Israelis Overpaying Billions for Redundant Medical Insurance Coverage

Hundreds of thousands of Israelis are spending billions of shekels annually on supplementary medical insurance policies that offer overlapping coverage, leading to significant overpayments. Many individuals hold multiple policies covering the same medical services, resulting in no additional benefit when a claim is filed. The Israeli Ministry of Finance estimated these redundant expenses at approximately 1.3 billion shekels per year prior to a reform. Despite a reform implemented in the summer of 2024, the issue persists, with nearly a million people estimated to still have overlapping insurance by the end of 2025. This problem is particularly acute for families with multiple working adults, children, and elderly relatives, who may simultaneously pay for hospital "kupah" supplementary programs, individual private insurance, and employer-provided collective insurance.

The Israeli healthcare system has three tiers: mandatory state insurance via four health funds (kupot cholim), supplementary paid programs from these funds known as SHABAN, and commercial insurance from private companies. Overlapping coverage often occurs between the second and third tiers. For instance, private surgery coverage can be structured as "first shekel" (covering the entire cost from the start, often more expensive) or "SHABAN supplement" (covering costs not met by the kupah's SHABAN program). Prior to the reform, about 95% of those with commercial surgery policies also had SHABAN, indicating widespread double payment for the same service.

Financial analyses highlight the cost disparity. For individuals aged 41-50, the monthly cost for "first shekel" surgery coverage can be around 138 shekels, compared to approximately 64 shekels for a SHABAN supplement, saving 888 shekels annually. For those over 66, the difference widens to about 221 shekels monthly, or 2,652 shekels per year. A family of two adults and two children could be overpaying by roughly 9,360 shekels annually for overlapping surgery coverage, with potential savings of over 4,000 shekels per year by switching to the supplementary SHABAN option.

The 2024 reform aimed to reduce this redundancy by automatically switching holders of individual "first shekel" policies purchased after February 2016 to the cheaper SHABAN supplement. However, about 42% of those affected chose to revert to their more expensive policies. Reasons for this include concerns about limited surgeon choice and faster access to care, though studies suggest surgeon overlap between the systems is significant. Additionally, insurance agents' commissions, which are higher for more expensive policies, may incentivize them to recommend redundant coverage.

Not all dual coverage is redundant. Policies offering fixed payouts for specific severe illnesses (pitzui) can be held multiple times for increased benefit. Commercial policies may also cover services not in the state basket, like expensive medications or overseas treatment. To identify and address overpayments, Israelis can use the state website "Har HaBituach" to review all their insurance policies and compare coverage details. It is advised to carefully assess specific services and conditions before canceling older policies, as they may offer unique benefits or be difficult to replace later due to age or health status.