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Mediclinic News : Risk pooling in healthcare financing

Title

Risk pooling in healthcare financing

Date

2018-03-29

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News Description

BUSINESS REPORT Risk pooling is traditionally viewed as an insurance function, where financial risk associated with health interventions for which the need is uncertain is equitably shared by the covered population. Within health insurance systems, large risk pools tend to take advantage of the economies of scale where the law of large numbers often leads to substantial cross subsidies from low risk to high-risk individuals. This form of pooling within a community rated environment leads to some equalisation risk and contributions amongst members of the pool. Those with high income and low expected healthcare expenditure often cross subsidise the old and sick and premiums are not proportional to risk. This demonstrates the impact of risk pooling within a community rated environment. Large risk pools can be observed within multiple funds Social Health Insurance systems as well as within Single Fund Health Insurance Systems. Countries such as Hungary, Iran, Norway and Korea are examples of single fund National Health Insurance NHI systems where large pools enable an increase in resource availability and progressively offer better financial protection. Whilst countries with multiple funds such as Turkey, Brazil, Thailand and Peru have also adopted health financing policy to expand the sizes of their risk pools, Within these countries, it has been noted that "the level of pool fragmentation or integration within any national health system will have a direct impact on the extent of financial protection provided, the richness of benefits and the extent to which the fund is able to strategically purchase healthcare services and use alternative reimbursement methods. "Integrated pools also come with the reduction in administration costs and contribution payment." It is within this background that the World Health Organisation recommends that health financing reforms should not only focus on increasing the level of prepayment funding for the risk pools. They should also consider policy options to encourage risk pool consolidation and avoid increased fragmentation otherwise, implementing such measures i.e. increasing the level of prepayment funding without paying proper attention to changes in risk pooling can result in increased fragmentation and compromised equity and efficiency goals. Iran, Argentina, Turkey, South Korea, Brazil, Thailand, Ghana, Peru, Estonia, Lithuania and Indonesia are examples of how national health systems have evolved to consolidate risk pooling to improve the level of financial protection for the population. Current challenges within risk pool fragmentation in the medical schemes environment can be traced back to before the amendment of the Medical Schemes Act. In 1997, the National Department of Health published the private health financing policy document, which noted at that time the following concerns about risk pools fragmentation: • Risk pools were too small and the benefits of economies of scale were lost. • There were challenges in spreading the risk of illness across large risk pools. • Many schemes offered a differentiated set of benefits, with limited information for members to compare options. There was also inadequate funding and oversight over many benefit options. • Tension between proliferation of benefit options and minimising cream skimming. • Policy debates at that time acknowledged that multiple benefit options created challenges associated with risk selection, adverse selection and inadequate funding of certain small risk pools. One of the key recommendations from that policy document was that each benefit option should be self-funding with a minimum membership of 2500. The Registrar was given legislative power to call for sufficient financial guarantees for each option for protection of the above recommendation. Options created for the sole purpose of hosting defined groups on an exclusive basis could not be registered and movement between options would only be affected with the express permission of the Registrar.
Created at 2018/04/10 04:40 PM by Mediclinic
Last modified at 2018/04/10 04:40 PM by Mediclinic