Understanding Health Insurance Financing Mechanisms

1. DESIGN ELEMENT 2. Choice of Insurance Financing Mechanism Presented by: Chris Atim October 19, 2009

2. 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

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

4. 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

5. 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

6. Basic features of the HI types

7. Reality more complex than schematics • 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

8. 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

9. 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

10. 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

11. 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

12. 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.

13. Advantages and challenges

14. Advantages and challenges (2)

15. Thank you