EUROPEAN PAPERS ON THE NEW WELFARE

Private Health Insurance in OECD Countries: a Policy Brief

3. Types of private health insurance

Private health insurance is used at different levels, and for different reasons, in individual OECD countries. In some countries it is the primary source of health coverage for at least part of the population; in others it duplicates the public system, offering a private alternative; and finally it acts as a complement or supplement to public programmes.
The variety of roles and market sizes of private health insurance in OECD countries (see table 1) arises from several factors. Many countries with large markets have a tradition of private health financing and insurance markets. Statutory health coverage and delivery systems affect which services, providers and population groups private health insurance covers, and government attitudes towards private health insurance markets shape their structure and dimension. The presence of employer-based private health insurance often contributes to explain high levels of private coverage (as in the United States, Canada, and France). Consumer desire to obtain more and faster care, or the level of satisfaction with publicly funded services also influences demand for private health insurance.

4. Does private health insurance improve access to care and coverage?

The contribution of private health insurance to improving access to health coverage and health care has varied depending on how large a private market has developed and how broad a pool of risks it covers.
For example, public health insurance markets have not developed enough to provide significant financial protection in Korea, Mexico, Greece or Turkey, despite large gaps in the population or services covered by public systems. This could be the result of several factors, ranging from lack of a history of health insurance markets to premium affordability considerations. Even where private markets have developed, access to coverage remains a key challenge. Where private health insurance is under little or light regulation, higher-risk individuals have often faced difficulty in obtaining policies at an affordable price. Several OECD countries have introduced measures to promote availability and affordability of insurance, which apply either to the entire private health insurance market or to that part of it servicing high-risk groups. Clearly, when public coverage is not comprehensive or universal, private health insurance has enhanced access to care. But such access is often inequitable, largely because private health insurance is typically purchased by high-income groups. In duplicate systems, for example, private health insurance provides a level of care, choice and speed of access above that offered by public systems to those who can afford to pay for it. Privately insured patients may benefit, in particular, by obtaining shorter waiting times for elective surgery. But there is no clear evidence that waiting times are also reduced in the public sector, the only choice for those on lower incomes.
There are also equity issues arising from the fact that in some countries the private health-care sector pays providers more than they could earn in the public system. While this encourages high service volumes and productivity in the private sector, the quality and quantity of publicly financed services might suffer as a consequence, especially when providers’ responsibility and obligations to public patients are not clearly defined and monitored. To avoid such problems, policy makers in some systems have introduced regulations limiting the possibility for privately insured persons to enjoy a superior level of care and choice, as in the case of the Netherlands. This minimizes the risk of creating two levels of health care according to insurance status and, therefore, ability to pay.

5. Does private health insurance create more choice and responsiveness?

Private health insurance has enhanced consumer choice and the responsiveness of health systems in many OECD countries. First, the opportunity to buy private health insurance in itself offers consumers an additional level of choice with respect to financing health-care services and providers on an out-of-pocket basis. Second, private health insurance has improved individuals’ choice over health providers and timing of care in most countries with duplicate markets — although the scope of this added choice depends upon the freedom of choice already existing within public systems. Third, most private health insurance markets offer a wide array of products to consumers, allowing them to tailor their risk and product preferences.
Clearly, for consumers to exercise meaningful choice, insurers’ marketing and product information materials need to be clear and enable comparisons across the market. Consumers have complained about the quality of product information at the point of sale in some countries. Governments or private organizations have intervened by disseminating comparative information on the quality, features and cost of health plans in some countries, such as the United States and Switzerland.
But an abundance of product choices can make it harder for higher-risk patients to find coverage, to the extent it results in segregation of the market by risk level. To avoid the problem of vulnerable groups being priced out of the private health insurance market, as has occurred in some OECD countries, some policy makers have limited the scope for insurers’ flexibility and innovation. For example, they have regulated the minimum benefits that insurers must cover, required insurance products to be standardized, or limited the extent to which insurers can refuse cover and rate premiums on the basis of individual risk.

6. Does private health insurance promote high-quality care?

Private health insurance has had only a minimal impact on the quality of care in most OECD countries, since private insurers have not usually engaged in significant efforts to influence the quality of the services they finance. The lack of effort is due to a combination of factors, ranging from lack of regulatory and financial incentives for insurers, to a desire not to restrict individual choice, as well as resistance from health-care providers to the introduction of a new source of influence on decisions over appropriateness of care. The United States has been the only OECD country where some private insurers, known as managed care plans, have been substantially involved in efforts to influence some aspects of care delivery. Despite indications of some effectiveness, the overall evidence of the impact on quality of care is mixed: such plans do not appear to have fundamentally changed clinical processes. Payment incentives that do not consistently reward plans’ or employers’ efforts to improve quality and inadequate quality-measurement and reporting systems, explain the still small and non-systematic impact of private health insurance on quality improvements in the United States.

7. Has private health insurance helped to relieve cost pressures?

Policy makers often look to private health insurance markets as an alternative or additional source of funding for publicly financed health systems, especially when these budgets are stretched to capacity. Yet health systems in OECD countries continue to be predominantly financed from public sources, which account, on average, for 72% of total health expenditure, compared to 6.3% for private health insurance and 19% for out-of-pocket payments. Only in the United States does private health insurance exceed a third of total health expenditure, at 35%, while it goes above 10% only in the Netherlands, Canada, France, Germany and Switzerland (Figure 1). Whatever the role played in a health system, private health insurance has added to total health expenditure. Most OECD countries apply less government control over private sector activities and prices, compared to public programmes and providers. Private insurers tend to have less bargaining power over the price and quantity of care as compared with public systems, particularly single-payer ones. Countries that have multiple sources of primary coverage, including those with significant private health insurance market size, tend to be those with the highest total health spending levels per capita, such as the United States, Switzerland, Germany and France.


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