payment of existing undisputed liabilities by the State. The Slovak authorities provide further details on the transfers of portfolios from DZP to VZP and of EZP to SZP and claim that also those transfers did not provide SZP/VZP with a selective advantage under Article 107(1) of the Treaty. Finally, they also provide further information on the RES, clarifying in particular how the contributions were redistributed (monthly and annually) in the years 2006 to 2012, and argue that this measure does not qualify as State aid either, as it equalises the risks included in the system due to the existence of uniform contribution rates for all groups of insured persons with varying degrees of risk.

The Slovak authorities devoted their comments to the opening decision on defending their position that SZP/VZP, due to the absence of economic activity, are not undertakings and that the measures are compliant with the market economy investor principle and do not provide SZP/VZP with an advantage and, hence, do not involve aid. Therefore, they did not consider it necessary to present any arguments about the compatibility of the alleged aid measures.

Article 107, paragraph 1 of the TFEU provides that ‘[…] any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’

As explained in the opening decision, the question whether the measures granted in favour of SZP/VZP constitute State aid therefore depends in the first instance on whether and to what extent SZP/VZP, when they operate within the Slovak compulsory health insurance system, act as undertakings because they could be considered to be engaged in an economic activity as defined by the case-law.

The ultimate determination whether the provision of compulsory health insurance services in the Slovak Republic is a non-economic or an economic activity will therefore depend on a thorough analysis of the specific way in which that activity is organised and carried out in that Member State and will therefore be specific to the compulsory health insurance system in that Member State. It is in the light of these general observations that the Commission will assess whether the contested measures allegedly granted to SZP/VZP constitute State aid as measures granted to an ‘undertaking’ within the meaning of Article 107(1) of the Treaty.

A number of indicators point to the non-economic nature of the Slovak health insurance system, in particular as regards its social features and objectives, which feature predominantly in the operation of that system, and that the system is centrally based on the solidarity principle.

Second, Slovak compulsory health insurance is based on contributions that are fixed by law proportional to the income of the insured, rather than being based on the insured risk (age, health status, disease risks of the insured person). Moreover, there is no direct link between the amount of contributions paid by an individual into the scheme and the value of the benefits received by that same individual from the scheme. As a result, insurance companies have no possibility to influence either the amount of contributions or the minimum level of coverage to which the insured persons are entitled as this is all fixed by national legislation.

The Commission acknowledges certain features of the Slovak compulsory health insurance system could point to the economic nature of the activities involved in that system: (i) the presence of several insurance operators (public and private) in the Slovak compulsory health insurance sector; (ii) some degree of competition between these health insurers; which are (iii) involved in a for-profit activity; and (iv) the fact that the activity was considered to be open to competition by the Slovak Constitutional Court. Nevertheless, the Commission is of the opinion that the presence of those features does not call into question its conclusion that compulsory health insurance in Slovakia is a non-economic activity.

Finally, the Commission considers that the fact that the Slovak Constitutional Court (when assessing a possible violation of the right under the Slovak Constitution to conduct a business) considered the Slovak compulsory health insurance system to be ‘included in the realm of competition’ does not mean that this system involves activities of an economic nature within the meaning of the State aid rules. In fact, in that case the Slovak Constitutional Court was asked to review whether the 2007 legislative ban on profit distribution by health insurance companies was compatible with the Slovak Constitution (violation of the right of ownership, protection of property and right to conduct a business) and compatible with Articles 18, 49, 54 and 63 of the Treaty. The Slovak Constitutional Court decided that this ban violated the Slovak Constitution, and that therefore there was no reason to discuss the substantive elements of the EU internal market rules or to rule on their violation.

Against this background, taking account of the particularities of the current case and the presence and weighting of the relevant indicators, the activity of compulsory health insurance as organised and carried out in Slovakia cannot be considered as an economic activity.

In light of the above, the Commission concludes that SZP/VZP, as the recipients of the contested measures, cannot be considered to constitute undertakings within the meaning of Article 107(1) of the Treaty and thus that those measures do not give rise to State aid within the meaning of that provision.

Therefore, there is no need to examine the other conditions for the existence of State aid within the meaning of Article 107(1) TFEU nor to assess the compatibility of the contested measures.

In light of the above considerations, the Commission concludes that the contested measures do not constitute State aid within the meaning of Article 107(1) of the Treaty,