Supplementary Health Insurance and Regulation of Healthcare Systems

Most developed nations provide generous coverage of care services, using either a tax financed healthcare system or social health insurance. Such systems pursue efficiency and equity in care provision. Efficiency means that expenditures are minimized for a given level of care services. Equity means that individuals with equal needs have equal access to the benefit package. In order to limit expenditures, social health insurance systems explicitly limit their benefit package. Moreover, most such systems have introduced cost sharing so that beneficiaries bear some cost when using care services. These limits on coverage create room for private insurance that complements or supplements social health insurance. Everywhere, social health insurance coexists along with voluntarily purchased supplementary private insurance. While the latter generally covers a small portion of health expenditures, it can interfere with the functioning of social health insurance. Supplementary health insurance can be detrimental to efficiency through several mechanisms. It limits competition in managed competition settings. It favors excessive care consumption through coverage of cost sharing and of services that are complementary to those included in social insurance benefits. It can also hinder achievement of the equity goals inherent to social insurance. Supplementary insurance creates inequality in access to services included in the social benefits package. Individuals with high incomes are more likely to buy supplementary insurance, and the additional care consumption resulting from better coverage creates additional costs that are borne by social health insurance. In addition, there are other anti-redistributive mechanisms from high to low risks. Social health insurance should be designed, not as an isolated institution, but with an awareness of the existence—and the possible expansion—of supplementary health insurance.