Accra, Ghana October 19-23, 200 9 Extending Health Insurance: How to Make It Work DESIGN ELEMENT 2. Choice of Insurance Financing Mechanism October 19,

Accra, Ghana October 19-23, 2009

Extending Health Insurance: How to Make It Work

DESIGN ELEMENT 2. Choice of Insurance Financing Mechanism

October 19, 2009

Presented by: Chris Atim

Objectives

Understand the different mechanisms for financing health insurance and factors to help decide which model is most appropriate for you

Examine the strengths and challenges of each financing mechanism, particularly as they relate to the participant’s country

Outline

Health Insurance Models: advantages and disadvantages

Deciding which model is right for you: Environmental considerationsInsurance goalsEquity

Health insurance - definition

Health insurance systems pool the losses associated with health risks so that in return for a premium (or tax) beneficiaries are protected from those losses if the insured risk occurs

Risks of loss are spread and shared among many individualsFacilitates lower premiums, more diversified risks and viability

Works best when (classically)Pool of individuals is large (Hsiao: more than 5000)Individual risks are independent (so not for epidemics!)

But compare apparent paradox of Thies’ mutuelle experience

Major types of HI

Universal, mandatory, socialPublic or national health service model (Beveridge)

Typified by UKClassical social health insurance (Bismarckian)

Typified by Germany

Voluntary health insurancePrivate voluntary (commercial schemes)

Eg USA, South AfricaCommunity based (CBHI, mutuelles/MHOs)

Eg Senegal, Mali

Emerging national health insurance scheme (NHIS) in AfricaGhana, Rwanda, Tanzania

Basic features of the HI typesType of scheme Financing Defined-income

or -benefits?Management system

Examples

Public or national health service

General tax revenue Income defined by national budget

Public sector UK, Canada, Scandinavia, Eastern Europe

Social health insurance

Earmarked payroll taxes by employers and employees

Benefits defined by law

Social security agency, health or sickness funds

Germany, Belgium, France, Medicare in US

Private voluntary schemes

Premiums from individuals or employers and employees

Defined benefit Commercial for-profit or non-profit insurance co

South Africa (Medical Aid Societies), USA (HMOs, Blue +/Blue Shield)

CBHI and MHOs Premiums from members /community

Neither income nor benefits fixed (in law)

Community, members or association

Senegal, Mali, India, Cameroon,

NHIS /NHIF Earmarked taxes, payroll by employers and employees

Both defined income and defined benefit

Public agency or parastatal, decentralized funds

Ghana, Rwanda, Tanzania,

Consider these interesting variations:Switzerland

All individuals required by law to carry health insuranceBut HI is provided by private commercial insurance who must accept

anyone regardless of riskGovt pays subsidies to enable poor to buy HI; no public insurance

FranceBased on social security with defined contributions according to

income; 6 special regimesBut 98% of French belong to mutuelles due to high co-pays and to

avoid paying OOP up frontThailand

Reality more complex than schematics

Thailand: Development of Universal Coverage in Stages

Source: Thaworn Sakunphanit, “Universal Health Care Coverage Through Pluralistic Approaches: Experience from Thailand”, http://www.nhso.go.th/eng/content/uploads/files/research_pub_04.pdf; accessed Oct 17, 2009

Key features of HI types (2)

Public or national health serviceGovt or public service managed with general taxation as

revenue baseCoverage based on residence or national territory not

workHence 100% coverage normal in this system

SHILegally mandated coverage for some pop. groupsDirect link between contributions and benefitsAutonomously run by health funds, parastatals, or social

security

Key features (3)

Private voluntary insurancePrivately owned, run for profit or non-profitPremiums individually or risk-ratedIndividual or group membership

CBHI or mutuelles /MHOsNot for profit, focus on informal sectorCommunity or member owned and controlledEthic of community solidarity and mutual aid

Key features (4)

NHISTargets previously excluded groups (informal /rural

sectors) as well as formal sectorGovt subsidies from tax revenues to enable key groups

and vulnerable persons to joinPayroll contributions by formal sector (Ghana, Rwanda,

Tanzania)Decentralized management, run semi-autonomously by

public agencyMost countries have a mix of mechanisms, esp

before but often also with universal coverage

Scheme type Advantages Challenges

Public or national health service

Social health insurance

Private voluntary schemes

CBHI and MHOs

NHIS /NHIF

Advantages and challenges

Table exercise:Take 10 mins to list the potential advantages and challenges of the different types of scheme.

Each table will be assigned a different scheme type.

Advantages and challenges

Scheme type Advantages Challenges

Public or national health service

Only system that guarantees 100% population coverageProgressive revenue collectionNational budget offers wide resource baseAdministrative simplicity (lowest admin costs)

Funding variable and may be limited by budget/MoFLimited provider competition or choice Quality issues

Social health insurance

Mobilizes additional resources from employersEarmarked funding insulates revenue from annual budget roundUsually progressiveTransparency or visibility of system enhances legitimacy /population support as well as quality care

May not achieve 100% coverage due to link to work and premiumsTaxes usually capped, so less progressivePayroll contributions may adversely affect employmentMore complex management systems

Private voluntary schemes

Financial protection to those who can affordand offer tailored HI productsIncreases sources of funding for sectorCan increase competition for quality and efficiency

May reinforce inequities in accessCannot provide 100% coverageMay result in ‘wasteful’ expenses eg marketing, extra admin costs

Advantages and challenges (2)

Scheme type Advantages Challenges

CBHI and MHOs •Targets population groups usually outside public social protection schemes•May help equity by closing social protection gap with formal sector•Facilitate donor and Govt support /subsidies•Assist Govt and donors to better target subsidies and extend protection to informal sector•Develop tools and techniques used by NHIS

Small risk pools result in low revenue and limited benefitsLimited financial protection due to small revenue base and benefit packageCannot cover poorest without unless subsidizedLimited ability to affect care delivery

NHIS /NHIF Same as CBHI/MHOs above plus:Ability to cover much larger population due to bigger risk pool and revenue base Offers much more attractive benefitsAddresses equity shortcomings of CBHI

Design may not be optimal esp if driven mainly by politicsRevenue bases still fragile, thus sustainability still in questionTendencies towards bureaucratization and centralizationCost escalation an issueReaching the very poor still a challenge

Accra, Ghana October 19-23, 2009

Extending Health Insurance: How to Make It Work

Thank you