Community-Based Health Insurance

Community-Based Health Insurance• Of all the risks facing poor households,

health risks pose the greatest threat to their lives and livelihoods.

• A health shock adds health expenditures to the burden of the poor precisely at the time when they can afford it the least.

• One of the ways that poor communities manage health risks, in combination with publicly financed health care services, are community-based health insurance schemes

Community-Based Health Insurance

• These are small scale, voluntary health insurance programs, organized and managed in a participatory manner.

• They are designed to be simple and affordable, and to draw on resources of social solidarity and cohesion to overcome problems of small risk pools, moral hazard, fraud, exclusion and cost-escalation.

Community-Based Health Insurance• It is voluntary in nature, formed on the basis of

an ethnic of mutual aid, and covers a variety of benefit packages.

• CBHIs can be initiated by health facilities, NGOs, trade unions, local communities, local governments or cooperatives and can be owned and run by any of these organizations.

• They may be organized around geographic entities (villages, cities), professional bodies (i.e. cooperatives or trade unions) or around health care facilities.

CBHI: Deep Roots in History

• Community based health insurance schemes were amongst the first social protection institutions to be established in the industrial market economies.

• In the Netherlands, mutual health insurance societies were founded by the guilds during the Middle Ages. Doctors also established insurance funds to stabilize their own incomes.

• Community-based health insurance was also the earliest form of health insurance to be established in the USA. The first US health insurance program was founded in Baylor Hospital, in Texas in 1929 when a group of school teachers contracted with a local hospital to provide room, board and specified medical services at a pre-determined monthly rate.

CBHI: Deep Roots in History

• Other Examples Includes:– The Friendly Societies of the United Kingdom– The Mutual Benefit Associations of France,

Belgium, Germany, Japan and Korea– The Fraternal Benefit Societies of Canada

• Over time, the growing political influence of these community-based institutions gave rise to social insurance programs, and ultimately to the spread of more elaborate social protection systems

Different Names for CBHI

• Micro-insurance, • Community health finance organizations, • Mutual health insurance schemes, • Pre-payment insurance organizations, • Voluntary informal sector health

insurance, • Mutual health organizations/associations, • Community health finance organizations,• Community self-financing health

organizations.

Difference from other micro-finance schemes

• CBHIs differ from other forms of micro-finance in that they use an insurance mechanism,

• In credit schemes, members may avoid out-of-pocket payment when they need medical services. But they eventually should pay it in a later time.

Size of CBHIs

• Most CBHIs in developing countries are small– 22% had less than 100 members,– 33% had 100-500 members, – 28% had 500 to 10,000 members, – 14% had 10,000 to 100,000 members– 2% had more than 100,000 members.

Size of CBHIs

• In Sub-Saharan Africa, the majority of the CBHI schemes are small and came into existence only in the 1990s.

• Asia’s CBHI schemes are larger (with the smallest having several thousand members), older, and involve considerable cost-sharing with Governments.

• CBHIs play an important role in the health systems Latin American Countries. In These Countries CBHIs are closely linked to trade unions and social funds.

Contributions and Expenses

• Total annual member contributions from small CBHIs are generally less than $1,000 per annum, which limits their ability to cover major health risks.

• Total annual contributions of an average CBHI in West Africa is about $370, implying that one major hospitalization could deplete the CBHIs’ entire reserves.

• Member contributions are on the order of $1.5-$2.5 per capita per annum in Sub-Saharan Africa and rise to as much as $25 - $30 per capita per annum in low-middle income Asian nations (Philippines, rural China).

Health Cost Recovery

• The average share of health costs recovered by a CBHI is 25 percent, and very few CBHIs recover more than 50% of all health care costs.

• Despite the low rates of health cost recovery, there is strong evidence that CBHIs provide effective protection to scheme members by reducing out-of pocket health expenditures and improving access to health care

Coverage

• Less than 10% of the rural/informal sector population in the developing world participates in CBHIs.

• Even amongst the long-established schemes in India, Bangladesh, China and the Philippines, the covered population is less than a third of the total target beneficiary group.

