Health insurance is rapidly breaking into Sri Lanka’s health sector. Last year, the government introduced “Suraksha,” a publicly-financed health insurance scheme to reimburse the (private) healthcare expenses of all school-goers. The government has pledged to double Suraksha’s health benefits in its second year. Various private insurance companies are competing to gain a foothold in the health insurance market. There was news of an insurance provider’s “Health Protector” scheme, offering coverage up to Rs. 20 million with cashless benefits in hospitals across the world. A few weeks ago, another private insurance concern unveiled its exclusive scheme, “Premier Health Benefit,” promising a similar package with Rs. 50 million coverage.
What is health insurance?
Health insurance is essentially a way to finance healthcare. The financial ‘risk’ associated with ill health is shared among a group of people who purchase a specific health insurance plan. Individual dues or premiums (the monthly/annual rate for the plan) may be paid for by governments, employers, or individuals. Using the premiums, the insurer covers the costs of healthcare services for those who experience ill health (not all those insured will fall ill, hence the ‘risk’ of ill health is ‘shared’ within the group). Payments by the insurer (reimbursements) are made either directly to healthcare providers or to users who have paid out-of-pocket for the service, at the point of use.
A key feature of health insurance is that it separates purchasing and provision in a health system. The insurer ‘purchases’ services for the insured from selected healthcare ‘providers.’ While the ‘purchaser-provider split’ enables governments to entrust purchasing and/or provision to private entities, this separation is believed to improve cost-effectiveness as (private) providers compete for insured clients, keeping quality high and costs low. However, information asymmetries and ‘market failures’ result in higher cost private services that are often of questionable quality, especially where regulation is weak.
Undoing ‘free health’
According to the Institute for Health Policy, in 2015, 54% of Sri Lanka’s health spending came from private sources, and, of this, about 85% was paid out-of-pocket – a major concern for policymakers and, of course, the public. Of the remaining 15%, employers contributed about 5-8% in claims and medical benefits, and 2-3% was accounted for by the non-profit sector. The outstanding 5% came from health insurance. Although this proportion may not seem substantial, the health insurance contribution to private financing has risen from 1% in 1990, to 5% at present, suggesting that it is a growing industry. This 2015 estimate is likely to climb further as numerous schemes have been/are being rolled out, even as health insurance is presented as the solution to the crisis of out-of-pocket spending in the health sector.
The publicly-financed Suraksha scheme, introduced last year, covers all students between the ages of 5 and 19 years, with benefits of up to Rs. 200,000 for hospitalization (Rs. 100,000 maximum per admission, including Rs. 1000 per day for admission in a state hospital plus Rs. 10,000 for drugs/tests not provided at the state hospital), Rs.10, 000 for outpatient services (for specified chronic illnesses), and some accident/disability cover. Here, the government purchases premiums from the insurer, Sri Lanka Insurance Corporation, which reimburses parents for claims on out-of-pocket expenses and other benefits. While this may look good on paper, schemes like Suraksha would be pointless in the absence of the public healthcare system.
"A key feature of health insurance is that it separates purchasing and provision in a health system. The insurer ‘purchases’ services for the insured from selected healthcare ‘providers"
In the ‘free’ public healthcare system, the government is both ‘purchaser’ and ‘provider.’ Without market-oriented profit- and rent-seeking, the government is able to control the costs associated with delivering healthcare. Moreover, on entering a state facility, the care received does not depend on an insurance plan that dictates which services will be covered, to what extent, and for whom. Instead, users access (available) services with no charges at the point of use. In addition, the public system delivers an expansive range of preventive health services (contrasting with health insurance, which tends to focus on more profitable hospital-based services).
Universality and comprehensiveness
As a targeted health insurance scheme for school-goers, Suraksha does well on universality because it covers the entire school population, although comprehensiveness is restricted by annual limits on claims. The reason SLIC offers ‘universal coverage’ to students is because this age group is generally healthy and account for fewer hospital admissions. When the probability of ill health is greater, health insurance companies place limits on eligibility and claims. For example, a private insurance company’s Health Protector Scheme may be purchased only by those below 61 years and does not provide coverage beyond 70 years. Moreover, “worldwide” coverage is limited to 250 surgeries and 37 critical illnesses. If the illness experienced is not among those listed, the user must either pay out-of-pocket or rely on public healthcare. Health insurance also comes with out-of-pocket payments in the form of ‘cost-sharing.’ While premiums may (or not) be covered by governments and/or employers, users may be subjected to co-payments (a flat amount that the user must pay per service or item), coinsurance (a percentage of the charge that the user must pay) and/or deductibles (an amount the user must pay before coverage begins). While these payments are thought to prevent users from ‘abusing’ services, some health systems include protective mechanisms that exempt or limit cost-sharing based on income and other factors.
For debt-ridden governments under World Bank and IMF pressures, like Sri Lanka, shifting to a health insurance-based system is appealing because it allows for cost-sharing, aligning with the stipulations and ideologies of international agencies.
With Suraksha, however, the government has opted to cover the premium, impressing on the public that a health insurance-based system may be ‘free’ for all.
Supported by the government, the health insurance industry is trying its best to expand its limited role in Sri Lanka. Suraksha was an ingenious strategy on the part of the government, literally brainwashing the younger generation into accepting an insurance-based system in favour of socialized medicine. As outlined in budget proposals of recent years, the government would also like to issue cost sheets to patients on discharge from the ‘free’ public system, perhaps to highlight the potential role of an insurer in ‘purchasing’ healthcare?
Meanwhile, the private health insurance industry is also using innovative strategies to expand markets. For instance, a private insurer launched its “Healthiest Workplace Survey” to ‘boost the low penetration levels’ of health insurance in the country’s corporate sector (Daily Mirror,August 13, 2018).
No doubt, the survey will reveal high levels of ill health among employees, and health insurance will be proposed as the solution rather than radical changes in lifestyle and working conditions.
"According to the Institute for Health Policy, in 2015, 54% of Sri Lanka’s health spending came from private sources, and, of this, about 85% was paid out-of-pocket"
At this time when major health reforms are in the offing, we should ask ourselves what kind of a health system we envision for future generations. Should we endorse publicly-financed health insurance to pay for ‘world class,’ resource-intensive, hospital-based, private healthcare services (for the few with supplemental benefits via employers or individually purchased plans) or should we call for strengthening the ‘free’ public system that provides a semblance of equity, universality and comprehensiveness? If it is the latter, we really need to say ‘NO’ to spreading privatization through health insurance expansion.
[The author is attached to the Department of Community and Family Medicine, Faculty of Medicine, University of Jaffna]