Private Health Insurance

x List of Figures8.4 Household expenditure on private health insurance in Israel(premiums and co-payments) as a share of total householdexpenditure on health, 2000–2014 8.5 Public expenditure on health and confidence in the healthsystem in Israel and selected OECD countries, 2012 10.1 Cost-sharing revenue as a share (%) of total expenditureof Kenyan Ministry of Health, 2001/2002 to 2008/2009 10.2 Breakdown of private expenditure on health in Kenya,2004–2015 11.1 Health insurance in the Netherlands after the 2006reform 11.2 Number of insurers in the Netherlands, 1994–2016 11.3 Average growth rates in health care expenditure in theNetherlands, 2000–2015 13.1 Generic benefit design in medical schemes in South Africain the mid-2000s 13.2 Number of beneficiaries in open and restricted medicalschemes in South Africa, 1997–2015 13.3 Personal medical savings account expenditures in SouthAfrica by benefit category, 2014 14.1 Health care financing in Switzerland in 2014 14.2a Change in net premiums as a percentage of disposableincome (Swiss average and cantons with lowest andhighest incidence), 1998–2014 14.2b Shape of the 2011 net insurance premium incidence fora couple living in Ticino 14.3a Number of sickness funds in Switzerland, 1915–2015 14.3b Market share of the largest insurers and holdings inSwitzerland, 1996–2015 14.4 Correlation of cantonal results in the 2007 and 2008popular ballots in Switzerland 277294328333360367371424427435465471472474475485

Tables1.1 Private health insurance (PHI) roles page 41.2 Overview of spending on health in the countriesin this volume, 2017 71.3 Examples of measures to ensure voluntary private healthinsurance is accessible, affordable and offers quality coverage 203.1 Private health insurance claims ratios and average monthlyrevenues in Brazil according to insurer size, 2009 and 2016 693.2 Private health insurance coverage among Brazilianpopulation by income quintile, 1998–2013 753.3 Regional private health insurance coverage rates in Brazilby region (% of regional population), 2000–2016 (selectedyears) 764.1 Health care spending in Canada by source of funds, 2013 1034.2 Private health spending in Canada, 2012 1054.3 Private health insurance products in Canada, 2014 1165.1 User charges for publicly financed health care inFrance, 2016 1455.2 Health care financing by source of funds in France, 2015 1505.3 Key features of the French private health insurance market,2014 1536.1 Development and regulation of private health insurancein Germany and Chile, 1970–2016 2046.2 Health status and health care use among the publicly andprivately insured in Germany, 2006 2116.3 Characteristics, health status and health care use amongthe publicly and privately insured in Chile, 2006 2117.1 Maximum permitted waiting periods for private healthinsurance benefits in Ireland before 2015 2368.1 Breakdown of private health care expenditure in Israel,2013 270xi

xii List of Tables8.2 Key features of the National Health Insurance and privatehealth insurance in Israel, 2017 8.3 Share of the adult population (22 ) with private healthinsurance in Israel, 1999–2016 8.4 Development of supplemental and commercial insurancemarkets in Israel, 1933–2017 9.1 Health financing indicators in Japan, Republic of Korea andTaiwan, China, 2015 9.2 Organization of the health systems in Japan, Republic ofKorea and Taiwan, China, 2016 9.3 Key features of the private health insurance markets inJapan, Republic of Korea and Taiwan, China, 2016 10.1 Total expenditure on health in Kenya, 2001/2002 to2012/2013 10.2 National Hospital Insurance Fund revenues fromcontributions and benefits paid out in Kenya, 2008/2009to 2014/2015 10.3 Distribution of insured people by the type of healthinsurance coverage and region in Kenya, 2013 10.4 Private health insurance market structure and regulation inKenya, 2016 10.5 Range of premiums for private health insurance charged byselected insurance companies in Kenya, 2016 11.1 Health insurance population shares in the Netherlands (%),1990–2005 (selected years) 11.2 Overview of policy changes in the 1990s introducingsome competition in statutory health insurance in theNetherlands 11.3 Trends in consumer behaviour in the Netherlands,2006–2015 11.4 The development of nominal premium and income-relatedcontribution rates in the Netherlands, 2008–2015 13.1 Benefit expenditure by registered medical schemes inSouth Africa, 2014 14.1 History of popular ballots and legislative reforms in the fieldof federal health insurance in Switzerland, 1900–2014 14.2 Main differences between statutory health insurance andprivate voluntary insurance in Switzerland 4461

