International Situation for the Insurance
Insurance Variations by Income Level
Based on available data, thirty-nine countries in the world have private health insurance exceeding 5% of total health expenditures. Although private insurance markets are most well developed in wealthier countries, almost half (46%) of these countries are in the low and lower-middle income categories.
Private insurance tends to play a different role depending on a country's wealth and institutional development. In many lower- and middle-income countries, private insurance may be the only form of risk pooling available and it usually provides principal coverage to those in the formal sector, with private policies frequently subsidised by employers.
Historically, this is not unlike the situation in Western Europe in the nineteenth century when the only significant forms of insurance were provided by mutual associations, employers, guilds or unions - on a voluntary basis. For example, 10% of Sweden's workforce was covered by voluntary private insurance schemes called "Friendly Societies" in 1885. In Germany, Bismarck established the first national social insurance system by knitting together voluntary pre-existing occupationally and industrially based sickness funds.
By contrast, in most OECD countries today, with the exception of the U.S., private insurance provides supplementary coverage to predominantly publicly funded systems. In France, for example, 85% of the population purchases private policies to pay for copayments; while in the Netherlands over 90% of the population purchases either principal or supplementary insurance plans. In the OECD, when private insurance provides principal coverage, it generally faces significant restrictions.
The European Union's directive on health insurance states that health insurance should only be subject to normal financial regulations except where a “general good” could be demonstrated. When private health insurance is the only form of risk pooling for the population, the public interest can be clearly demonstrated, and the insurance regulations of many countries reflect this. Among wealthy countries, Australia and Ireland are unique in explicitly encouraging private health insurance as a strategy to complement public financing.
Historically, both countries used private insurance to provide principal coverage for significant segments of their population and it is now used to relieve pressures on the public system. As a result of targeted interventions, about 45% of the population in each of these countries purchase private insurance. Despite the fact that private coverage is now supplementary, both countries have strong regulatory structures to manage the market and require private insurers to community rate premiums and meet guaranteed issue and renewal requirements.