European experience with voluntary health insurance

Voluntary health insurance in Europe: role and regulation

By Anna Sagan and Sarah Thomson
World Health Organization
European Observatory on Health Systems and Policies
Observatory Studies Series No. 43

This book offers a succinct overview of the size, operation and regulation of markets for voluntary health insurance (VHI) in countries across Europe. We define VHI as health insurance that is taken up and paid for at the discretion of individuals or employers on behalf of employees, including group policies sponsored by employers that come with the job and are thus not strictly voluntary. VHI can be offered by public and quasi-public bodies and by for- profit (commercial) and non-profit-making private organizations.

National policy developments

The period from 2000 to 2015 has been marked by policy developments in four main areas: the extension of publicly financed coverage to groups of people previously excluded, which has effectively abolished several markets for VHI playing a substitutive role; an intensification of measures to make VHI more accessible and affordable, especially but not only where VHI plays a substitutive or complementary role; an increase in domestic legal challenges to some of these measures; and a reduction in the provision of tax incentives to take up VHI.

In spite of well-established evidence about the inefficiency and inequity of many forms of tax incentive for VHI, over half of the countries in this study (19 out of 34) offer some form of tax incentive for people to buy VHI. However, there has been a notable trend to reduce or abolish tax incentives for VHI, often because they have been found to be expensive for governments and a poor use of public funds. In France, Greece and Portugal, reductions in tax incentives were in part a response to fiscal concerns in the context of the economic crisis. Countries have also reduced or abolished tax incentives for equity reasons or used tax incentives in a targeted way to promote equity and access to health care.

National policy concerns

National policy concerns about VHI often include one or more of the following: inequitable (two-tier) access to health services; the magnitude of public subsidies for VHI; the challenge of ensuring affordable access to VHI for some groups of people; the high administrative costs associated with VHI; and the transaction costs linked to the complexity VHI brings to health systems, particularly in larger markets for VHI.

Concerns about unequal access to health care – so-called two-tier access, in which people with VHI enjoy easier, faster or preferential access to treatment – have been debated in Austria, Denmark, Finland, France, Germany, Italy, Latvia, Poland, Portugal, Spain and the United Kingdom. These concerns are driven by a number of factors. For example, where providers receive payment from public sources and VHI (doctors work in both sectors or there are private beds in public hospitals – the case in most countries), and VHI-paid fees are higher than publicly paid fees, doctors and hospitals will have incentives to prioritize VHI-financed patients. This may result in longer waiting times for those who rely on publicly financed coverage, as well as their having to be treated by less experienced junior medical staff. In addition, the time doctors devote to working in a private capacity is lost to the public sector and doctors working in both sectors may experience role conflicts.

Differential access for people with VHI goes against the principle of access on the basis of need rather than ability to pay. In the United Kingdom, these concerns have been countered by arguing that users of VHI are paying for VHI coverage over and above their tax-financed contributions to the NHS and, furthermore, that their use of VHI-funded care relieves pressure on the NHS, to the benefit of people who rely on the NHS for treatment. Even if this claim is valid, the benefits of VHI may not outweigh the cost in terms of doctors’ time and public subsidies. Similar claims have been made in Ireland in the past, where some have argued that public subsidies for VHI are justified because those who opt for VHI effectively forgo a statutory entitlement while continuing to contribute to the funding of the public health service through taxation. They have also argued that VHI reduces demand for publicly financed health care. However, the evidence does not support this claim; a significant proportion of VHI-financed care takes place in public hospitals at less than full economic cost – 60% of adult inpatients with VHI, according to recent figures.

Explicit and implicit public subsidies for VHI have generated fiscal, efficiency and equity concerns in some countries. Implicit subsidies may come from public funding of medical education; failure to charge VHI the full economic cost of using beds in public hospitals; the potential for VHI to shift costs onto the publicly financed part of the health system in other ways if the system lacks transparency and accountability – for example, where there is double coverage; and the backup function of the publicly financed system.

VHI take-up is systematically concentrated among people with higher socioeconomic status, partly because VHI is less accessible to the most vulnerable population groups: older or disabled people, people with chronic conditions, unemployed people and poorer households. This raises questions about policies that lower the breadth, scope or depth of publicly financed coverage in the expectation that VHI will fill the gap. Even in countries with well-established VHI markets that cover a large share of the population, such as France, there is evidence of inequities in the depth of VHI coverage, with resulting inequities in the use of health services. Earlier, we showed how some countries have increasingly adopted measures to address access and affordability issues, particularly in the larger VHI markets. Such measures have not always been sufficiently effective, however, as the French example reveals.

The relatively high administrative costs associated with VHI have been a source of concern in several countries. This is especially the case in countries that have promoted VHI by allowing private insurers to offer publicly financed benefits. In such instances, private insurers have not been seen as providing good value for money.

VHI can bring significant complexity to a health system, adding to transaction costs for governments and households. Monitoring and regulation of VHI markets, efforts to ensure VHI is accessible and affordable for those who need it, developing policies to establish clear boundaries between public and private financing and service delivery, responding to domestic and EU legal challenges – all are likely to be time consuming and expensive.



By Don McCanne, M.D.

Many European nations, in addition to having some form of universal or near-universal health insurance, also have optional voluntary health insurance plans (VHI). These have raised concerns about access, inequity, two-tiered care, queues, inefficient use of public funds, and the excess costs and inefficiencies due to greater administrative complexity. “Private insurers have not been seen as providing good value,” according to this report.

If their public programs fully covered costs for all reasonable health care services that would be expected in a comprehensive health care system, then there should be no need for additional voluntary health insurance. Certain services that should not be funded by a public program, such as luxury hospital suites or vanity cosmetic surgeries, should be paid for privately and not through a common insurance risk pool. Using private payment to jump the queue should be prohibited as well to ensure that the wealthy would continue to support an egalitarian public program.

We already have considerable experience with the waste, inefficiencies, and administrative excesses of plans that are somewhat comparable to their voluntary health plans, except our waste and inefficiencies are even worse. Medigap plans and private Medicare Advantage plans are prime examples. But what we do lack is a universal public financing infrastructure, and that makes our system much more dysfunctional, inequitable, and outrageously priced than the European systems.

Thus a well-designed single payer system that covers everyone for all essential services - an improved Medicare for all - would obviate the need for voluntary health insurance. We'd be much better off without it.