Social Health Insurance

1. Social Health Insurance Dr Kambiz Monazzam Khoramabad – Lorestan May12-15, 2005

2. Goals of This Session • Provides an overall context that gives rise to Social Insurance • Introduce market and government failures that the design of a Social Insurance program should consider • Introduce the essential characteristics of Social Insurance

3. RISK • At Personal Level • At Social Level

4. RISK How Do people deal with risk? And way to confront with • Savings • Barrowing • Family/ Friends Help • Charity • Insurance

5. Why would people like to be insured?In which circumstances?Do people want to be insured at any risks?

6. Why Do Nations Consider Social Insurance? • Diseases and illnesses are uncertain; serious illnesses can bankrupt families; • Health and health care are basic necessities for life, EQUITABLE access to health care is a national goal for most countries • Insurance (pooling risks) enhance people’s well-being and prevent impoverishment

7. When Insurance initiated/devised? • There are great risks • People know the risks • Risk imposes great burden on individual • Uncertainty at individual level

8. Health & Insurance • Can’t pay the cost of cure • Don’t come back to healthy state • Long treatment period • Loss of work/discharge • Falling down the poverty line

9. The basic Principle behind Insurance: Risk Aversion: The desire to replace an uncertain loss with a steady & certain premium payment

10. Insurance: • Individual view: • Risk Aversion • Social view: • Risk Pooling way • Cross Subsidy Insurance: Pools the risks; but, don’t vanish or decreased it

11. Bilateral Exchange Model for Goods Service Consumers Providers Money Hospitals Clinics Physicians

12. Exchange Model for Goods Government Premiums & Taxes Charity Payments User fees Consumers Providers Service

13. Trilateral Exchange Model for Goods Taxes Payments Financing Organization Treasury Premiums Service Consumers Providers User fees Hospitals Clinics Physicians

14. GOV Charity Insurance Provider Consumers

15. Rely On Free MarketFor Insurance? • Market and competition deal with efficient allocation of resources, not EQUITY • There are serious market failures in the insurance market and in the health services markets. Regulations have not been able to effectively remedy the market failures • Social insurance is a major approach to promote equity and address these market failures

16. Failures In The Private Insurance Market Asymmetry of Information Adverse Selection by insurance buyers Risk Selection by insurance company Absence of Optimal Insurance Products Elderly and less healthy people left uninsured

17. Insurance Asymmetry of Information, Imperfect Agency, Barrier to Entry Moral Hazard Monopolistic Power of Providers Induce Demand Inefficiency High Prices/High Profits, Excessive Quantity of Services Market Failures In The Health Services Markets

18. Rely On The Government For Insurance? There are serious government failures: • Vested interest politics • Government operates as a monopoly • Government manages by top down hierarchy, higher ranked officials’ interests dominant over common people’s interest • Government manages by bureaucratic rules that stifle innovation and create inefficiency

19. Government Failures Vested Interest Politics Public Monopoly, Poor Public Administration • Distorted Payment-Misallocation of Resources • Inequity • Inefficiency/Higher Costs • Unfriendly to Users • Possible Corruption

20. Special Features of Social Insurance • Mandatory for designated population to avoid adverse and risk selections • A social contract between government and the enrollees • Eligibility for benefits require that the enrollee has paid the premium (contribution) for a minimum period. Thus SI is not a right of every citizen, and not a welfare program • Financially autonomous and has to maintain its own solvency • Benefits prescribed by law • Benefits not directly related to contributions

21. Advantages of Social Insurance • Pools risks widely • Can improve equity • Mobilizes financial resources for health care from workers in the formal sector • Low administrative costs • Can control health expenditure inflation if the program is designed properly

22. Disadvantages of Social Insurance • Requires sophisticated knowledge and organization to do it properly • Alters locus of financial power and this power can be misused • Can’t provide universal coverage unless the government subsidizes the farmers and workers in the informal sector

23. Impacts of Social Insurance • Organize and mobilize funds for health • Pool risks between the healthy and the sick, cross subsidy by the high-income to the low-income • Can provide cost effectiveness health care • Can control health cost inflation • Can improve efficiency and quality of health care • Potential negative economic impacts: • Excess burden, labor market, price inflation

24. Major Planning Issues • Covered population/eligibility • Enrollment/premium collection • Benefit package • Costing/financing • Macro organization • Public, Semi-public, Private non-profit, for-profit • Monopoly or competition • Payment system

25. Major Planning Issues (2) • Administrative systems • Eligibility card and enrollment • Premium collection and accounting • Claim card • Monitoring quality and cost • Management information

26. Social Health InsuranceHistory & Background: • Poverty law in 19th century • Saving accounts introduced by GOV • Employer responsibility for work injuries • Workers help association

27. Social Security historyBismarck Model (Germany) • Medical Care Benefits 1883 • Employment injury Benefits 1884 • Old age & Invalidity Benefits 1889 • Social Security Law 1911 • Social Assistance Law 1911

28. Social Security historyBeveridge Model (UK) • 8.Unemployment Benefits 1906 • Old age Benefits 1908 • Total coverage Insurance 1911 • Medical Care Benefits 1912 • Family Law 1945 • National Health System 1946 • Anti poverty Law 1948

29. Social Security Benefits (ISSA) 1. Old age Benefits 2.Disability Benefits 3.Death Benefits 4.Sickness Benefits 5.Maternity Benefits 6.Medical Care Benefits 7.Employment injury Benefits 8.Unemployment Benefits 9.Family Benefits ( مزاياي بازنشستگي ) ( مزاياي از كار افتادگي ) ( مزاياي فوت ) ( مزاياي بيماري ) ( مزاياي زايمان ) ( مراقبت هاي پزشكي ) ( مزاياي حوادث ناشي از كار) ( مزاياي بيكاري ) ( مزاياي خانواده ) (2) R

30. Changing Vision toward RISK REDUCTION From Medical INS To Health INS So Can reduce the risk

31. Medical VS Health • Medical • In order to cover the costs Have to increase premiums • Health • Decrease costs • Decrease Invalidity or disease so increase quality of life & productivity

32. When we Have a good health Insurance !? • What’s Insurance sales? A PROMISE

33. SO, • They know they have to do their Promise • If they don’t do on time Somebody obliged them to: • do the task • Pay penalty for loss • Pay penalty for breaking the social law • They don’t have “rich father”

34. Thanks for your attention

35. Social Health Insuranc? Do you have • If NO !!! You are A Loser JOlN US • Sweden & UK have no socialinsurance! Make a Business!? • Why don’t you establish one?