Accra, Ghana October 19-23, 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 participants country

Outline Health Insurance Models: advantages and disadvantages Deciding which model is right for you: Environmental considerations Insurance goals Equity

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 individuals Facilitates 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, social Public or national health service model (Beveridge) Typified by UK Classical social health insurance (Bismarckian) Typified by Germany Voluntary health insurance Private voluntary (commercial schemes) Eg USA, South Africa Community based (CBHI, mutuelles/MHOs) Eg Senegal, Mali Emerging national health insurance scheme (NHIS) in Africa Ghana, Rwanda, Tanzania

Basic features of the HI types Type of schemeFinancingDefined-income or -benefits? Management system Examples Public or national health service General tax revenueIncome 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 benefitCommercial 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 insurance But HI is provided by private commercial insurance who must accept anyone regardless of risk Govt pays subsidies to enable poor to buy HI; no public insurance France Based on social security with defined contributions according to income; 6 special regimes But 98% of French belong to mutuelles due to high co-pays and to avoid paying OOP up front Thailand 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, accessed Oct 17, 2009http://

Key features of HI types (2) Public or national health service Govt or public service managed with general taxation as revenue base Coverage based on residence or national territory not work Hence 100% coverage normal in this system SHI Legally mandated coverage for some pop. groups Direct link between contributions and benefits Autonomously run by health funds, parastatals, or social security

Key features (3) Private voluntary insurance Privately owned, run for profit or non-profit Premiums individually or risk-rated Individual or group membership CBHI or mutuelles /MHOs Not for profit, focus on informal sector Community or member owned and controlled Ethic of community solidarity and mutual aid

Key features (4) NHIS Targets previously excluded groups (informal /rural sectors) as well as formal sector Govt subsidies from tax revenues to enable key groups and vulnerable persons to join Payroll contributions by formal sector (Ghana, Rwanda, Tanzania) Decentralized management, run semi-autonomously by public agency Most countries have a mix of mechanisms, esp before but often also with universal coverage

Scheme typeAdvantagesChallenges 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 typeAdvantagesChallenges Public or national health service Only system that guarantees 100% population coverage Progressive revenue collection National budget offers wide resource base Administrative simplicity (lowest admin costs) Funding variable and may be limited by budget/MoF Limited provider competition or choice Quality issues Social health insurance Mobilizes additional resources from employers Earmarked funding insulates revenue from annual budget round Usually progressive Transparency or visibility of system enhances legitimacy /population support as well as quality care May not achieve 100% coverage due to link to work and premiums Taxes usually capped, so less progressive Payroll contributions may adversely affect employment More complex management systems Private voluntary schemes Financial protection to those who can afford and offer tailored HI products Increases sources of funding for sector Can increase competition for quality and efficiency May reinforce inequities in access Cannot provide 100% coverage May result in wasteful expenses eg marketing, extra admin costs

Advantages and challenges (2) Scheme typeAdvantagesChallenges 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 benefits Limited financial protection due to small revenue base and benefit package Cannot cover poorest without unless subsidized Limited 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 benefits Addresses equity shortcomings of CBHI Design may not be optimal esp if driven mainly by politics Revenue bases still fragile, thus sustainability still in question Tendencies towards bureaucratization and centralization Cost escalation an issue Reaching the very poor still a challenge

Accra, Ghana October 19-23, Extending Health Insurance: How to Make It Work Thank you