Insurance

Publicly mandated Social Health Insurance and private instruments like Voluntary Health Insurance, both play important roles in health system financing and providing coverage for health services.

Social Health Insurance

Social Health Insurance (SHI), also known as statutory health insurance, is a form of prepayment for health services. In many European countries SHI forms the main part of a system of compulsory health financing, usually alongside other revenue sources drawn from national, regional or local taxes.

Under SHI, members’ pooled contributions are held by a separate entity – usually one or more social health insurance funds or sickness funds – which then purchase health services for their members from providers. Depending on the country, membership of a fund can be based on employment, with funds for specific professional groups or labour market sectors; or it may be open to anyone living or working in a specific region or nationally. There may be different rules on the ability to switch from one fund to another, and how often this can be done. Membership of a SHI fund gives people access to a publicly funded benefits package of health services.

Voluntary Health Insurance

Voluntary Health Insurance (VHI), also known as private health insurance, is health insurance that is taken up and paid for at the discretion of individuals, or employers on behalf of their employees. VHI can be offered by public or quasi-public bodies and by profit-making (commercial) and nonprofit-making private organizations. It is useful to look at VHI in relation to statutory coverage – whether this is based on SHI or general government budgets – because VHI markets are generally shaped by the rules and arrangements regulating the statutory health system.

VHI plays different roles in relation to statutory coverage. For example, substitutive VHI covers people excluded from publicly financed coverage, or those allowed to choose between publicly and privately financed coverage (as is the case in Germany). More common in Europe is supplementary VHI, which offers top-up services such as faster access to services, greater choice of health care provider or enhanced amenities such as single-occupancy hospital rooms. Also common is complementary VHI for services, which covers gaps or exclusions in the publicly financed benefits package (for example, dental care). Another type of complementary VHI covers user charges, known as copayments, for goods and services in the public benefits package. This is less common, but in Europe, France and Slovenia both have large complementary insurance markets for this purpose. One defining characteristic is that private (VHI) health insurance premiums are typically linked to a person’s risk of ill health or are set as a flat rate, whereas prepayment for publicly financed coverage (SHI) is almost always linked to income.

Markets for VHI around Europe vary considerably in size, operation and regulation. As a way of avoiding greater use of out-of-pocket payments, VHI has benefits and, if properly calibrated, can contribute to financial protection. However, it is a complex, challenging and highly context-specific policy instrument that may undermine other health system goals, including equitable access, efficiency, transparency and accountability – even where markets are well regulated.

The European Observatory has been actively building the evidence base on both SHI and VHI, with a catalogue of highly focused studies, which bring together expert analysis and international experience to elicit valuable policy lessons.

Financing and payment topics

Related publications

A collection of comparative case studies analysing the history, politics and performance of private health insurance globally and its implications...

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Voluntary health insurance in Europe: country experience

No two markets for voluntary health insurance (‎‎VHI)‎‎ are identical. All differ in some way because they are heavily shaped by the nature...

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Voluntary health insurance in Europe: role and regulation

If public resources were unlimited, there would be no gaps in health coverage and no real need for voluntary health insurance (‎‎VHI)‎‎....

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Private medical insurance in the United Kingdom

In comparative studies of health care, the United Kingdom’s health care system continues to be categorized as public (‎in terms of both financing...

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Voluntary health insurance in the European Union

This study by the European Observatory on Health Systems and Policies provides an overview of markets for private or voluntary health insurance in the...

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This study by the European Observatory on Health Systems and Policies provides an overview of markets for private or voluntary health insurance in the...

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Using the seven countries in western Europe with social health insurance systems - Austria, Belgium, France, Germany, Luxembourg, the Netherlands and Switzerland...

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The question of how to generate sufficient revenue to pay for health care has become a serious concern for nearly all European policy-makers. This book...

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Financing and payment topics

Related publications

Private health insurance: history, politics and performance

Voluntary health insurance in Europe: country experience

Voluntary health insurance in Europe: role and regulation

Private medical insurance in the United Kingdom

Voluntary health insurance in the European Union

Voluntary health insurance in the European Union

Social health insurance systems in western Europe

Funding health care: options for Europe

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