Health Insurance: Who Owns It?

When we buy a car we are required (in most countries) to provide evidence of third party insurance before we can drive the car on government roads. Similarly, banks require us to take out mortgage insurance to protect their loans.

Insurance is about risk coverage and, traditionally, where risk is high so are the premiums. Most insurance is predicated on actuarial data that identify risks, ie the probability of a road accident or defaulting on a mortgage.

But with health care there is no risk at all. This is because illness is a certainty. The probability that each of us will use a healthcare service during our lifetime is 100%: everyone will get sick at some point; everyone uses healthcare services; everyone dies – usually after an extended period of high cost health service utilisation.

Health insurance systems use three mechanisms to minimise risk:

  1. Universal coverage. The NHS is an example where risk of government expenditure is minimised by decreasing access. GP/primary care physician gatekeeping and low supply of these clinicians results in restricted access. This is especially acute in the English-speaking countries like the UK and the US
  2. Private health insurance. Here enrollees face uniform or near-uniform premiums and the risk is minimised by transferring the burden back to the individual at a time when they can least afford it – usually at the commencement of an illness episode when the health insurer risk-adjusts coverage and payments.
  3. Social health insurance. This operates under the principle of health risk pooling within societies where the third party involvement of insurers is lessened if not removed and the protection of health financing is so integrated into society that health insurance becomes obsolete.

But since none of these mechanisms can truly be described as “insurance” health insurance, whether it is called “universal”, “private” or “social” is a misnomer.

As individuals we have little control over what or how we want to “insure” our illness care. Yet we are gaining more and more control of our individual finances. Pension and superannuation funding enable us to manage our retirement; debit cards let us spend what we have now and credit cards allow us to spend what we can recover in the future.

So, why hasn’t this occurred in health? Responsibility for health care is shifting all the time. Patients are becoming more involved in decisions about their care. But they are not yet fully engaged, on an individual basis, in the financing of that care. This may be because health insurance is just another form of third party coverage to protect the income of the clinicians and the revenue of those institutions that service us.

If we want to change how we both pay for and think about our healthcare it may be worth considering the usefulness of individual health credit and debit cards as a starting point.

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