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Social health insurance in perspective

Social health insurance in perspective

The concept of social health insurance (SHI) is deeply ingrained in the fabric of health care systems in western Europe. It provides the organizing principle and a preponderance of the funding in seven countries – Austria, Belgium, France, Germany, Luxembourg, the Netherlands and Switzerland. 

Since 1995, it has also become the legal basis for organizing health services in Israel. Previously, SHI models played an important role in a number of other countries that subsequently changed to predominantly tax-funded arrangements in the second half of the twentieth century – Denmark (1973), Italy (1978), Portugal (1979), Greece (1983) and Spain (1986). 

Moreover, there are segments of SHI-based health care funding arrangements still operating in predominantly tax-funded countries like Finland, Sweden and the United Kingdom, as well as in Greece and Portugal. 

In addition, a substantial number of central and eastern European (CEE) countries have introduced adapted SHI models since they regained control over national policy-making – among them Hungary (1989), Lithuania (1991), Czech Republic (1992), Estonia (1992), Latvia (1994), Slovakia (1994) and Poland (1999).

Despite this pivotal role in European health care, the organization and operation of SHI systems has received notably less attention from academics and researchers than have tax-funded systems. 

Neither the core system characteristics that define the SHI model, nor the performance of various SHI models in comparison with that of various tax-funded systems, have received the type of systematic assessment they deserve. 

This is the case not only in the English language literature. Those comparative studies available in Dutch, French or German language (the seven western European SHI countries) tend to be limited to neighbouring (border) countries, and often focus on narrow technical rather than broader conceptual issues. 

Wide structural and organizational differences between western European SHI countries (as well as with Israel) further complicate efforts to delineate common patterns and problems. The availability of widely accessible, comparative knowledge about SHI systems could be helpful for health policy-making both outside and inside Western European SHI systems. 

Outside, policy-makers in central and eastern Europe (CEE), but also in other potentially interested areas such as south-east Asia, South America and the United States, would benefit from being able to obtain a clear picture of how western European SHI systems are organized and how well they perform. 

Among other advantages, this might reduce political tendencies within some former Soviet Bloc countries to focus on only the official form of SHI systems without considering the equally important societal characteristics necessary to make those systems work successfully. 

Inside SHI systems, a clearer comparative picture could assist policy-makers as they grapple with increasing challenges to the economic, political and social sustainability of the traditional SHI framework (see below). 

One of the most striking observations about contemporary SHI systems is the contrast between this knowledge gap about what they are and how well they function, on the one hand, and the strength of the emotional attachment of the citizens within these countries to their particular SHI system, on the other hand. 

How can one account for such a powerful popular attachment to a health care arrangement that is so hard to describe and about the performance of which information is so limited? This observation suggests that, before detailing the dilemmas that contemporary SHI systems confront, it may be useful to consider how SHI systems look in the eyes of those who support them.

An insider’s perspective 

The attraction of the SHI approach for both citizens and policy-makers appears, on initial viewing, to be based on three structural characteristics. First, SHI systems are seemingly private in both the funding and delivery of health services.

Second, as seemingly private, SHI systems appear to be self-regulating, managed by the participants themselves (e.g. sickness funds, physicians and, to a lesser degree, patients). 

Third, as perhaps the most important consequence of being seemingly private and self-regulatory, SHI systems are perceived as stable in organizational and especially financial terms. This stability often appears to be the most highly prized of all the outcomes associated with SHI systems. 

Indeed, when one considers the political turmoil that the twentieth century brought to western Europe, and the number of new governmental systems adopted or imposed on France (four), and Germany (three), as well as on Austria, Belgium, Luxembourg and the Netherlands, one cannot help but being impressed with the extraordinary stability and longevity of SHI within these countries. 

Beyond these three perceived characteristics of private, self-regulating, and stable, however, lies a deeper, less discussed essence that is implicitly understood by both citizens and policy-makers alike as separating off SHI systems sharply from other arrangements for funding and providing health care services. 

This perspective can be summarized by the observation – made persistently by policy-makers from SHI countries – that SHI is not simply an insurance arrangement but rather a ‘way of life’. 

In this view, SHI is a key part of a broader structure of social security and income support that sits at the heart of civil society. As such, SHI helps define how ‘social order is established in society’ (De Roo 2003). 

It is part of the ‘fabric of society’ (Zöllner 2001), supported by a ‘social consensus’ that is deeply rooted in the ‘balance of society as a whole’ (Le Pen 2001). A central (if not entirely correct) presumption is that both funders (sick funds) and providers (hospitals and physicians) are in the private sector. 