Boxes1.1 From voluntary to compulsory private health insurance infive countries page 51.2 Major developments in markets for private healthinsurance in this volume, 1960–2017 151.3 Selected examples of risk segmentation linked to privatehealth insurance 284.1 Canada Health Act national standards for full federaltransfer 1024.2 Québec’s mixed public–private universal drug plan 10710.1 Affordable private health insurance scheme by KenyaWomen Finance Trust 34512.1 Overview of the South African health system 38012.2 Key developments in the market for private health insurancein South Africa, 1889–2015 38713.1 Key developments in benefit design and the market formedical savings accounts in South Africa, 1986–2016 419xiii

AcknowledgementsThe editors are indebted to the many national experts who contributedto writing and reviewing the chapters in this volume. They are listedbelow. We thank them for their patience in seeing the book through topublication. We are also grateful to Bob Evans (University of BritishColumbia) for his contribution to the planning of the book, Joe Kutzin(WHO headquarters) for his feedback on the overview chapter andCamilo Cid (Pan American Health Organization), Valeria de OliveiraCruz (WHO Regional Office for South-East Asia), Awad Mataria (WHORegional Office for the Eastern Mediterranean), Grace Kabaniha (WHORegional Office for Africa) and Peter Cowley (WHO Western PacificRegion) for their comments on selected country-based chapters andJonathan North and Caroline White (European Observatory on HealthSystems and Policies) for preparing the manuscript for publication. Theeditors alone are responsible for any mistakes.We dedicate this book to the memory of Revital Gross and AlanMaynard, who contributed to an early draft. Revital Gross was AssociateProfessor at the School of Social Work, Bar-Ilan University and a SeniorResearcher at the Smokler Center for Health Policy Research, MyersJDC-Brookdale Research Institute. Alan Maynard was Professor ofHealth Economics at the University of York and the founding directorof the Centre for Health Economics.xiv

ContributorsShuli Brammli-Greenberg: Faculty member, Department of HealthAdministration and Economics, Braun School of Public Health, Facultyof Medicine, the Hebrew University of Jerusalem, and Senior ResearchScholar, Smokler Center for Health Policy Research, Myers-JDCBrookdale Institute, Jerusalem, Israel.Lawrence D. Brown: Professor of Health Policy and Management,Mailman School of Public Health, Columbia University, New York,New York, United States.Agnès Couffinhal: Senior Economist, The World Bank, WashingtonDC, United States.Luca Crivelli: Head, Department of Business Economics, Health andSocial Care, University of Applied Sciences and Arts of SouthernSwitzerland, Manno, Switzerland, and Vice-Director Swiss School ofPublic Health, Professor at Università della Svizzera italiana, Lugano,Italy.Switzerland.Maria Dolores Montoya Diaz: Professor, School of Economics, Businessand Accounting, University of São Paulo, São Paulo, Brazil.Stefanie Ettelt: Associate Professor in Health Policy, Department ofHealth Services Research and Policy, London School of Hygiene andTropical Medicine, London, United Kingdom.Denzil G. Fiebig: Professor, School of Economics, University of NewSouth Wales, Sydney, Australia.Carine Franc: Senior Health Economist Research, INSERM, NationalInstitute for Biomedical and Human Health Research, and Associatexv

