Health insurance is a mechanism for spreading the risks of incurring health care costs over a group of individuals or households, protecting the individual from a catastrophic financial loss in the event of a serious illness.
Insurance, therefore, spreads the burden of payment for illness among all the members of the scheme whether they are ill or healthy, poor or rich. By their very nature, insurance schemes act as financing agents: they receive funds from employers, households, and the government and use these funds to purchase health care for their beneficiaries. Therefore, the main components of insurance schemes are collecting revenue, pooling resources and risks, and purchasing quality goods and services. Many countries see the initiation or promotion of one or more insurance schemes as a way to address health financing issues and achieve universal health care coverage for citizens. Health insurance is appealing to governments because it takes the entire financial burden and spreads the total cost of insured health care among various partners. However, when governments consider instituting health insurance, they need to be aware of the realities of implementation; the complexity of the issues involved is often poorly understood. No one, widely accepted model of universal health insurance would be accepted in all societies, and how best to develop one in a resource-poor setting is still a matter of considerable debate. Whatever type of health financing mechanism a country decides to adopt, the transition to universal coverage may require several years, even decades.
This chapter covers four models of health insurance -
- Social or public health insurance
- Private health insurance
- Community-based health insurance
- Health or medical savings accounts
Any health insurance model may or may not cover medicines. Some insurance schemes incorporate medicines as part of a comprehensive care package, others compensate for them separately, and others do not cover them at all. However, strong arguments favor including medicines in insurance schemes because proper use of medicines can help prevent serious illness and death, and because pharmaceuticals make up such a large share of out-of-pocket spending in countries around the world.
Health insurance coverage for medicines offers significant potential to reduce the burden of disease and poverty. Using their power as large-scale purchasers, health insurance programs with pharmaceutical benefits can expand access to medicines at affordable prices to vulnerable populations and enforce better prescribing by clinicians and more cost-effective use by consumers. Furthermore, carefully designed insurance-based financing for medicines is both scalable and sustainable.
In part because of the pervasive potential for “moral hazard” (which in this case refers to more frequent use of services or medicines by members of an insurance scheme than would occur were they not insured), well managed health insurance programs - whether public or private, mandatory or voluntary - are always looking for ways to manage costs efficiently. Public and private insurance programs control pharmaceutical expenditures through measures related to payment, management, prescribing patterns, dispensing practices, and use. Such programs can therefore profoundly affect the quality of prescribing by making reimbursement depend on adherence to treatment guidelines or restricted formularies.
Ultimately, cost-control measures should aim to optimize access to and rational use of essential medicines, which remain a highly cost-effective element of health care, particularly for vulnerable populations.