Highest Private Insurance Expenditures
Countries with the Highest Private Insurance Expenditures
In 2000, seven countries stood out as funding over 20% of total health expenditures through private coverage (figure 4). Interestingly, these ranged from Zimbabwe, a lowincome country that spent $171 annually per capita on health care, to the United States, which spent the highest amount on health care in the world ($4499 per capita) (3). Each of these countries use private insurance to provide principal coverage for some segment of its population.
Three of these are adjoining countries in Sub-Saharan Africa: Namibia, South Africa and Zimbabwe, while three are in South America: Uruguay, Chile, Brazil. while three are in South America: Uruguay, Chile, and Brazil. All of these countries experienced significant European immigration.(26) The countries of the Americas won their independence much earlier, and consequently developed health insurance institutions over a longer period of time and in parallel to similar developments in Western Europe. By contrast, health insurance schemes in the African countries were established under colonial governments, and have only had a few decades of independent development.
In the three African countries, private insurance covers a relatively small share of the populations, despite representing a large share of total expenditures. For example, in Zimbabwe, in 2000, an estimated 6% of the population purchased private cover which accounted for 26% of total health expenditures. Seventeen percent of those in the paid formal sector were covered by private insurance schemes. Despite Zimbabwe’s plans in 1997 to launch a comprehensive social insurance scheme, the share of private insurance expenditures rose sharply between 1998 -2000 (from10% to 26%). (NHA) In 2001, perhaps due to economic turmoil, this share fell to 19%. In Namibia, private coverage also protects largely the employed sector.
South Africa has a history of over 100 years of private insurance based largely on mutual insurers called medical schemes or medical aid societies. Wealthier people benefit most from this insurance, with 80% of those in the two highest income quintiles being covered compared to only 2% of those in the lowest income quintile (28). In 2000, private insurance covered about 7 million people (17% of the population), again, largely employees in the formal sector and their families. (28) In this group of African countries, only South Africa has a strong regulatory structure governing the private market.
In 1998, the country strengthened its regulatory framework through the quasi-governmental Commission for Medical Schemes and in 2002, the government proposed a major reform aimed at achieving universal health coverage which envisions gradual evolution of the private insurance market into a mandatory social insurance system. (28)
Unlike the Sub-Saharan countries, the three Latin American countries have much larger private health insurance markets. Uruguay is unique in having a mandatory, private insurance system that covers over 60% of the population. This system is complemented by publicly funded programs for the elderly and poor. (29) Uruguay has a long history of health insurance regulation aimed at making insurers serve public
policy goals; for example, from their inception, concerns that medical factors should play a primary role in treatment decisions led to the requirement that physicians participate in running insurance companies. Later, regulations were introduced covering many of the basic operations of insurers. In Chile, the role of private insurance in health financing is explicit and allows those who can afford it to ‘opt-out’ of the publicly funded health system and buy private cover.
By contrast, Brazil’s private health insurance market grew despite public policies aimed at establishing a universal publicly financed health system. In both Chile and Brazil, private insurers emerged with relatively light regulation, but since the late 1990s, as a result of market failures, the governments of both countries have been trying to impose more stringent regulations on the operations of insurers.
The United States is the only rich country to rely on voluntary private insurance to provide coverage to most of its people. Over 70% of the population obtain health coverage through private insurers, with almost 64% of this through employment-based insurance plans. However, U.S. public expenditures on health are on par with total health expenditures for most OECD countries and cover the elderly, disabled and poor, through public insurance programs such as Medicare and Medicaid, as well as a system of public hospitals and community clinics. (32) The U.S. private insurance market is heavily regulated.
Many U.S. states mandate community rating or do not permit fully risk rated premiums, and specify tight rate bands for premiums in hopes that this will allow small groups and individuals to obtain affordable coverage. (7) Seventy-five percent of U.S. states have guaranteed issue and renewal requirements in the small group market and almost half have set up insurance pools for high-risk populations funded through assessments on insurers.