Annex

Report on the technical support mission for the

Feasibility assessment and financial projection results for a Social Health Insurance Scheme in Lesotho

Exploring Possible Options

Revised DRAFT for discussion with the MOHSW and SHI TWG - Not for distribution -

WHO, September 2007

Annex 1: Terms of Reference

Feasibility Assessment and Actuarial Analysis of the Proposed Social Health Insurance Scheme in Lesotho
I. Background Lesotho is a small country in Southern Africa. It consists of 10 districts, with a population of about 2 million people. Its territory is completely enclosed by South Africa. Indeed, some of the health care needs of its population are met through medical referrals to South Africa, a problem that has motivated government decisions on two key areas: The upgrading of the Queen Elizabeth II Hospital (QEII) into a referral-care facility. This is being done under a public/private partnership arrangement using build-operate-transfer long-term concession. This initiative is being led by the International Finance Corporation with support from the World Bank. The formulation of a social health insurance (SHI) program initially to cover public servants under a medical aid scheme (MAS). To spearhead the effort of formulating the SHI, the MOHSW is organizing a Technical Working Group (TWG) on social health insurance consisting of representatives from relevant ministries (e.g., Finance, Health, Public Service, and Labor) and other stakeholders. From July 11-13, 2006, the government with support from the World Bank, USAID/East Africa, and the Tanzania National Health Insurance Fund, also organized an SHI orientation and planning workshop which attracted about 30 participants from MOHSW, the Ministry of Finance, and the Ministry of Public Service.

II. Objective of the Undertaking The objective of this undertaking is to provide technical support to the SHI TWG revolving around the area of actuarial analysis of the planned SHI. This undertaking complements a parallel effort, the "Omnibus Study on Health Care Financing in Lesotho" which is aimed to generate basic data on public and private providers, their unit cost structures, and the utilization of health services, most of which will be used as inputs in the actuarial analysis. For this analysis, the Consulting Team is expected to be in possession of, or have access to, an actuarial software model that could be used for the study. This undertaking does not fund the development of such an actuarial software model. III. Components of the Undertaking This undertaking consists of three parts: (a) Stakeholder consultations to generate additional information to formulate appropriate assumptions for the actuarial model. The stakeholder consultations are also meant as an opportunity to educate would-be members, providers, and supporters of the SHI. (b) Actuarial analysis of the proposed SHI program. (c) Local staff training on the actuarial model, and institutionalization plan. 1

A. Stakeholder Consultations and Feasibility Assessment The purpose of this component is to undertake a series of stakeholder consultations on various aspects of SHI design and operations so as to inform and educate would-be beneficiaries and providers, to advocate for their support, and to elicit information from them that could be used as data for the actuarial model. The tasks of this part of the undertaking are as follows: 1. Assist the SHI TWG undertake beneficiary consultations using an appropriate approach (e.g., focus group discussions, simple surveys). In undertaking these consultations, the Consulting Team should ensure that a representative sample of beneficiaries from different age groups, ministries, offices, and geographic areas are consulted. The Team should also consult with unions and civil servants' associations. The beneficiary consultations should cover the following areas: Perceived risks and benefits of participating in the SHI as members; Desire to participate in the SHI; voluntary vs. mandatory contributions; Willingness to contribute, contribution rates, and appropriate ceiling on contribution rates; Preferred health service benefits to be covered under the SHI; Domestic vs. external (South Africa) referrals, and implications of personal preferences on contribution rates; Rules and procedures for entitlement; Concerns of potential members from rural or outlying areas with constrained access to providers; Other programmatic issues from beneficiary's perspective that impinges on the design of the SHI.

2. Assist the SHI TWG undertake provider consultations using an appropriate approach (e.g., focus group discussions, simple surveys). In undertaking these consultations, the Consulting Team should ensure that a representative sample of providers from government and private (nonprofit and for-profit) sectors are consulted. The provider consultations should cover the following areas: Perceived risks and benefits of participating in SHI as provider; Desire to be accredited as provider of services and to receive payments from SHI for services rendered; Licensing and accreditation standards and phasing in of those standards; Quality assurance and utilization review; Preferred provider payment system; Fee rates; Administrative issues including medical records and claims payment; Regulatory issues; Other programmatic issues from providers' perspective that impinges on the design of the SHI.