Thus, crucially, the state is not seen to be the owner of these social security structures, but rather their guardian and administrator – their steward (Saltman and Ferroussier-Davis 2000). 

In consequence, there is a firm belief that these health care systems are not artificial bureaucratic structures but rather ‘living entities’. To operate successfully, they require major commitments of energy and time by many parties involved, often on a voluntary basis. 

They also require a high level of trust among many actors (see Chapter 6), leading to a conclusion that ‘certain non-written rules are essential’ (Pfaff 2001). In Germany, for example, ‘traditions and unwritten rules’ play a critical part in managing its SHI system (Normand and Busse 2002). 

A central dimension of this deeper understanding of SHI systems is that, in structure, they are intentionally very different from standard commercial insurance. Instead, SHI systems are constructed first and foremost as part of a social incomes policy, to be redistributive in nature (Glaser 1991). 

They are thus consciously designed to achieve a series of societal objectives through a set of financial cross-subsidies – not just from healthy to ill but also from well-off to less well-off, from young to old and from individuals to families. 

It is this redistributive focus that distinguishes SHI from what is normally understood as ‘insurance’ – the latter being an actuarially precise device by which each individual seeks to protect his or her own interests (Glaser 1991; Stone 1993). 

Thus SHI is understood inside SHI countries as not being ‘insurance’ at all, but rather exactly the opposite. 

Instead of enabling each individual to focus on his or her own perceived personal interests, SHI requires individuals to contribute toward the best interest of the population generally through its structure of financial redistribution. 

It is this understanding of SHI that leads the citizenry in SHI countries to link it to the notion of solidarity (see Chapter 2). The deeply-rooted popular view of SHI systems as a ‘way of life’, grounded in the core of civil society in an organic manner, and structured on solidarity rather than on actuarial principles, highlights an additional core characteristic of how these social health systems are viewed. 

It is that they are not, in the mind of either citizens or policy-makers, intended to be primarily economic arrangements. They are, rather, sociological and psychological structures, in which the economic dimension is distinctly secondary (De Roo 2003). 

Indeed, taking an exclusively economic and/or financial view of SHI systems is typically viewed by policy-makers in these countries to be inappropriately reductionist. 

In practice, one can readily see the imprint of SHI’s sociological or civil society role in the pattern of health system reforms over the 1990s in SHI countries, as policy-makers sought to accommodate growing financial pressures while still maintaining the core social arrangements and purpose of the SHI project (see Chapter 3). 

Looked at in this way, SHI systems can be understood as more than just a set of institutions, and the decisions made about the reform of those institutions to be based on considerably more than the currently pre-eminent political science notion of ‘path dependency’ (Wilsford 1994; Peters 1999; Saltman and Bergman 2004 forthcoming). 

These institutions themselves serve rather as intermediaries, as the administrative embodiment of a set of values deeply rooted in the society as a whole, which underscore and reinforce this particular set of institutional arrangements. 

In the case of western European countries with health systems based on social insurance, these values are tied to national culture and grounded in the historically generated principles of collective responsibility and social solidarity. 

As the literature on cultural anthropology suggests, if new institutions were to be introduced, the strength of this national culture and its associated social values is such that ‘the persistent influence of a majority value system patiently smoothes the new institutions until their structure and functioning is again adapted to the societal norms’ (Hofstede 1980: 26). 

In short, the historical experience of SHI systems supports the thesis that it is the national culture and its associated social values that are broadly stable, and that the stability of particular SHI institutions is a consequence of that social continuity, rather than an independent event (Saltman and Bergman 2004 forthcoming). 

From this cultural anthropological perspective, it is unsurprising that SHI institutions are perceived inside SHI countries as being as much sociological as economic in character (e.g. as a ‘way of life’). 

Much like the broader configuration of social security arrangements within which SHI systems sit, SHI reflects core values that are ‘socially embedded’ in the very heart of how these societies understand themselves (Granovetter 1985; Saltman 1997). 

This organic view of SHI is an important part of the explanation for why policy-making in SHI systems appears to be cautious and incremental, why institutions – once established – are rarely uprooted, and, consequently, why the overall pattern in SHI systems continues to be one of stability and resilience.

A structural description

When one moves from this inside view to a more detached, outsider’s perspective, SHI systems can be described in more structural terms. This structural understanding incorporates seven core components that exist across all eight studied countries, and that can be considered to comprise the organizational kernel of an SHI system.

