Private Health Insurance
Private health insurance plays a large and increasing role around the world. This paper reviews international experiences and shows that private health insurance is significant in countries with widely different income levels and health system structures.
It contrasts private health insurance across regions and highlights countries with particularly high rates of private expenditures. It argues that policy makers need to confront the role that private health insurance will play in their health systems and regulate the sector appropriately so that it serves public goals of universal coverage and equity.
As policy makers consider how to move towards financing mechanisms that will protect their people from the financially catastrophic effects of illness, they have three broad options to consider: taxation, social security, and private health insurance which consists of non-profit and for-profit plans, and community health insurance schemes1 .
Unlike taxation and social security, which are commonly viewed as promoting equity, private insurance often conjures up visions of unequal access, large numbers of uninsured people, and elitist health care for the rich. Experience indicates that unregulated or poorly designed private health insurance systems can indeed exacerbate inequalities, provide coverage only for the young and healthy, and lead to cost escalation.(2)
However, when appropriately managed, private health insurance can play a positive role in improving access and equity in developing countries for several reasons. First, out-of-pocket spending on health services is the most common form of health financing in developing countries and represents a significant financial burden for households.(3) To the extent that private insurance gives households an opportunity to avoid large out-of-pocket expenditures, it can provide access to financial protection that is otherwise lacking.
Secondly, many developing countries have public expenditures for health of less than $10 per capita per year, with large informal sectors.2 (4) Their ability to generate tax revenues or fund social insurance systems to provide broad financial protection for health care is limited. Private coverage, when appropriately regulated, may be one way to move towards prepayment and risk pooling until publicly funded coverage can expand sufficiently. It also allows policy makers to target limited public resources towards the most vulnerable groups, while those who can afford it, can contribute to their medical costs
Thirdly, history shows that the social insurance systems of several OECD countries evolved from voluntary private health insurance schemes based on professional guilds or communities. (5) These historical lessons in building institutional capacity and the changing role of private coverage as public financing is strengthened, may be useful in informing policy debates in developing countries as they consider moving towards public insurance systems.
Finally, private health insurance continues to be important even in countries where universal coverage has been achieved. Policy makers who plan ahead for this supplementary role will be better prepared to ensure that private coverage will complement public systems as they develop.
Health Insurance, Health Policy, Private Sector, Economic Development, and Public Policy.