3. Assist the SHI TWG undertake appropriate consultations among key ministries and other stakeholder groups, including but not limited to:

The MOHSW as steward, provider, and regulator of health services; The Ministry of Finance; The Ministry of Public Services; The Ministry of Labor; The Christian Hospital Association of Lesotho (CHAL); The Central Bank as regulator of the fiduciary aspects of health insurance in Lesotho; Professional societies/bodies; Other organized groups that may be relevant.

These consultations should cover the following areas: Perceived roles of each agency in the SHI; Regulatory issues, both for fiduciary and service quality areas; Governance, administration, and management of the SHI, including oversight structure and monitoring and reporting; Legal requirements; Administrative costs, and the feasibility (pros and cons) of contracting out some or all of the SHI administrative functions to a Third-Party Administrator (TPA) under an administrative services only (ASO) arrangement; Other programmatic areas that impinge on the design of the SHI.

B. Actuarial Analysis of the Proposed Lesotho SHI The purposes of this component of the undertaking are: (a) To generate appropriate actuarial assumptions on the proposed SHI which the actuary will use in calculating the expected costs and revenues of the health insurance plan, including but not limited to: utilization rates, age and sex mix of enrollees, and costs of medical services. (b) To run the actuarial model using alternative scenarios on costs and revenues, administrative arrangements, and legal reserve requirements. The tasks of this component are: 1. Generate appropriate assumptions on the contribution revenues of SHI, based on the results of the consultations with beneficiaries and relevant ministries, the companion undertaking on "Omnibus Study on Health Care Financing in Lesotho," and other data sources: Number of potential contributing members, labor force participation rates, and forecasts of economic and demographic growth; Contribution rates and any appropriate ceilings on contributions; Government subsidies to the proposed SHI; Legal reserve requirements and investment policies of the SHI fund; Inflation rates. 2. Generate appropriate assumptions on costs of health services, based on the results of the provider consultations as well as the companion undertaking on "Omnibus Study on Health Care Financing in Lesotho": Benefit package and entitlement to benefits; Utilization rates for various health services; Provider payment system to be adopted; 3

Unit costs of health services and payment rates for providers; Inflation rates.

3. Generate appropriate assumptions on the administrative costs of the SHI program, based on the results of consultations with key ministries: Assumed percentage of contribution revenues that will be used for administration; Estimation of the likely administrative costs of an SHI program of the size being envisioned for Lesotho; for this sub-task, it is useful to know the actual costs of similar SHI or other health insurance programs; Choice to be made whether the administrative functions will be performed inhouse, or will be contracted out fully or partially to a TPA under an ASO arrangement.

4. Run the actuarial model, analyse results, perform sensitivity analyses and alternative scenarios of costs and revenues, and discuss the findings with the SHI TWG. The sensitivity analyses/alternative scenarios could be: Alternative assumptions about the number of members and dependents; Changes in contribution rates and ceiling rates; Presence or absence of government subsidy; Alternative assumptions about the benefit package, especially pertaining to access to tertiary care and South African referral services; Alternative assumptions about utilization rates and provider payments; Phased roll-out of membership coverage and benefits; Other assumptions that the SHI TWG may want to explore.

5. Perform sensitivity analyses under alternative assumptions of administration of the SHI, and discuss findings with the SHI TWG. Scenario A, in-house administration; Scenario B, assuming ASO arrangement with TPA.

C. Local Staff Training and Institutionalization of the Actuarial Model 1. Train at least 5 local staff on the actuarial model. 2. Assist the MOHSW and the SHI TWG think up ways of how to institutionalize actuarial analysis in the proposed SHI program. IV. Level of Effort and Skills Needed The undertaking requires a Consulting Team consisting of the following illustrative skillmix: Health insurance actuary; Health systems specialist and/or health economist; Workshop facilitator.

