1.1 Access to health care: The role of (trade in) health insurance services

Box 1.1 Access to health care: The role of (trade in) health insurance services

Appropriately regulated (such as to ensure equity, protect consumers, and avoid cost escalation) and adapted to local needs and preferences, private health insurance—and potentially trade in health insurance services in that context—can play a positive role in improving access to health care in low- and middle-income countries.

Benefits of private health insurance

Two main benefits explain the potentially positive role of private health insurance: First, private health insurance may help households avoid large out-of-pocket spending on health services (the most common form of health financing in low- and middle-income countries). Second, when available to those who can afford it, private coverage allows the publicly financed health care system to focus on the most vulnerable groups (Sekhri and Savedoff 2005).

Although private health insurance is no panacea for universal health coverage (UHC), it may help to expand access to health care in various ways. Available research on UHC shows that, although the overall effect of private health insurance on UHC is ambiguous, compulsory private health insurance schemes are positively and significantly associated with specific health service coverage indicators (Wagstaff and Neelsen 2020).

Still, no two markets are the same, and depending on how national health care systems are organized, private health insurance may play a positive role. Private health insurance may be compulsory or voluntary. In the latter case, private insurance may play a supplementary role (allowing users to overcome the flaws of publicly financed systems, such as long waiting times); a complementary role (allowing users to fill the gaps in noncomprehensive publicly financed protection schemes); or a substitutive role (for users excluded from public schemes on grounds of age or income or who are allowed to choose between private and public coverage) (Thomson, Sagan, and Mossialos 2020).

Private health insurance plays an important role in health care financing in both high-income economies and low- and middle-income economies, and its role is not restricted to any particular region or level of development. Even in countries where UHC has been achieved, private health insurance (either voluntary or compulsory) continues to be significant. Figure B1.1.1 shows selected countries where private health insurance contributes at least 10 percent of current health expenditure.

Impact of regulation and policy on health insurance trade

Although trade in health insurance (in particular through commercial presence) is feasible in practice, restrictive regulation and policy, among other factors, may hinder uptake. As shown in figure B1.1.1, various low- and middle-income economies have a significant proportion of health care financed through insurance spending. Together with inadequate demand due to a population’s risk aversion or misperception and the potentially high administrative costs involved (which may be higher than the risk premium that users are willing to pay), supply restrictions motivated by regulation may explain the small size of health insurance markets in many economies (Pauly et al. 2006).

Services trade policy may help widen the health insurance market and thus contribute— among many other factors—to expanding health insurance coverage. Adequately regulated (to ensure equity, protect consumers, and avoid cost escalation), foreign health insurance suppliers

(Continued)