Health insurance — essential to social development

Author(s): ARMANDO BARRIENTOS

Source: International Union Rights, Vol. 7, No. 4, Struggling for a social wage: Focus on
social security (2000), pp. 6-7
Published by: International Centre for Trade Union Rights
Stable URL: https://www.jstor.org/stable/41935876
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Social health
insurance has in
many countries
evolved out of
trade union
mutual societies
DR ARMANDO BARRIENTOS is
Principal Lecturerat the
University of Hertfordshire
Business School in the UK
INTERNATIONAL union rights Page 6 Volume 7 Issue 4 2000
FOCUS □ SOCIAL SECURITY
Health insurance -
essential to social
development
that they cover health needs with out-of-pocket
health expenditures, is a primary cause of health expenditures.
ILL healthpoverty
poverty
and health, expenditures,
deprivation and leading
for households in deprivation to large is a for and primary households unpredictable cause of in Recent economic and demographic trends
developing countries. The impact of unpre- have placed a spotlight on health insurance mod-
dictable health expenditures may extend well els. On the one hand, there is concern over esca-
beyond current standards of living, and under- lating health care expenditures, and over how to
mine longer term investment in the education finance them. Population ageing in the developed
and health of younger members, or undermine world is likely to produce rising health care
care for elderly members. In the developing costs. In the developing world, the accelerated
world in particular, ill health is strongly associat- demographic transition and the epidemiological
ed with unemployment and low income, which transition (reflecting the rise in health conditions
themselves preclude preventative health care and associated with economic development such as
reinforce a vicious circle of deprivation. mental illness and traffic accidents, for example)
Health insurance plays an important role in will produce rapidly rising health care costs.
reducing the impact of ill health on the standard Technological innovation in health care, and its
of living of households, and in encouraging rapid diffusion, will also lead to rising health care
human and economic development. From the costs. The concern is with establishing health
perspective of the household, health insurance insurance models which facilitate cost contain-
turns unpredictable health expenditures into pre-ment in health care. On the other hand, fiscal
dictable insurance payments. Furthermore, itcontraction and structural adjustment in the
enables longer term investment in household developing world have exacerbated the residual
well-being and encourages preventative health nature of government welfare provision. The con-
care. It is generally accepted that insurance cern with alternative means of financing health
against large and unpredictable health expendi- care has led to the expansion of social health
tures is a key component of social protection and insurance in some countries, and created oppor-
a significant factor in economic development. tunities for private health insurance providers in
others.
Models of health insurance provision Universal health systems provide the most
Most countries are committed to developing an comprehensive model of health insurance provi-
effective health insurance system, with a compre- sion, because they are able to pool risks across a
hensive coverage of the population and of health wide population, have strong incentives for pre-
risks, but there has been an ongoing debate on ventative health care, and can reduce to a mini-
the relative advantages of different forms of pro- mum the administrative costs of insurance provi-
viding health insurance. These include national sion.
or universal health insurance, social health insur- Social health insurance has the benefit of pool-
ance, and private health insurance. Some coun- ing risks across homogeneous groups of workers.
tries, such as the United Kingdom, have devel- It has many advantages for employers as a means
oped a national health system, attempting to of reducing work absences and increase firm
cover in a unified and universal way the health attachment, these explain extensive employer
care needs of the population. Under this system, provision of health insurance in some developed
all residents are entitled to health care, which is countries. Social health insurance is flexible in
largely tax-financed. Social health insurance relies accommodating a mix of health care provision,
on workers contributing a fraction of their earn- since workers are usually refunded health expen-
ings to a health insurance fund which is used to ditures independent of providers. In developing
refund affiliates' health expenditures. Social countries, its main disadvantage lies in the fact
health insurance has in many countries evolved that coverage is restricted to formal sector work-
out of trades union mutual societies, but now it is ers with regular employment. It is also restricted
usually mandated by governments on formal sec- by the administrative capacity to collect contribu-
tor workers. Private health insurance is more tions and manage the health fund.
common among high income groups with good insurance providers, whether for-prof-
Private
health condition in developed countries. Private iť or 'not-for-profit', need to set actuarial premi-
health insurance is available from privateums to cover average liabilities. However, good
insur-
ance providers. These offer health plans covering health risks' have lower than average liabilities
a specified list of health conditions in exchange and are therefore likely to exit the scheme, leav-
for a renewable premium. In the developing ing only 'bad health risks' behind. As those with
world, high income groups usually self-insure, higher in
than average liabilities remain, premiums
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rise, further undermining the health plan. 'For- insurance provider. In Argentina, successive
profit' insurance providers have incentives to reforms in the 1990s have aimed to open up the
seek out the good health risks', and will there- union-run Obras Sociales to competition from
fore incur high marketing and administration each other and from private health insurance
costs. Private health insurance excludes low providers. In Colombia, the 1993 health reform