A total of __ consulting days are expected to be rendered for this undertaking, apportioned illustratively as follows: Component A: __ person-days Component B: __ person-days Component C: __ person days

V. Deliverables and Schedule The Consulting Team is expected to deliver the following outputs: Final report on the stakeholder consultations and feasibility assessment, to be delivered by _________________________. Final report on the results of the actuarial analysis, including sensitivity analyses and alternative scenarios, to be delivered by _____________________. Training of at least 5 staff on the actuarial model, to be completed by ________________________.

VI. Reporting Requirements The Consulting Team is required to report and make briefings to the following: The Technical Working Group on Social Health Insurance; and The head of the Planning Department of the MOHSW. The Consulting Team may also be asked to make briefings to the Lesotho Cabinet, the Ministry of Finance, the MOHSW, donors supporting the SHI, and other stakeholders.

Annex 2: Data Sources, Assumptions and Explanations for SimIns Financial Projections
Annex 2 explains each figure input into the SimIns Model. The SimIns Model consists of 6 different modules for data input. The section numbering corresponds to these 6 modules; sub-section numbers refer to the input cells in each of these modules from top to bottom. Ideally, this section is read with the SimIns files opened in front of you on the screen.

Annex 2.1: Scenario A: "SHI for All"

1. Introduction 1.1. 1.2. 1.3. 1.4. 1.5. Name of this simulation: Lesotho National Social Health Insurance (or Scenario A) Short description of this simulation: See Main Report, Chapter 6.1.1 Base year: 2008 Type of health insurance analysed: Social health insurance for Lesotho Health Service Categories: The following health service categories are covered by the social health insurance scheme: - GOL health centre (outpatient, OP) - CHAL health centre (OP) - GOL district hospital (OP) - CHAL district hospital (OP) - GOL hospital (inpatient, IP) - CHAL hospital (IP) - Queen Elizabeth II (OP) - Queen Elizabeth II (IP) - Private (OP) - RSA referrals (IP) Government entities: No other health relevant government entity is included in this scenario. Population Structure Demography

1.6.

2. 2.1.

2.1.1. Total population (thousands): Population and growth rate taken from United Nations, Department of Economic and Social Affairs (UN 2006). Data interpolated for yearly figures. For details, see file UNPop-LES.xls (See the attached Excel-folder) 6

2.1.2. Growth rate: same source as 2.1.1 2.1.3. Percentage of dependants: same source as 2.1.1 2.1.4. Of which children: same source as 2.1.1 2.2. Workforce, wages and pensions 2.2.1. Structure of workforce & pensioners (non-dependants): The workforce is defined as non-dependants from population figures. The number of government employees was taken from the Cabinet Memo on SHI/MAS, the formal sector size is estimated in the QEII referral study (Bicknell et al. 2002), p165. Pensioners assumed to be 1% of the workforce (but more precise data is required). The rest of the population is part of the informal sector; in SimIns this population group is called "self-employed". For details, see file SimIns-data.xls > Population (worksheet) 2.2.2. Average annual wage and pension: For civil servants, data on salary adjustments and number of posts provided by the Ministry of Public Service (see file SimIns-data.xls > Gov emp 2). For teachers, the salary data was from the same source and the number of teachers were provided by the Ministry of Education. The average was calculated based on above sources (see file teachers.xls). The average formal sector wage is based on garment factory worker salaries as described in the Garment Industry study (Salm et al. 2002). The figure from that study is inflation adjusted. Pensions are assumed to be M10,000 a year, but more precise data is required. 2.2.3. Nominal growth rate: GDP deflator figure used (see 3.1.2) 3. 3.1. Macroeconomy Gross domestic product (GDP): Figures are taken from the Lesotho Bureau of Statistics. Data for 2005 were projected to 2008 by using the average annual % change over the 5 year prior. See file SimIns-data.xls > GDP

