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Private

Insurance

andManagedCare

AnInternational

View

HughWaters

February22,

2007


3/56

Outline

of

Talk

(1) ComparisonofHealthExpenditures

Internationally

(2) OverviewofTypesofHealthInsurance

Internationally

(3) ExperienceofU.S.HealthInsurance

CompaniesinLatinAmerica

(4)Example

of

Chile


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HealthCare

Expenditures

Internationally


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HealthSpendingandIncome,byCountry,2004

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$0 $10,000 $20,000 $30,000 $40,000

PercapitaGrossNationalIncome(PPP)

Hea

lthExpend

ituresper

Capita


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HealthSpendingandIncome,byCountry,2004

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$0 $10,000 $20,000 $30,000 $40,000


Hea

lthExpend

ituresper

Capita


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UnderFiveMortalityandIncome,byCountry,2004

0

50

100

150

200

250

300

350

$0 $10,000 $20,000 $30,000 $40,000


U

nderFive

MortalityRate


8/56

UnderFiveMortalityandIncome,byCountry,2004

0

50

100

150

200

250

300

350

$0 $10,000 $20,000 $30,000 $40,000


U

nderFive

MortalityRate


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HealthSpendingas%ofGDP,byCountry,2004

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0 $10,000 $20,000 $30,000 $40,000


HealthExpendituresas%

ofGDP


10/56

HealthSpendingas%ofGDP,byCountry,2004

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0 $10,000 $20,000 $30,000 $40,000


HealthExpendituresas%

ofGDP


11/56

Typesof

Health

Insurance

Internationally


12/56

National

HealthInsurance

(MOH)

Health

InsuranceSystems

CommunityRisk

Sharing

SocialInsurance

PrivateInsurancewithCompetition

Single Multiple Feefor

ServiceManaged

Care

Types of Pooling Arrangements

Source:AkikoMaedaandCristianBaeza,theWorldBank


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Social Health Insurance

Health insurance through payroll tax.

Sometimes mandatory for designated population,

but eligibility requires that the enrollee has paid thepremium (contribution).

Social insurance is not a right of every citizen.

Social insurance programs are financiallyautonomous and have to maintain solvency.


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National Health Insurance

Government collects funds and also (generally) acts

as a health care provider.

Most NHI programs are mandatory, have universalcoverage, financed from general government

revenues.


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Roles for Public and Private Health Insurance

Uninsurable risks for private sector:

Non-random health care risks.

Very low-cost services.

Uninsurable individuals or groups.

Roles for private insurance:

Coverage for those ineligible for publicinsurance.

Supplemental coverage for services not covered

by a universal public insurance program.

Potential for competition in the context ofuniversal coverage.


16/56

Private Public Integration

Individual Private

Insurance

Population-based

Social Insurance

Private, risk related,

Market

Public, salary related,

Command and Control

Private ProviderDemand side provider

financing mechanism

Public ProviderSupply Side provider

Financing Mechanisms

Insurance

Provision


17/56

Private Public Integration

Individual Private

Insurance

Population-based

Social Insurance

Private, risk related,

Market

Public, salary related,

Command and Control

Private ProviderDemand side provider

financing mechanism

Public ProviderSupply Side provider

Financing Mechanisms

Insurance

Provision


18/56

Public Sector Purchasing from the Private SectorPrivate health care often considered of higher qualitythan public services.

A demonstrated willingness to pay for perceivedhigher quality care. Examples Thailand,Zimbabwe.

Examples of contracting with private sectorproviders Peru, El Salvador, Guatemala,

Cambodia.Constraints limited competition, public financingand institutional capacity including human

resources and information systems.


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Private Insurance Companies as Purchasers

The average contribution of formal private insuranceto total health spending is just 3.3 %.

But in some countries it is as high as 43% and inmany low and middle-income countries privateinsurance coverage is growing.

In low and middle-income countries, very limitedevidence of impact on quality.