income and vulnerable groups. established the Empresas de Promoción de Salud
(EPSs), which collect health insurance contribu-
Health insurance provision in the tions and provide basic health care cover for affil-
developing world iates and their families. The potential for expan-
sionacross
Health insurance varies across regions and in the private health insurance market has
countries. Very few developing countriesattracted
havea number of multinational corporations,
which have acquired a significant stake in the
managed to establish universal health insurance.
These include some countries in the Caribbean sector.
which have followed the British national health In Chile, the ISAPREs have focused on high
system model, and some socialist countries such earnings groups, and have discouraged high
as Cuba, China, and Vietnam. Social health insur- health risk groups such as the elderly and work-
ance is long-standing and extensive in Latin ers with low pay and irregular employment. The
America. In Asia, social health insurance is found ISAPREs provide health insurance for around a
in some of the major countries such as India,quarter of the population, but their membership
Indonesia, the Philippines and Thailand, and it isis predominantly from high income groups, with In Argentina,
expanding in others. It is also expanding in low health risks. In 1990, 44 per cent of individu-
successive
Africa. In some developing countries in Asia and als in the top income quintile belonged to
Africa, which had previously relied upon direct ISAPREs, but only 2.5 per cent of the lowest quin-reforms have
public provision of health care, social health tile did so. Whereas public health insurance had
insurance is being established as a means of administrative costs of around 1.8 per cent, the aimed to open up
securing a greater contribution to health care private health insurance providers had adminis- the union-run
from formal sector workers. In Latin America trative costs of 18 per cent of expenditure. There
there appears to be a move away from is concern over the interaction of private and Obras Sociales to
social
health insurance and towards private health
public health insurers. The failure by the private
competition from
insurance. sector to provide health insurance cover for low
In Latin America, health insurance and health income groups, and for old age related and cata- private health
care are stratified by income. High income strophic illnesses, concentrates bad health risks' insurance
groups individually purchase health care from groups within the public health insurer, reinforc-
private providers. Formal sector workers, around ing service demand pressures on the publicly providers
one half of the labour force, rely on social health funded sector. This refutes the argument that tak-
insurance. Payroll contributions from workers ing the well off away from public health care will
and their employers are collected into a fund leave more resources to be targeted on the less
which is then used to partially refund health care well off.
expenditures. This group access health care from In Colombia, there has been a deliberate
both public and private health care providers. attempt by the designers of health reform to take
Low income groups rely on public health care account of the problems with the private health
providers for basic health services. The public insurance model. The reformed health insurance
system has two components. A contributory
health care sector acts as an insurer of last resort
scheme covers all formal sector workers who
for this group. Health insurance coverage varies
across countries with the more developed coun-contribute 12 per cent of their earnings to a
tries having high rates of population coverage,health insurance plan with one of the EPSs. A
subsidised scheme covers low income house-
around 90 per cent, but many smaller less devel-
holds, whose contributions are financed by a
oped countries having rates below 40 per cent.
The range of health conditions covered, and thevariety of taxes, and government sources, and by
an additional solidarity contribution of formal
quality of health care, shows considerable varia-
tion across the rural and urban sectors and across sector workers of one per cent of earnings. In
income levels. order to prevent cream skimming' by the EPSs,
the government sets out annually a per capita
The region suffered an acute recession in the
health insurance premium, and the EPSs are
1980s, with rising unemployment, slow or nega-
tive economic growth, and rising povertyrequired
and to pay the excess of contributions over
inequality. Structural adjustment programmesthis
andpremium into a fund, or withdraw from it if
further crises in the 1990s led to a retrenchment contributions collected are below the premium.
of public social expenditure, and to large finan- These measures are intended to increase the
health insurance coverage of the population, to
cial deficits within the existing social insurance
funds. In many countries social insurance pen- prevent exclusion of 'bad health risks', and to
sion and health programmes have been radically secure a basic package of health care for all cov-
reformed. The thrust of health insurance reform ered households.
in the region has aimed to extend the scope forThe debate over the relative advantages of dif-
private provision. ferent health insurance models is set to continue.
A common factor in the reforms is the emer- There are divergent trends in health insurance
gence of for-profits corporations as important reforms across the world. Social health insurance
health insurance providers. These collect com- is expanding in Asia and Africa, but contracting
pulsory payroll contributions, plus voluntary in Latin America. Private health insurance provi-
con-
tributions, and insure individuals against speci-sion has inherent limitations, and its recent intro-
duction in Latin America will produce costly and
fied health risks. In Chile, health reforms in the
early 1980s resulted in the establishment of inequitable
the outcomes. Providing comprehensive
Institutos de Salud Previsional (ISAPREs), which health insurance for vulnerable groups remains a
provide health insurance on an individual or key challenge in the developing world.
group basis, in competition with the Fondo
Nacional de Salud (FONASA) the social health

Page 7 Volume 7 Issue 4 2000 INTERNATIONAL union rights

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