3.1.1. Growth rate: Same source and calculation as 3.1 GDP 3.1.2. Percentage change in GDP deflator: Same source and calculation as 3.1 GDP. 3.2. External price index: Economist Intelligence Unit (EIU) forecast for US$ GDP deflator used (www.eiu.com)

3.2.1. Interest rate: Source: EIU forecast. See file SimIns-data.xls > Exchange rate 3.3. Exchange rate (NCU (National Currency Units) per US$): Source: EIU forecast. See file SimIns-data.xls > Exchange rate

3.3.1. Purchasing Power Parity (PPP): In the absence of better data, PPP is being used. 3.4. Utilization of resources (national accounts) 3.4.1. Household & government consumption, gross fixed capital formation, exports & imports of goods and services: Source: International Monetary Fund (IMF) International Financial Statistics: 2005 figures used. GDP change and deflator applied to estimate 2008 figures. 4. Health care costs

4.1. For base year: All health centre and district hospital costs are based on a step-down costs analysis (Boston Medical Center 2006). Average costs calculated from the study are used. QE II OP costs are assumed to be double the outpatient costs of a health centre. QE II IP costs are based on the figures reported in the QEII referral study (Bicknell et al. 2002). Private OP costs are assumed to be twice those of health centres. RSA referrals are again based on the figures reported in the QE II referral study (Bicknett et al. 2002). See file SimIns-data.xls > Unit costs 4.2. For year-on changes: For this simulation the costs are assumed to increase by 50% over 10 years, i.e. current costs (100%) at base year to 150% of those costs in year 10 (all in constant prices). This is to simulate a quality improvement in services. There are 2 exceptions: private OP costs are increased by 13%, since unit costs were set at a much higher rate from the outset at which it is assumed that private providers will be willing to offer care. Also, there is not such a large need for improved quality. RSA referral costs are not increased, as the stated aim is to limit such referrals. 5. Utilization rate

5.1. All utilization rates for public sector health services are calculated from MOHSW Health Statistical Tables (2005). As co-payments (see Section 6.4, copayment rates) in the SHI scheme and user fees for the non-insured are simulated to be lower than current user fee levels (in line with plans of the MOHSW to lower user fees), new utilization rates under the SHI scheme are assumed to increase for both the insured and the non-insured.. The increase in utilization rates is calculated assuming a price elasticity of demand of -0.32. This figures is an estimate for Swaziland (Yoder 1989) which is the geographically closest available figure. Private OP utilization rates are calculated using information from interviews during the first mission. These interviews yielded an estimate of total patient contacts at private facilities. We then assumed that two thirds of these contacts are by the formal sector (govt employees, formal employees, pensioners, and dependants of these), and calculated the respective average utilization rates for this group based on this assumption. Utilization rates for private OP for the uninsured are lower as the uninsured do not benefit from the drop in co-payments. Utilization for RSA referrals are based on the QEII referral study (Bicknell et al. 2002, p.2). See file MOH stats util&cost.xls

6.