Private Insurance as % of Health Spending


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PrivateInsuranceas%ofHealthSpending,byCountry,2004

0%

10%

20%

30%

40%

50%

60%

$0 $10,000 $20,000 $30,000 $40,000


Private

Ins.as%

ofHealth

Spending Uraguay



21/56


0%

10%

20%

30%

40%

50%

60%

$0 $10,000 $20,000 $30,000 $40,000


Private

Ins.as%

ofHealth

Spending Uraguay



22/56


0%

10%

20%

30%

40%

50%

60%

$0 $10,000 $20,000 $30,000 $40,000


Private

Ins.as%

ofHealth

Spending

SouthAfrica



23/56


0%

10%

20%

30%

40%

50%

60%

$0 $10,000 $20,000 $30,000 $40,000


Private

Ins.as%

ofHealth

Spending

Bahamas

Private Insurance as % of Health Spending,


24/56


0%

10%

20%

30%

40%

50%

60%

$0 $10,000 $20,000 $30,000 $40,000


Private

Ins.as%

ofHealth

Spending

UnitedStates


25/56

Experience

of

U.S.

Companies

inLatin

America


26/56

CharacteristicsofManagedCareReadiness

Centralized

Government

Control

Autonomy

of

Health

Plan

Consumer

Choice

of

Health

Plan

Consumer

Choice

of

Provider

Provider

Integration

Financial

controls

and

Incentives

Population

Orientation

UR/EBM

andCare

Management

Tools

U.S. / +/++ ++/++ ++/+ +/++ +/++ /++ +/++

U.K. ++ +

+ + ++ +Chile + + + + +

Canada ++ +

Sweden ++

+ + +

Germany + + ++ +

France + + +

Country

OverallSystemStructure Consumers Providers ClinicalService


27/56

Managed

Care

Companies

in

Latin

America

MultinationalinsurersareactiveinArgentina

andChile,andhavebeguninBrazil.

Threewaysthatmultinationalcorporations

investfinancecapitalinLatinAmerican:

(1) Purchasingcompaniesthatsellindemnity

insuranceorprepaidhealthplans;

(2)Jointventureswithothercompanies;

(3) Agreementstomanagesocialsecurity

andpublic

sector

institutions.


28/56

Managed

Care

Companies

in

Latin

America

Themainmultinationalcompaniesoperating

areAetna,CIGNA,theEXXELGroup,the

AmericanInternationalGroup(AIG),

InternationalMedicalGroup(IMG),and

Prudential.

InChile,Aetnacontrolsasubsidiary,Aetna

Chile

Seguros

Generales,

and

created

an

ISAPRE

AetnaSaludin1993,whichhas60,000insured

subscribers(5thamongtheISAPREs).


29/56

Managed

Care

Companies

in

Latin

America

InArgentina,Aetnaoperatesthrough

investmentsin

the

EXXEL

Group

and

bought

thelargestandoldestprepaidinsuranceplanin

Argentina,AsistenciaMdicaSocialArgentina

(AMSA).

CIGNAoperatesinChile,BrazilandEcuador.


30/56

Private

Insurance

Internationally

Onlyafewcountriesintheworldhavea

nationalhealthsystembasedprimarilyor

heavilyonmultipleprivateinsurers.

Amonghighincomecountries,anational

systembased

on

multiple

private

insurers

existsonlyintheUnitedStates

EvenintheU.S.,publicsourcesaccountfor

45%of

health

expenditures

nationwide.


31/56

Roles

for

Private

Insurance

Internationally

Supplementarybenefitsforhigherincome

populationgroups.

Administratingpublicinsurance.

Managedcareindevelopedhealthsystems.

Increaseinvestment

in

health;

allow

governmenttofocusonlowerincome

groups.

Othernationswithasubstantialprivate

insurancemarketincludeChile,South

Africa,and

the

Philippines.


32/56

Private

Insurers

and

Public

Insurance

Currently,themostcommonadministratorsof

healthbenefitsinclude:

Nationalgovernment

Regionalgovernment

Socialinsurance

funds

PrivateinsurersorManagedCare

Organizations

(MCOs)

Quasiautonomousnongovernmental

managementunits(forexamplelocally

controlledPrimary

Care

Trusts

in

the

UK)


33/56

Exporting

Managed

Care

Incountrieswithagrowingmiddleclass,

MCOscanplayacomplementaryroletothe

publicsystem

although

others

believe

that

suchprivateplanscanpotentially

undermine

the

public

system.

Thesecomplementaryplanscanbe

purchasedeitherbyemployersorthe

individualsthemselves.


34/56

Example

the

Philippines

Spendsjust3.2percentofitsGDPonhealth.

Has35privateinsurancecompanies.

Theprimarydrivingforcebehindthis

processistheneedforaccesstoqualityheath

servicesin

the

private

sector.

Inprinciple,thegovernmentisableto

reallocateitslimitedresourcesand

strengthenitsprogramsforthepoor.


