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NUMERO 20 - 29/10/2014

 'Micro in Macro': the role of private Health Insurance in Brics

Insurance is something invisible but constantly present in the majority of commercial and interpersonal relations: as a sort of “phantom”, insurance remains behind the curtain, until the (eventual) moment when something bad (the so called “insured event”) happens. The main role of insurance is to reduce uncertainty or, better to say, to limit the negative consequences of certain events of life by transferring the risk from the person exposed to the risk itself, to another subject (the “insurer”) under the payment of a certain amount of money (the “premium”). Because it reduces the risks - both economic and strategic risks - connected to uncertain negative events, insurance allows a better planning of life and it is considered an engine for progress and wellbeing of individuals and natural persons (public entities, business entities, and so on). Economic and political stability allows a better penetration of private insurance schemes, which - in all economies - are today devoted to have a more and more fundamental role in social welfare strategies. In particular, the role of private insurers and, more specifically, of health insurance products represents a key point in the evaluation of the welfare of a country and in determining a balance point between the role of the private market players and the public involvement in healthcare. It is consequently important to consider the role of private health insurance in BRICS countries, in the light of the actual economic and social changes that they are living. It may be useful to preliminary recall the fact that, as well known, BRICS countries have established closer forms of cooperation in many sectors. In fact, after the local meetings that took place since 2009, BRICS have identified specific areas of common interests, between which a crucial role is played by public health solutions. In particular, meetings between the ministries of health of the BRICS countries have become a reality since 2011, in order to develop common strategies, or merely to compare national strategies, of health policies. The established specific network was confirmed stable and it met again in New Delhi (January 2013). As noted, “the issues involved access to public services, including medical technology and drugs, and cutting rising healthcare costs, particularly with reference to communicable diseases. Tackling these challenges in a more convenient, fair and sustainable way will promote economic development, as well as better healthcare and a stronger social cohesion”. In addition, the Delhi meeting assumed an important declaration, where it was pointed out that “the BRICS health Ministers meeting (…) should be henceforth institutionalized in order to address these common challenges in the most cost-effective, equitable and sustainable matter”. The analysis of the role of private health insurance in BRICS countries and of the strategies for assuring a fair health treatment to a larger part of the population may be useful in order to verify if and how fundamental rights, such as the right to life and health treatment, are protected in changing societies and of the struggle to find a satisfactory compromise between the public welfare and the role of private entities, like insurers, in order to better assure people the access to health care.  The same issue is well at the focus of actual discussion in many European and Western Countries, where the social welfare is retracting, from one side, and where the economic crisis has determined a urgency in the definition of health strategies, with important changes also where those strategies were (or were considered) well consolidated. The USA experience is one example of the embarrassment of the Governments in the light of gaps of the existing health care solution and of the exorbitant social costs of a negotiated system of health care. In EU countries the need to find the right balance between private and public, in the field of healthcare and the protection of fundamental rights, is proven to be far from easy to satisfy, having in mind that even if the public healthcare system and the private ones respond to very different logics, they might as well be complementary. In the light of these questions and global uncertainties, the approach to insurance in BRICS seems to be a relevant factor not only in order to better understand the economic, social and legal shape of these countries, but also in order to have elements of comparison that might be useful for the Western Law Tradition experience. In fact, even if health matters are quite always considered in the public perspective, there is no doubt that private entities play an important role in BRICS, as well as they have done during the last three decades in the majority of Western countries. Health insurance is one of the main indicators. In modern economies, the role of private insurance has deeply changed since its medieval origins. Insurance is more and more a service, not merely a product, and it is conceived as a fundamental partner in order to allow the role of the State in assuring fundamental services. Nevertheless, it should be remembered that the spreading of all forms of private insurance, where not imposed by the law (so, where it is not mandatory to be insured) is proven to be dependent on some pre-requisites: (a) the economic possibility of the population to buy insurance, as well as any other good or service. This is not a sufficient condition but it is nonetheless the preliminary one. Recent studies conducted on the rural India has shown that 99% of the poor population considered insurance as an important tool, but the majority of them was unable to buy it; that is why, as we will see, microinsurance is a form of penetration in urban areas, especially in the field of agricultural risks and health insurance related risks; (b) the existence of a private insurance market, that’s to say the offer by private companies of insurance products and services. This element seems and is an obvious pre-condition, but it was not a global reality. In fact, the existence of private insurance companies, assuring a minimum competition, is strictly connected with the existence of liberal and sufficiently stable markets. In some of the BRICS countries the presence of a free private insurance market is a relatively recent reality to be affirmed and this is due to different reasons; (c) the need to be protected against a specific risk. The need for an additional insurance coverage provided by private insurers arises where and when a) a risk is present; b) the State does not provide for a sufficient protection in a specific sector, and the risk is too complex to be self-insured, for example where social welfare has insufficient forms of pension schemes, life insurance or health insurance may find a possibility to spread. With special reference to health insurance, there is no doubt that the need for insurance arises when the public sector retracts, or it is inefficient, or where people are not satisfied by the quality or types of the offered services. This is particularly true in the BRICS countries: the problem concerns first of all that part of the population with higher economic possibilities (see letter d) here after) who demand higher quality of treatments and can better manage the economic risks connected to illness by taking an insurance coverage.  The same problem, paradoxically, also concerns low income people who cannot afford private treatments and are in many cases unable to address the public service; (d) a culture of insurance: in order to have insurance, there must be a demand from natural persons as well as from legal entities. Demand for insurance requires that people are not only exposed to a certain risk, but they also perceive and are aware of the risk they are exposed to. In addition, they have to know the existence of insurance and its accessibility: this is mainly related to information strategies, management of the insurance products, channels of distribution of insurance. Another key element, especially in emerging countries (but not only) is “insurance illiteracy”, that’s to say people must perceive the type of services insurance can offer; on the contrary, in most cases, especially in emerging countries and particularly in low income segments of the population, there is a misknowledge (or ignorance) of insurance. In addition to all these elements, people must have confidence in insurance companies and insurance intermediaries; in other words, they must trust the insurer. This process may require lots of efforts by the professional side; at the same time, the regulators must create the proper conditions in order to make people who get insured protected against misconduct or abuses of the market players: for example, the existence of a consumer protection law is an important element. Ultimately, confidence requires a long process of improving the relation between insurers and their clients. In other words, the “image” of insurers and of the products and services they offer is a crucial tool. In the light of these premises, it is now possible to try to verify what the role of private insurance in healthcare strategies of the BRICS countries is. In fact, given the limitations of a public healthcare system, private health insurance (PHI) offers a potential alternative to insure against the cost of illness. As indicated by the WHO private schemes can serve as “a preparatory process of consolidating small pools into larger ones” to eventually achieve universal coverage. Such development would indeed correspond to the experience of many industrialized countries, where universal social insurance emerged out of private risk-sharing programs”... (segue)

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