Health insurance

6.1. Health insurance coverage (percentage insured, exempted included): This scenario simulates a rapid increase in coverage. The government sector is covered 100% immediately. The formal sector is covered by half (e.g. the garment industry) in the first year. Coverage is then extended to 100% over two more years. Pensioners are assumed to be covered at the same rate as the formal sector. Coverage of the self-employed is extended across the country by one district per year, thus reaching universal coverage in the last year of the projection period. See file SimIns-data.xls > Coverage 6.1.1. Percentage insured that are exempted: Using poverty figures from the Lesotho Household Budget Survey (KOL 2006a / Table 6.2.7.1, p.65), the districts were classified into three levels of poverty. Informal sector exemption rates were then applied according to poverty level of either 70%, 83.6 or 90%. Relative to the total population, this results in an exemption rate of just over 50% of the total population at universal coverage. See file SimIns-data.xls > Poverty & exemptions 6.2. Health insurance contributions 6.2.1. Insurance contribution rate as a percentage of the wage and pension (%): 5% was chosen as a contribution rate for the formal sector. This is within the range of what the stakeholder consultations revealed as an acceptable contribution rate for the formal sector (see Main report, Chapter 5.1.). Pensioners, earning less than the employees of the formal sector, are assumed to pay a lower contribution: 3%. 6.2.2. Average contribution rates per self-employed adult: Half of the current average health expenditure per household (see the Household Budget Survey, KOL 2006a) was chosen as the flat contribution rate for households from the informal sector (in SimIns, for what is called the "selfemployed"). The given figure for 2003 was inflation adjusted to arrive at a 2008 rate. See file SimIns-data.xls > Poverty & exemptions 6.2.3. Average contribution rate per adult dependant in self-employed category: This simulation assumes that dependants are included for no extra contribution, i.e. it is a family insurance. Therefore this figure is at zero. 6.2.4. Average contribution rate per child in self-employed category: This simulation assumes that dependants are included for no extra contribution, i.e. it is a family insurance. Therefore this figure is at zero. 6.3. Government subsidies: The initial scenario calculates results before any extra government subsidy. The Main report (Chapter 6) provides further explanations. 6.4. Co-payment rates (%) 6.4.1. in government facilities: Scenario A simulates the currently envisaged flat GOL user charges, which are lower (mostly half) than currently applied user charge. With the agreed harmonization of user fees and government subsidies between GOL and CHAL

facilities, the same figures are used for both. The average length of stay for inpatient visits is assumed to be 6 days. See file MOH stats util&cost.xls): - Health centre OP (GOL & CHAL): Maloti 0 - District hospital OP (GOL & CHAL): M 5 - District hospital IP (GOL & CHAL): M 10 per day or M 60 per stay - Queen Elizabeth II OP: M 10 - Queen Elizabeth II IP: M 20 per day or M 120 per stay For SimIns calculation requirements, CHAL facilities are treated and categorised as government facilities.1 This is because they receive a large amount of their revenues from government budgets. 6.4.2. in non-government facilities: Private outpatient treatment is assumed to be subject to a 30M co-payment in scenario A. RSA referrals incur no co-payment, however their utilization is strictly controlled as a referral has to be initiated by QE II hospital. 6.5. Reserves, administrative costs and other non-health care costs 6.5.1. Reserves (%): This simulation uses a 5% reserve rate (calculated as a percentage of health care costs to the insurance).2 6.5.2. Administrative costs (%): This simulation uses a 15% administrative cost rate (calculated as a percentage of health care costs to the insurance).3 6.5.3. Other non-health care costs (%): None specified. 7. Governments share in financing and provision of health care

7.1.1. Government-funded share of average cost per health service (%): Scenario A simulates that current budgets from the MOHSW are maintained at current levels (in constant prices) for the simulation period, and that they continue to be used to fund or subsidize the provision of services. Thus, as a percentage of health care costs, the government funded share is between 90 and 97% in the first year of the financial projection (2008), the remaining difference to 100% consisting of co-payments / user fees, which differ across the health service categories. With increasing unit costs (by 50%) that reflect improved quality and the same level of government funding, this government share then decreases as a percentage of the overall health care costs to about 66%. In essence the SHI funds the cost (and quality) increase whereas the MOHSW budgets to GOL and CHAL facilities is maintained at its current level. With the agreed harmonization of user fees and government subsidies between GOL and CHAL facilities, the same figures are used for both GOL and CHAL. For SimIns calculation requirements, note again that CHAL facilities are treated as government facilities. This is because they receive a large amount of their revenues
This categorization merely serves to ensure that SimIns can correctly calculate health care costs catered by the Social Health Insurance. 2 The reserves amount to 4% in terms of total SHI expenditure. 3 The administration costs amount to 12.5% in terms of total SHI expenditure.
1