35/56

Managed

Care

in

Developed

Health

Systems Inhighincomecountries,policymakershave

suggestedthatcompetinghealthplanscould

offerbenefits

to

socialized

models

of

care.

Learnfromthemethodsappliedbyprivate

healthinsurance

and

MCOs.

Canefficiencybeimprovedthrough

competitionandintroductionofinternal

markets?


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Issues

CreamskimmingexperienceinIsraelshow

thatinsteadoffocusingonimproving

clinicalquality

and

efficiency,

competing

sicknessfundsemphasizeincustomer

amenities

and

marketing.

Sincegovernmentfundingisbasedon

averagecost,withoutriskadjustmentfunds

willtry

to

select

members

with

the

lowest

risk,threateningtheintegrityofthesystem.


37/56

U.S.

Companies

Abroad

Advantages

Processing

Utilizationmanagement

Caremanagement

Qualityimprovement

Designand

implementation

of

provider

paymentschemes.


38/56

U.S.

Companies

Abroad

Inthe1990smanagedcarecompanies

includingAetna,CIGNA,United,andBlue

CrossBlue

Shield

plans

formed

joint

venturesinLatinAmerica,Asia,andAfrica.

Nowmost

U.S.

MCOs

have

abandoned

their

riskbearinginsuranceoperationsoverseas.

Why? Complexityofadaptingtolocal

conditions,provider

resistance,

and

anti

Americanorantimanagedcaresentiment.


39/56

Case

Study

UnitedHealth

in

South

Africa

Inthe1990s,Unitedformedajointventure

withSouthernLife,aSouthAfrican

insurancecompany,

and

Anglo

American

Corporation,alargeminingconglomerate.

Facedseveral

challenges

including

negative

physicianresponseandbadpress.

WhentheAngloAmericanCompanymade

anindependent

business

decision

to

divest

ofitsnonminingbusinesses,thejoint

venture

was

effectively

abandoned.


40/56

Case

Study

UnitedHealth

(cont.)

Severalfactorscontributedtothefailure:

(1)Overcommitmentofresources;

(2)Failuretorecognizetheimportanceof

directpatientpaypharmaceuticalsasa

sourceof

revenue

for

physicians;

(3)Failuretogainthesupportofemployers;

and

(4)Lackoffullunderstandingofthecomplex

racialsituationinSouthAfrica.


41/56

Current

Situation

UnitedandafewotherU.S.MCOs

includingKaiserPermanenteandCIGNA

maintaininternational

operations.

Consultingandadministrativeservicesand

partnershipsfor

healthcare

provision.

Insuranceproductsarelimitedmainlyto

U.S.expatriatesandthoseworkingforU.S.

companiesabroad.


42/56

Chile

Case

Study
http://upload.wikimedia.org/wikipedia/commons/d/d1/Ci-map-CIA.png


43/56
http://upload.wikimedia.org/wikipedia/commons/d/d1/Ci-map-CIA.png


44/56

Chile

Population16.1million.

GDPper

capita

(PPP)

$10,874.

Healthexpenditures$489percapita.

TotalFertility

Rate

(TFR)

2.0.

Lifeexpectancyatbirth78.0.

OOPas

%

of

total

health

spending

23.7%.

Source:2006WorldDevelopmentIndicators

Chile DecliningTotalFertilityRate


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Chile DecliningPovertyRate


46/56

Chile HealthSectorOrganization


47/56

Ministry of Health (both subsectors) through Regional Health Services

National programs funded and managed by the Ministry of Health (i.e. free

vaccination, TBC treatment, Hanta virus control, PNAC, etc.)

Insurance must finance annual preventive physical examination for each beneficiary.

Public health

interventions

Private health insurance regulatory

agency (Superintendencia de Isapres)

Stewardship and

Regulation

28 Regional Health Services (SS) make up

a complex network of 194 public hospitals,

specialty centers, and (mostly municipal)

primary care centers.31.804 hospital beds

National Health Fund (FONASA): 10.3

million beneficiaries (67.5%)

Public subsector

Health Sector

Network of providers, located mainly in

major urban centers.

11.208 hospital beds(includingmutual

fundhospitals)

Providers

18 private health insurance plans

(ISAPRES): 2.8 millionbeneficiaries

(18.5 % of population)

Curative and

preventive health

insurance

Private subsector

Ministry of Health (both subsectors) through Regional Health Services

National programs funded and managed by the Ministry of Health (i.e. free

vaccination, TBC treatment, Hanta virus control, PNAC, etc.)