xvi List of ContributorsResearcher, Institute for Research and Information in Health Economics(IRDES), Paris, France.Sherry A. Glied: Dean, Professor of Public Service, Robert F. WagnerGraduate School of Public Service, New York University, New York,New York, USA.Kees van Gool: Deputy Director and Professor, Centre for HealthEconomics Research and Evaluation, University of Technology Sydney,Australia.G. Emmanuel Guindon: Centre for Health Economics and PolicyAnalysis (CHEPA)/Ontario Ministry of Health and Long-Term CareChair in Health Equity, Associate Professor in the Department of HealthResearch Methods, Evidence, and Impact (HEI), associate memberof the Department of Economics, McMaster University, Hamilton,Ontario, Canada.Noah Haber: Postdoctoral fellow, Meta-research Innovation Center atStanford (METRICS), Stanford University, Stanford, California, USA.Jane Hall: Distinguished Professor of Health Economics, Universityof Technology Business School, and Director of Strategy, Centre forHealth Economics Research and Evaluation, University of Technology,Sydney, Australia.Jeremiah Hurley: Dean of Social Sciences, Professor at the Departmentof Economics and the Centre for Health Economics and Policy Analysis,McMaster University, Hamilton, Ontario, Canada.Naoki Ikegami: Professor Emeritus, Keio University, and adjunctresearcher, Japan Medical Association Research Institute, Tokyo, Japan.Patrick Jeurissen: Professor in Fiscal Sustainability of Health CareSystems, Radboud University Medical Centre, Nijmegen, the Netherlands.Soonman Kwon: Professor of Health Economics and Policy, School ofPublic Health, Seoul National University, Seoul, South Korea.

List of Contributors xviiYue-Chune Lee: Professor, Institute of Health and Welfare Policyand Masters program on Trans-disciplinary Long-Term Care andManagement, National Yang-Ming University, Taipei, Taiwan, China.Dan P. Ly: PhD candidate in Health Policy, Harvard University,Cambridge, Massachussetts, USA.Hans Maarse: Emeritus Professor of Health Policy Science, Universityof Maastricht, Maastricht, Netherlands.Di McIntyre: Emeritus Professor, Health Economics Unit, University ofCape Town, Cape Town, South Africa.Heather McLeod: Extraordinary Professor, Department of Statistics andActuarial Science, University of Stellenbosch, Stellenbosch, South Africa,and Honorary Senior Research Fellow, School of Nursing, Universityof Auckland, Auckland, New Zealand.Philipa Mladovsky: Assistant Professor, Department of InternationalDevelopment, London School of Economics and Political Science,London, United Kingdom.Elias Mossialos: Co-Director, European Observatory on Health Systemsand Policies, and Brian Abel-Smith Professor of Health Policy, LondonSchool of Economics and Political Science, London, United Kingdom.David Muthaka: Economic Policy Analyst, Kenya and Research Associateat Kenya Institute for Public Policy Research and Analysis (KIPPRA),Nairobi, Kenya.Emma Pitchforth: Senior Lecturer and Senior Research Fellow in PrimaryCare, University of Exeter, Exeter, United Kingdom.Andres Roman-Urrestarazu: Assistant Professor, International HealthDepartment, Maastricht University, Maastricht, the Netherlands,and Harkness Fellow 2020–2021, University of Cambridge , Cambridge,United Kingdom.

xviii List of ContributorsAnna Sagan: Research Fellow, European Observatory on Health Systemsand Policies, London School of Economics and Political Science, LondonSchool of Hygiene and Tropical Medicine, London, United Kingdom.Wael Fayek Saleh: Assistant Professor, Faculty of Medicine, CairoUniversity, Cairo, Egypt.Flavia Mori Sarti: Professor, School of Arts, Sciences and Humanities,University of São Paulo, São Paulo, Brazil.Samantha Smith: Research Fellow, Centre for Health Policy andManagement, Trinity College, Dublin, Ireland.Sarah Thomson: Senior Health Financing Specialist, WHO BarcelonaOffice for Health Systems Strengthening, Barcelona, Spain.Brian Turner: Lecturer, Department of Economics, Cork UniversityBusiness School, University College Cork, Cork, Ireland.Ruth Waitzberg: Research Scholar, Smokler Center for Health PolicyResearch, Myers-JDC-Brookdale Institute, Jerusalem, Israel; PhDFellow, Department of Health Systems Management, School of PublicHealth, Faculty of Health Sciences, Ben-Gurion University of theNegev, Beer-Sheva, Israel; and Fellow researcher, Department of HealthCare Management, Faculty of Economics and Management, TechnicalUniversity Berlin, Berlin, Germany.