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from government budgets. Hence, the share of MOHSW funding in total health care expenditure, as presented in the SimIns graphs and output section, includes the funding that CHAL is supposed to collect from their own donors. See file MOH stats util&cost.xls 7.2. Estimated share of total services provided by government facilities (%): As GOL services are provided 100% by government, and as CHAL services are provided 100% by CHAL, yet given that CHAL are treated as government services for purposes of SimIns calculation steps, we enter 100% government provision. Private and RSA referrals are classified as private services. The latter could have equally been classified as a government services, but since the costs incurred through referrals are fully assumed by the SHI, the financial projection results do not change. 7.3. Timeline and extent for financial autonomy of government facilities (%): As Scenario A assumes that the current government spending on services is maintained, this figures stays at 0 throughout. 8. Public finance

8.1. General government revenue 8.1.1. Taxes on income, profits, and capital gains, on goods and services, on international trade and transactions, other fiscal revenues, non-fiscal revenues, grants: Source: IMF Government Finance Statistics Yearbook. 2008 figures are based on the provided figures for 2004 and then projected with GDP change and deflator data. See file SimIns-data.xls > Public finance 8.2. General government expenditure 8.2.1. General public services, defence, public order and safety, economic affairs, education, social protection, and other functions: Source: IMF Government Finance Statistics Yearbook. 2008 figures are based on the provided figures for 2004 and then projected with GDP change and deflator data. See file SimIns-data.xls > Public finance 9. Ministry of health expenditure

9.1.1. Inpatient, outpatient and other personal care, prevention and public health services, health administration and health-related functions: As this detailed data is not available in the Lesotho National Health Accounts estimations, the full figure for MOHSW health expenditure is entered as Other personal care. See file SimIns-data.xls > NHA 9.1.2. Growth rate: GDP growth rate is used. 9.2. Other general government health expenditure: No entities entered. 10. Private health expenditure 10.1. Total private health expenditure: National health accounts data used. See file SimIns-data.xls > NHA

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10.2. growth rate of residual: This simulation applies no growth rate.

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Annex 2.2: Scenario B: "SHI for formal sector only"

2. Introduction 1.1. Name of this simulation: Formal Sector Insurance (or Scenario B) 1.2. Short description of this simulation: See Main Report, Chapter 6.2.1 1.3. Base year: 2008 1.4. Type of health insurance analysed: Social health insurance for Lesotho 1.5. Health Service Categories: identical with Scenario A. 1.6. Government entities: identical with Scenario A. 2. Population Structure

identical with Scenario A. 3. Macroeconomy

identical with Scenario A. 4. Health care costs

identical with Scenario A. 5. Utilization rate

identical with Scenario A. 6. Health insurance

6.1. Health insurance coverage (percentage insured, exempted included): This scenario simulates a rapid increase in coverage of the formal sector. The government sector is covered 100% immediately. The formal sector is covered by half (e.g. the garment industry) in the first year. Coverage is then extended to 100% over two more years. Pensioners are assumed to be covered at the same rate as the formal sector. Coverage by the social health insurance part of the health financing system of the selfemployed remains at zero throughout the projection period.

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6.1.1. Percentage insured that are exempted: identical with Scenario A. However, as the self-employed coverage is 0, these figures have no bearing on the result. (One could equally enter 0 in these cells). 6.2. Health insurance contributions 6.2.1. Insurance contribution rate as a percentage of the wage and pension (%): identical with Scenario A. 6.2.2. Average contribution rates per self-employed adult: identical with Scenario A. However, as the self-employed coverage is 0, these figures have no bearing on the result. (One could equally enter 0 in these cells). (One could equally enter 0 in these cells). 6.2.3. Average contribution rate per adult dependant in self-employed category: identical with Scenario A. However, as the self-employed coverage is 0, these figures have no bearing on the result. (One could equally enter 0 in these cells). 6.2.4. Average contribution rate per child in self-employed category: identical with Scenario A. However, as the self-employed coverage is 0, these figures have no bearing on the result. (One could equally enter 0 in these cells). 6.3. Government subsidies: The initial scenario calculates results before any extra government subsidy. The Main report (Chapter 6) provides more explanations on this. 6.4. Co-payment rates (%) identical with Scenario A. 6.5. Reserves, administrative costs and other non-health care costs identical with Scenario A. 7. Governments share in financing and provision of health care