Insurance must finance annual preventive physical examination for each beneficiary.

Public health

interventions

Private health insurance regulatory

agency (Superintendencia de Isapres)

Stewardship and

Regulation

28 Regional Health Services (SS) make up

a complex network of 194 public hospitals,

specialty centers, and (mostly municipal)

primary care centers.31.804 hospital beds

National Health Fund (FONASA): 10.3

million beneficiaries (67.5%)

Public subsector

Health Sector

Network of providers, located mainly in

major urban centers.

11.208 hospital beds(includingmutual

fundhospitals)

Providers

18 private health insurance plans

(ISAPRES): 2.8 millionbeneficiaries

(18.5 % of population)

Curative and

preventive health

insurance

Private subsector

Source:MinistryofHealth(www.minsal.cl)andFONASA(www.fonasa.cl).


48/56

Health FinancingHealth expenditures $581 per capita.

Health care system financed through the public

National Health Fund (Fondo Nacional de Salud FONASA), and a group of private insurers(Instituciones de Salud Previsional ISAPREs).

Employed individuals not otherwise covered arerequired to contribute 7% of their income toFONASA (up to a maximum of approximately

US$135). or to purchase health insurance from anISAPRE.


49/56

CoverageFrom 1981, possible to opt out FONASA andinto ISAPREs.

ISAPREs cover 20% of the population (from2% in 1983) and FONASA 67%.

There are currently 17 ISAPREs, covering 20%of the population (from 2% in 1983), vs. 67% forFONASA.


50/56

Coverage (cont.)The ISAPREs, by law, set premiums atcommunity rates by age, sex and family size.

Other private insurance companies offerdifferentiated plans that vary according to thepremium paid and the health risk of the insured

family.FONASAs rates are tied onlyto income. Peoplecan buy health insurance simply by paying 7% of

their income, independent of their age, numberof beneficiaries, or health status.

ChileSourceofHealthInsurance,2000


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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 (poorest) 2 3 4 5 (richest)

Income Quintile

% in FONASA

% in ISAPREs


52/56

Coverage (cont.)Wealthier Chileans went to ISAPREs example ofadverse selection.

9.0% of FONASA's risk pool is over 65 years of age,compared to only 2.2% of the ISAPREs' beneficiaries.

The ISAPREs' beneficiaries have a mean monthlyincome of $554 (1998 estimate) while the majority ofFONASA beneficiaries have a mean monthly incomeof less than $154.


53/56

FONASAs Benefit PackageBeneficiaries have access to a network of primary carecenters that are mostly managed by municipal

governments.The primary health care centers must deliver apredefined package of health services, the Primary

Care Program

ISAPREs RiskRatingTable


54/56

5,206,705,205,505,7070 - ms

4,305,504,305,105,1065 - 69

3,603,603,604,504,0060 - 642,802,002,803,902,1050 - 59

2,701,402,703,801,6040 - 49

3,301,003,304,201,0025 - 39

1,301,002,503,001,0018 - 24

1,101,102,502,301,1002 - 17

Years

2,402,402,402,402,4012 - 23

3,003,002,402,402,4000 - 11Months

FemaleMaleSpouseFemaleMale

DependantsInsured

Age

5,206,705,205,505,7070 - ms

4,305,504,305,105,1065 - 69

3,603,603,604,504,0060 - 642,802,002,803,902,1050 - 59

2,701,402,703,801,6040 - 49

3,301,003,304,201,0025 - 39

1,301,002,503,001,0018 - 24

1,101,102,502,301,1002 - 17

Years

2,402,402,402,402,4012 - 23

3,003,002,402,402,4000 - 11Months

FemaleMaleSpouseFemaleMale

DependantsInsured

Age

Source:MinistryofHealth(www.minsal.cl)andFONASA(www.fonasa.cl).


55/56

CriticismsThis mixed system of insurance has been criticizedprincipally because of an alleged negative effect on

equity.One specific criticism is that permitting the rich toopt out of the public health system diminishes what

some call the systems solidarity.Public opinion surveys show that a majority think thataccess to good health services is not available to all

Chileans.


56/56

Current Reform Efforts

The Standard Guaranteed Benefit Package(SHP)

Integrating two systems:

Resolving problems in the current public private interaction.

Identifying sources and mechanisms for

ensuring cross-subsidization.

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