Social Health Insurance Systems

The systems of social health insurance are generally characterised by independent or quasi-independent insurance funds. They rely on payroll contributions marking a clear link between their contributions and their right to a defined package of health benefits. The state generally defines the main attributes of the system although the funds are generally non-profit and supervised by the government. Unlike in the case of national health service systems, the payroll base for the social health insurance systems generally insulates the system from the uncertainties of budgetary allocations. However, social health insurance contributions alone may not be adequate to fully fund the healthcare costs, especially when the system is intended to cover a broader population than those who contribute. It may thus require an infusion of resources from general tax revenues too. Additional subsidies may also come from external aid or earmarked taxes. Social contributions (which also carries a component from the employer’s side) may have a deleterious effect on employment and economic growth if they increase labour costs. Social health insurance systems often cover only a limited population such as those in large formal sector enterprises as it is difficult to add the informal sector workers to the covered population. They are also difficult to manage as they involve more complex interactions among players. Some of the preconditions which might lead to the successful development of the social health insurance systems in developing countries are:

(i) Level of income and economic growth;

(ii) Dominance of formal sector vis-à-vis informal sector;

(iii) Population distribution with growing urban population;

(iv) Existence of room to increase labour costs;

(v) Strong administrative capacity;

(vi) Quality healthcare infrastructure;

(vii) Stakeholder consensus in favour of social health insurance along with political stability and rights; and

(viii) Ability to extend the system to informal workers with the institutional machinery required to collect regular contributions from them.

It is therefore important to examine the specific socio-economic, cultural, and political contexts and determine whether the setting and the timing are right for implementing such a system.