7.1.1. Government-funded share of average cost per health service (%): Scenario B simulates that current budgets from the MOHSW are continued at current levels (in constant prices) for the simulation period, and that they continue to be used to fund or subsidize the provision of services. However, these funds are used to pay the costs of health services to the general population that is not covered by the SHI, i.e. the informal sector. Thus, as a percentage of health care costs for the formal sector, the government funded share is zero and remains so. In essence the SHI is expected to fund the full cost of the health services incurred by its members (the formal sector). 7.2. Estimated share of total services provided by government facilities (%): identical with Scenario A. 7.3. Timeline and extent for financial autonomy of government facilities (%): identical with Scenario A. 8. Public finance identical with Scenario A.

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9.

Ministry of health expenditure identical with Scenario A.

10. Private health expenditure identical with Scenario A.

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Annex 2.3: Detailed results of sensitivity analyses for scenario A

Variations in variables for sensitivity analyses
A1: administration costs Variation relative to Scenario A values High variant Low variant +13% -33% (Administrative costs have been set (Administrative costs have been set to 17% instead of 15% of health to 10% instead of 15% of health care costs incurred.) care costs incurred.) +5% for public -10% +10% for private facilities (GOL and CHAL facility costs have not been increased that much for the sensitivity analysis, because the initial figures are believed to be on the high side. They were calculated using the findings of a costing study that included several high data outliers (Boston Medical Center, 2006).) +20% -20% Quality increase within 5 years instead of 10 (The cost increase of health services by 50% that represents a quality increase, has been applied over 5 years instead of 10.) Growth rate of number of government employees halved (The growth rate of government employees has been halved relative to scenario A, assuming that the number of government employees does not grow as fast as the overall population. As a result the proportion of government employees as part of the workforce decreases over the simulation period.) Members exempted from payment are not covered for OP care at private providers (Utilization rates for the informal sector (i.e. for the "self-employed", as they are called in SimIns) have been adapted to approximate the effect of not covering private (OP) services for those members of the insurance that are exempted from paying contributions, by reducing the rate by the same proportion as the proportion of exempted members.)4 Variants A1, A2 and A3 put together (This variant simulates the cumulative effect of variants A1, A2 and A3, i.e. and increase or decrease respectively of administration costs, health care costs and utilization rates.)

A2: health care costs

A3: utilization rate A4: faster quality increase

A5: fewer govt employees

A6: no OP care at private providers for the exempted members

A7: cumulative administration, health care costs and utilization rate

Since the calculation process of the SimIns model does not cater for a differentiated benefit package between contributing members (those paying contributions) and exempted members (those exempted from paying contributions), this financial projection variant only constitutes an approximation: It provides precise results on SHI income and expenditure, i.e. the financial feasibility of the SHI (the key point put forward above), whereas the projection of total private health care expenditure is over-estimated through this calculation process.

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Health insurance expenditure and income The following tables show the detailed results for the SHI for each of the above listed variations. The figures are in Maloti (2008 constant prices / thousands). The incomes and expenditures listed here are specifically for the SHI. The line actual required government subsidies lists the amount that would be needed extra for the SHI to break even in those years. This may be a subsidy, but it may also come from other sources. Notably, reserves from surplus years can be used to pay for deficits at least in the initial years. In those columns where this figure is negative, it means that the SHI is operating at a surplus, so no extra income (from subsidy, reserves, etc.) would be needed. A1.1: administration costs low

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A1.2: administration costs high

A2.1: health care costs low

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A2.2: health care costs high

A3.1: utilization rate low

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A3.2: utilization rate high

A4: faster quality increase

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A5: fewer govt employees

A6: no private services for exempted

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A7.1: cumulative administration, health care costs and utilization rate low

A7.2: cumulative administration, health care costs and utilization rate high

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