Health Insurance Mind Map - the Basics

Figure 1. Health Insurance Mind Map - The Basics

The above mind map provides the framework for discussing the basics of (Social) Health Insurance in this paper.

Basic Mechanism Advantages

Payment Schemes Health Insurance Brief1

What is a Health Insurance?

A health insurance is a system that makes health care or medical expenses more affordable to people who pay the system (members of the system).

Those people who are enrolled in a health insurance scheme (members), pay in small fixed amounts regularly. The money collected is pooled to a common fund. The money can be used to pay for the expenses of members who would suddenly get ill.

Who are the actors in the health insurance?

For a health insurance to function, there should be an agreement between three groups of people. These are:

a. Members – of the health insurance scheme. They give regular contribution to the health insurance scheme and in return gets the privilege/benefit from the health services provided in the scheme. b. Health Service Providers – are the people and institutions who render the health services. c. Insurer or Implementor – of health insurance can be an NGO, community organization, cooperative or any institution who collects members' contribution and put them into a common health or insurance fund.

Member

Provider Insurer

Figure 2. Actors (stakeholders) and Interactions in a Health Insurance Scheme.

Later, we can differentiate a social health insurance from a for-profit insurance from the roles played by the different actors and other features in the health insurance system.

What are the advantages of Implementing a Social Health Insurance (SHI) Scheme? Listed below are some of the advantages of SHI to different stakeholders.

Advantage to MEMBERS: a. Health Services can become less expensive. With more members enrolled in the health insurance, the insurer who collects the money can negotiate in behalf of the members to the health service providers to lower down medical costs. b. Social Health Insurance helps members to save small amount of money for future health needs. When there is an emergency health need, members are helped in their health expenses by the health insurance fund. c. Health Services can become more accessible. Because members know that they are supported by health insurance fund, there is greater tendency for them to access health services. d. Members can demand for better quality health services. The insurer can choose health service providers who offer better services. This is possible because the health service provider can be assured of good number of clients (members of SHI)

1 Most of the definition and contents were taken from Social Health Insurance Manual: Practical Guidelines and Recommendations for Developing a Social Health Insurance System by Dr. Elmer S. Soriano, under Social Health Insurance Networking and Empowerment Project of GTZ, Philippines, 1999. e. Improved Referral System. The insurer can make a referral scheme to members so that members would know where to go when ill. Advantage to HEALTH SERVICE PROVIDERS: a. Broader client base. When an insurer negotiates with the health service provider, there is an assurance that the health service provider can have a certain number of clients who would avail of his/her services (depending of course on the quality of service he/she provides). b. Increase predictability of Income. Depending on the agreement with the insurer/members, there is a certain predictability of the health service providers' income e.g., through salary, capitation, etc (which will be discussed later).

Advantage to INSURER: a. The insurer can generate income by charging a certain fee for the services they provide. b. The insurer can also exert institutional influence to health service providers backed by its members. c. The insurer can provide increased benefits to members. In most cooperative and NGOs in the Philippines, health insurance is becoming one of the more popular benefit provided to members. d. The insurer also gets the opportunity to upgrade skills particularly in the field of financial management, risk management, marketing, negotiations and organizational management.

What are the types of Health Insurance? There are two: for-profit and social health insurance.

a. For Profit Health Insurance – mostly are established to maximize profit with improved health care as by product. - insurer are more often external institution not related to the members, e.g., Indochine, Asia Insurance and Forte in Cambodia - payment is mainly in cash - high amount of contribution - services delivered usually prioritizes most profitable, e.g., curative - role of members are limited to being clients - social technique is more through command system, contracts, service agreements - In some countries, there are the so-called Health Maintenance Organizations (HMOs) who enroll people for a certain health benefit package. They are quite famous to enroll employees or those who have regular monthly income.

b. Social Health Insurance – is a scheme for mobilizing and utilizing resources through a risk-sharing mechanism to finance the health care needs of the members in a manner that reflects values of solidarity and shared responsibility for health care. - Its short term objective is equity and improved access to basic health services, long term objective is improved health status and quality of life. - Insurer are more often NGOs or institutions where members have long standing relationship - Payment depends on capability of members and can be in cash or in kind - payment schedules can depend on harvest season as agreed by most members. - Services prioritizes cost-efficiency, usually a balance between preventive and curative - Role of members are both client and co-operator of the SHI - Social techniques are enhancing value systems, social processes, community organizing, social mobilization, health ensuring behaviours - In Cambodia, there is only one social health insurance experience: the one assisted by GRET, a French NGO who has been active in the

3 development of agriculture, water and sanitation as well as micro- credit schemes.

What are the concepts in Health Insurance?

a. Risk Sharing – is the practice of collectively absorbing the financial burden of health care. Members assume a certain financial responsibility for whoever gets sick among them. This in the end reduces the cost for the one who is ill. It is also called risk pooling. b. Moral Hazard – instances when a member or a health service provider can over-use or abuse the benefits of the program. - Imagine a doctor who prescribes unnecessary medicines to benefit his/her pharmacy. This increases the spending from the health insurance fund. This is called provider-induced moral hazard. - Now, imagine a patient who tries to exaggerate the symptoms so that he/she can claim more from the insurance, e.g., asking the doctor to give vitamins, or stay one night longer in the hospital. This is called user(member)-induced moral hazard. In both cases, they drain the social health insurance fund, making the fund financially inefficient. c. Adverse Selection – happens when an extraordinary high proportion of sickly people enroll more than those who are healthy. There is an imbalance in the sickly and healthy members of the health insurance. This will incur higher medical expenses to the social health insurance. d. Cream Skimming – is the process by which the sickly are excluded or kept out of the health insurance because they have greater chances of claiming from the health insurance scheme. This can be done by the insurer by excluding the elderly or individuals with chronic diseases or those with disabilities.

Adverse Selection makes a health insurance inefficient because members have to support more sick members. Cream Skimming results in an unequitable health insurance program because the sick are left out.

What are the different payment schemes?

Member Payment Scheme

Health Insurance in general allows us to save small amount for future needs. Basically, each member pays in advance (pre-payment) in small amounts. The money collected from members are then pooled together and managed by the insurer.

In Social Health Insurance, payment of members are based on agreed mode: whether it be cash and/or in kind; timing: during harvest season, daily or monthly.

Provider Payment Scheme

There are three basic ways for paying health service providers.

Provider Definition Advantages Disadvantages Payment Scheme Fee for the patient goes to the Since doctor is paid - Consultation can be too Service health service provider per consultation, high thus preventing (e.g., doctor) and pay there is more patients to do follow-up afterwards, if he goes motivation to provide consultation back he pays again quality service - It also encourages doctors to over-provide services Salary the health service Predictability of - Members do not have a provider is given a fixed expenses by choice of health service

4 Provider Definition Advantages Disadvantages Payment Scheme rate (salary) per month members provider for the services he/she - This mode of payment is renders to members of also not viable for small the health insurance groups Capitation the health service Predictability of provider gets expenses for compensation per head members (or per capita) It is a viable for regardless of the smaller groups number of consultation This payment of that person scheme also is advantageous for health service providers because he/she is assured of a captive market.

There are still a lot of things to discuss about health insurance. Nevertheless, this brief suffices for the time being.

Prepared by: Yolanda V. Bayugo, MD PHA Kampot