Private Health Insurance in OECD Countries: a Policy Brief

1. Introduction

Health spending in OECD countries averages more than 8% of gross domestic product (GDP) and the share is rising. Overall, some three quarters of that spending is publicly financed. Private health insurance accounts, on average, for only a quarter of private-sector financing, although there is great cross-country variation. In a third of the OECD member countries at least 30% of the population has private health insurance, while market size is negligible in nearly as many countries. Private health insurance also plays a variety of roles, ranging from primary coverage for particular population groups to a supporting role for public systems.
Policy attitudes towards private health insurance also vary. Some governments do not see private health insurance as an important or desirable component of their health systems. Others consider it to be a pillar of the health system. Governments look to private health insurance to supplement public financing, or in some cases to replace it, for a variety of reasons. It may simply be a matter of finding an alternative source of financing to increase the capacity of the health system, or a means to achieve other health policy goals, such as greater individual responsibility for health-care funding.
Private health insurance can help governments attain health system performance goals, but can also put them at risk. The effect depends, in part, on the role of private health insurance, in terms of market size and function with respect to public systems. In countries where private health insurance plays a prominent role, it can be credited with injecting resources into health systems and helping to make them more responsive. However, it has also given rise to considerable equity and cost control challenges in most of those same countries.
This Policy Brief looks at trends in private health insurance in OECD countries and at the opportunities and challenges created by these markets. It also depicts useful practices that can help policy makers employ private resources to help them achieve health policy goals.

2. What is the role of private health insurance in OECD countries?

In the United States, the Netherlands and Germany, private health insurance is a source of primary coverage for population groups without access to public health cover. Under the US system, in which public coverage through Medicare and Medicaid is restricted to the elderly, disabled and certain poor groups, 72% of the population has some form of private health insurance. In the Netherlands, nearly a third of the population — those in the upper-income bracket — is excluded from publicly funded insurance; almost all of those excluded buy private primary coverage. Germany, on the other hand, is the only OECD country allowing individuals above an income threshold to opt out of social health insurance.
In Australia, Ireland, New Zealand and the United Kingdom, where privately funded providers operate in parallel to the public delivery system, private health insurance duplicates existing public universal coverage, offering a private alternative. Nearly half of the Australian and Irish populations purchase a private health insurance policy, making these the largest duplicate markets across the OECD.
Private health insurance also complements financing from public programmes in many OECD countries by covering cost-sharing under those arrangements.

Table 1: Population covered by private health insurance and by public coverage systems, 2000
Notes: Negligible indicates a proportion covered of less than 1%; n.a. indicates not available; (e) estimated.
Source: OECD (2004). Private Health Insurance in OECD countries.

This type of coverage predominates in France, where complementary insurance reaches over 90% of the population. In the United States, individuals eligible for Medicare can buy policies covering co-payments or other service gaps in the public programme.
Finally, in many OECD countries private health insurance supplements public systems by financing goods and services that are excluded from public coverage.
Private health insurance is purchased by 65% of the population in Canada, where the supplementary role is the sole permitted function of private health insurance in most provinces, while in the Netherlands nearly all of the population with social health insurance purchases supplementary insurance. In Switzerland, 80% of the population supplements basic mandatory health coverage with a voluntary private health insurance policy.

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