• While coverage is low, the number of CBHI schemes is growing rapidly, and developing nation CBHIs are becoming powerful advocates for reform of the public health service.

Common Features

• Common Features

• Accessibility

• Self-management

• Revenue Dependency

• External Support

• Complementing the Public Effort

Premium Calculation

• For CBHIs, simplicity of contract requires that the premium be based on a community (rather than a household) rating. Normally, individuals in a CBHI don’t have the choice between various types of plans.

Six Building Blocks of Health Insurance

• Choice over participation• Ownership of system• Premiums• Benefits package• Risk management• Provider payment

Choice over participation

• Voluntary

• Mandatory

• For all or for some

Choice over participation

Voluntary

• Mandatory

• For all or for some

Ownership of health insurance system

• Major possibilities:– Private commercial– Private formal non-commercial– Private informal non-commercial– National government– National quasi-governmental organization

(Social Security Institutes, NHS)– Local governments

Ownership of health insurance system

• Major possibilities:– Private commercial– Private formal non-commercial

Private informal non-commercial– National government– National quasi-governmental organization

(Social Security Institutes, NHS)– Local governments

Premiums

• Major possibilities:– Fixed amount per person, family,

household, or group– Percent of wage– Other ability-to-pay related– Risk-related– Exemptions for disadvantaged– Subsidy for disadvantaged

Premiums

• Major possibilities:

Fixed amount per person, family, household, or group

– Percent of wage– Other ability-to-pay related– Risk-related– Exemptions for disadvantaged– Subsidy for disadvantaged

Premiums

• Major possibilities:

Fixed amount per person, family, household, or group

– Percent of wage– Other ability-to-pay related– Risk-related

Exemptions for disadvantaged

Subsidy for disadvantaged

Sometimes these two are

included

Benefits package

• Major possibilities:– “Insurable” risks—high cost items such as

hospitalizations, surgeries, costly drug regimes and tests, rehab

– “Predictable” risks—ordinary outpatient visits, low-cost drugs and tests, deliveries, preventive services

– All risks—comprehensive coverage of all services– Deductibles and co-payments– Stop loss provisions for insurer– Exclusions

Benefits package

• Major possibilities:“Insurable” risks—high cost items such as

hospitalizations, surgeries, costly drug regimes and tests, rehab

“Predictable” risks—ordinary outpatient visits, low-cost drugs and tests, deliveries, preventive services

All risks—comprehensive coverage of all services

Deductibles and co-payments

Stop loss provisions for insurer

Exclusions

Risk management

• Major possibilities:– Pre-existing conditions excluded from

coverage– Addressing adverse selection: group

enrollment, waiting period, risk-rating premiums

– Promoting/requiring prevention– Reinsurance– Bundling “predictable” with “insurable”

risks

Risk management

• Major possibilities:– Pre-existing conditions excluded from

coverage

Addressing adverse selection: group enrollment, waiting period, risk-rating premiums

– Promoting/requiring prevention– Reinsurance– Bundling “predictable” with “insurable”

risks

Provider payment

• Major possibilities:– Fee-for-service– Capitation– Global budgets– Case-based– Insurer ownership and management of

provider

Provider payment

• Major possibilities:

Fee-for-service– Capitation– Global budgets– Case-based– Insurer ownership and management of

provider

Failure of CBHI

• Many schemes do fail.

• Problems, such as weak management, poor quality government health services, and the limited resources that local population can mobilize to finance health care, can impede success.

Complementary Function of CBHIs

• CBHIs should be regarded as a complement to, not as a substitute for, strong government involvement in health care financing and risk management related to the cost of illness.

• Government, and its development partners, can support the growth of CBHIs by: – Ensuring that there is a satisfactory supply of appropriate

health services, – Subsidizing start-up costs and the premium costs of the

poor, – Assisting CBHIs build technical and managerial

competence, – Helping to foster development of CBHI networks– Assisting CBHIs establish and strengthen links with formal

financial institutions and health care providers to better manage covariate shocks and catastrophic health risks

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