1Why private health insurance?sarah thomson, anna sagan, elias mossialosA disproportionate impact on health system performancePrivate health insurance makes a small contribution to spending onhealth in most countries around the world, but its effect on healthsystem performance can be surprisingly large owing to market failuresand weaknesses in public policy. Because private health insurance canhave a disproportionate impact, leading to risk segmentation, inequality and inefficiency, it should be considered and monitored with care.Proponents of private health insurance fall into two camps. Somesee private health insurance as attractive in its own right: in their view,a permanently mixed system of health financing will enhance efficiencyand consumer choice. Others regard private health insurance as asecond-best option in the context of fiscal constraints: not as desirableas public spending on health, but preferable to out-of-pocket payments.In richer countries, it is argued, encouraging the wealthy to pay morefor health care or allowing public resources to focus on essential serviceswill relieve pressure on government budgets (Chollet & Lewis, 1997).In poorer countries, private health insurance can play a transitionalrole, helping to boost pre-paid revenue and paving the way for publicinsurance institutions (Sekhri & Savedoff, 2005). A key assumption inboth contexts is that private health insurance will fill gaps in publiclyfinanced health coverage, even though economic theory indicates thatgaps may be filled for some people, but not for others. Analysts whoacknowledge this tension suggest that it can be addressed throughregulation (Sekhri & Savedoff, 2005).Evidence of international interest in private health insurance firstemerged in the early 1990s, in work funded by the European Commission.Studies systematically analysing private health insurance in the EuropeanUnion (Schneider, 1995; Mossialos & Thomson, 2002; Thomson &Mossialos, 2009) were later extended to cover other countries in Europe(Thomson, 2010; Sagan & Thomson, 2016a, 2016b). Comparative1

2 Private Health Insurance: History, Politics and Performanceanalysis of experience outside Europe began to appear from the late1990s, with publications focusing on high-income countries (Jost, 2000;Maynard & Dixon, 2002; OECD, 2004; Wasem, Greß & Okma, 2004;Gechert, 2010) as well as low- and middle-income countries (Chollet& Lewis, 1997; Sekhri & Savedoff, 2005; Drechsler & Jütting, 2005;Preker, Scheffler & Bassett, 2007).This volume adds to comparative research by offering an analysisof private health insurance in 18 high- and middle-income countriesglobally, which together account for one third of the world’s population.It focuses on several of the world’s largest markets, both in terms ofpopulation coverage and contribution to spending on health; covers arange of different market roles; and includes countries in which privatehealth insurance is the only form of health coverage for some people.The chapters that follow are mainly single-country case studies basedon a standard format to enable international comparison. Each casestudy examines the origins of a particular market for private healthinsurance, considers its development in the light of stakeholder interestsand discusses its impact on the performance of the health system as awhole. Country case studies reflect national developments up to 2017.By examining national successes, failures and challenges with privatehealth insurance, the volume aims to: identify contextual factors underpinning the emergence, evolutionand regulation of private health insurance, including the role ofinternal and external stakeholders in influencing market developmentand public policy; assess the performance of private health insurance against evaluativecriteria such as financial protection, equity in access and use, efficiency and quality in service delivery, and contribution to relievingfiscal and other pressures on the health system; and inform policy development in countries in different income groups.The following sections of this chapter define private health insurance;outline market failures in voluntary health insurance and their consequences; summarize the history of and politics around the developmentof private health insurance, to understand how we got to where we aretoday; review data on the size of contemporary private health insurance markets; consider evidence on how well private health insuranceperforms; and draw policy lessons for countries seeking to introduce or

Why private health insurance? 3extend the role of private health insurance or to minimize its adverseeffects on health system performance.No two markets for private health insurance are the samePrivate health insurance is often defined as insurance that is taken upvoluntarily and paid for privately, either by individuals or by employerson behalf of employees (Mossialos & Thomson, 2002). This definitionrecognizes that private health insurance may be sold by a wide rangeof entities, both public and private in nature. It distinguishes voluntaryfrom compulsory health insurance, which is important analyticallybecause many of the market failures associated with health insuranceonly occur, or are much more likely to occur, when coverage is voluntary(Barr, 2004). The reference to private payment signals a further definingcharacteristic: private health insurance premiums are typically linkedto a person’s risk of ill health or set as a flat rate, whereas pre-paymentfor publicly financed coverage is almost always linked to income.The main focus of this volume is

challenges of private health insurance globally through country case studies written by leading national experts. Each case study considers the role of history and politics in shaping private health insurance and determining its impact on health system performance. Despite great diversity in the size and