1. Risk-independent and transparent contributions 

The raising of funds is tied to the income of members, typically in the form of a percentage of the member’s wages (sometimes up to a designated ceiling). This has two equally important characteristics. First, contributions or premiums are not linked to the health status of the member. 

If a member has a spouse and/or children, they are automatically covered for the same income-related premium and under the same risk-independent conditions. Second, contributions or premiums are collected separately from state general revenues. 

Health sector funding is transparent and thus insulated from the political battles inherent in public budgeting. 

2. Sickness funds as payers/purchasers 

Premiums are either collected directly by sickness funds (Austria, France, Germany, Switzerland) or distributed from a central state-run fund (Israel, Luxembourg, the Netherlands) to a number of sickness funds (Belgium employs both methods). 

These funds are private not-for-profit organizations, steered by a board at least partly elected by the membership (except France and Switzerland), and usually with statutory recognition and responsibilities (Israel is an exception). 

The rules under which these sickness funds operate typically are either directly established by national legislation (Austria, France, Germany, Luxembourg, the Netherlands, Switzerland) and/or tightly controlled through a state regulatory process (Israel) (Belgium is an exception). 

The sickness funds use the revenues from members’ premiums (health tax in Israel) to fund collective contracts with providers (private not-for-profit, private for-profit, and publicly operated) for health services to members. 

3. Solidarity in population coverage, funding, and benefits package 

Depending on the country, 63 per cent (the Netherlands) to 100 per cent (France, Israel, Switzerland) of the population are covered by the statutory sickness fund system. 

In countries with less than 100 per cent mandatory participation, typically it is the highest-income individuals who are allowed (Germany) or required (the Netherlands) to leave the statutory system to seek commercial health insurance on their own (small exceptions exist for illegal immigrants, for people with objections by principle and for civil servants). 

Funding for all members is equalized either within national state-run pools (Israel, the Netherlands); within regional government (Austria) or foundation-based (Switzerland) pools; through mandatory risk-adjustment mechanisms (Belgium, Germany, Israel, the Netherlands); or through state subsidies (Belgium, France). 

In all eight SHI systems, the state requires the same comprehensive benefits package for all subscribers. 

4. Pluralism in actors/organizational structure SHI 

systems incorporate a broad range of organizational structures. Both within as well as between SHI countries, the number and provenance of sickness funds may vary widely, based on professional, geographic, religious/political and/or non-partisan criteria. 

Nearly all hospitals, regardless of ownership, and nearly all physicians, regardless of how they are organized (solo practice, group practice etc.) have contracts with the sickness funds and are part of the SHI system. 

Professional medical associations, municipal, regional and national governments, and also suppliers such as pharmaceutical companies are all seen as part of the SHI system framework. 

5. Corporatist model of negotiations Negotiations 

typically occur at regional and/or national level among ‘peak organizations’ representing each health sub-sector involved. This corporatist framework enables the self-regulation and contract processes to proceed more smoothly, with substantially more uniformity of outcome and substantially lower transaction costs. 

A corporatist approach among a group of ‘social partners’ (sick funds, health professionals, provider groupings and supplier groupings) is also consistent with policy-making arrangements in other parts of the social sector in the seven studied European countries (less so in Israel). 

6. Participation in shared governance arrangements 

As befits the pluralist configuration described just above, SHI systems typically incorporate participation in governance decisions by a wide range of different actors. 

The most visible manifestation is the traditional process of selfregulation by which sickness funds and providers negotiate directly with each other over payment schedules, quality of care, patient volumes and other contract matters. 

Medical associations, hospital associations and other professional groups frequently have some decision-making responsibilities as well. 

7. Individual choice of providers and (partly) sickness funds 

Members of sickness funds can usually seek care from nearly all physicians and hospitals. In six of the eight studied systems, a referral to see a specialist is not required (Israel and the Netherlands are exceptions). 

Increasingly, members can also choose to change their sickness fund (Austria, France and Luxembourg are exceptions). 

These seven characteristics – risk-independent contributions, sickness funds as payers, solidarity, pluralism, corporatism, participation and choice – comprise what is described in many writings about SHI systems as the ‘core structural arrangements’ (Glaser 1991; Hoffmeyer and McCarthy 1994; Normand and Busse 2002). Combined, they can be taken as the institutional mechanics of how an SHI system is organized.
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