In Germany payroll-dependency and inflexibility of SHI, incomplete risk adjustment for insurance funds, risk segmentation in the insurance market, and shorter waiting lists for PHI-holders make PHI schemes more attractive than SHI for many people (Normand and Busse 2002; Nuscheler and Knaus 2005; Bünnings and Tauchmann 2015; Lungen et al. 2008). Wörz and Busse (2005) highlight high costs, long waiting lists and user charges (excess payments) as issues in the German SHI. Bauhoff (2012) finds supply-side selection can emerge even in stringently regulated health insurance markets as the German one. The Dutch health insurance reforms brought along enhanced consumer choice, which, while not benefiting everyone equally, adds value to some patient-groups through risk pooling (Maarse and Ter Meulen 2006). Further, the reforms in the Netherlands induced shifts towards non-residential care, decentralisation of non-residential care, and expenditure cuts (Maarse and Jeurissen 2016). However, the authors explicitly mention the potentially adverse effects on health equity in the Netherlands.
It is a lasting concern that shifting the balance between solidarity and self-reliance plus individual agency in favour of the latter two would decrease redistribution in health care (cf. Hinrichs 1995). Nevertheless, health care in Europe has become more privatised (e.g. Maarse 2006; Albreht 2009), liberalised and marketised (e.g. Borges 2011; Krachler et al. 2021). Nevertheless, “… the commitment to solidarity, equity and universality is still a reality in the EU” (Borges 2016, p. 82). Wouters and McKee (2017) ask for caution about any expansion of private health care and Assa and Calderon (2020, p. 17) emphasise: “… to make health systems sustainable at various levels of development and given the expectation of worsening environmental conditions, there is an urgent need to reconsider the neoliberal impulse to privatise health care systems. The short-term benefits from such privatisation policies – e.g. reduced costs, shorter waiting times – must be weighed against the long-term damage such policies can do to countries’ ability to cope with a rapidly-spreading infectious disease”. Some scholars are alert when it comes to more privatisation of health care, as a strong public health care system is better equipped to manage pandemics than a weakened one (e.g. Ceukelaire and Bodini 2020; Armocida et al. 2020; Buzelli and Boyce 2021). Even more alarming is that in health systems of low-and middle-income countries (LMICs) private health has widely failed to provide adequate prevention, containment, treatment and care in the COVID-19 pandemic (Williams 2020; Williams et al. 2021).
Another key concern with PHI markets is that externalities, which concern fiscality, well-being and equity, are emitted by the respective markets (cf. Glied 2008). These externalities are largely absorbed by the state, so consequently by the citizens as taxpayers. Additionally, costly public health and emergency preparedness fall into the hands of the state (Carande-Kulis et al. 2007). Further, PHI produces severe risk selection problems, particularly when PHI is in competition with a SHI scheme like in Germany (e.g. Grunow and Nuscheler 2014). Selvaraj and Karan (2012, p. 67) attest a “… systemic and intrinsic failure of the free market”, to the largely unregulated Indian private health care sector. As a remedy the authors prescribe universal health coverage. Nkansah-Amankra et al. (2013) argue that neoliberal health policies in the USA have significantly exacerbated structural inequality in public health.
Addressing economics and antitrust law, insurance companies may use their market power to inflate insurance premiums (e.g. Havighurst and Richman 2006, Vaithianathan 2006; Dafny 2010). As selection incentives affect the availability of private insurance plans, e.g. for the chronically ill, considerable state interventions in the insurance market might be necessary, i.e. risk adjustment, subsidies, mandates and other regulations (Geruso and Layton 2017). The Netherlands and Germany show how health insurance reforms (choice of public or private health insurance), which were intended to improve consumer choice and efficiency, can result in insurance segmentation, potential efficiency loss and increased health inequity (Thomson and Mossialos 2006; Maarse and Bartholomée 2007). For the Dutch case Vonk and Schut (2019) argue that universal access and socially fair premiums of PHI can only be achieved when the insurance market is effectively regulated and mandatory cross-subsidies are strictly enforced. Roos and Schut (2012) find spillover effects from supplementary to basic insurance schemes, i.e. reduced choice of basic insurance and very significant risk selection in basic insurance, in the Netherlands. Lessons from the Nordic European countries raise concerns that PHI could undermine trust in and support of the public health care system and could result in suboptimal allocation of resources because public and private health care providers have to compete with each other (Tynkkynen et al. 2018). In Sweden privatisation of health care services preceded a rise in demand for PHI, which is likely to result in less equal and less fair access to health care overall (Lapidus 2020). A comparison of SHI and PHI in Germany and Chile shows that PHI can even in a niche role undermine overall health care funding and equitable access, treatment and care, as the whole system is at risk to drift towards ‘two-tier medicine’ (Ettelt and Roman-Urrestarazu 2020). Evidence from Colombia demonstrates that all types of social insurance schemes increase the likelihood of using medical care and diminish the financial burden of health utilisation across demographic groups (Ruiz et al. 2007). In South Africa the barely regulated private health care sector has de-facto created a two-tier system (Barber et al. 2018). Overall, PHI seems to increase health inequity in the EU (Mossialos and Thomson 2002).
Over the past decades the private sector and private capital have become gradually more involved in the public sphere of health policy and health care. This has happened on the political level and particularly in health care management, finance and provision, for example in Britain and Australia (e.g. Greenaway et al. 2004; Petratos 2005; McDonald and Duckett 2020). However, this trend came at a cost. Promoting efficiency and cost-effectiveness has amplified the trade-off with health equity, which becomes even more obvious in the COVID-19 pandemic (e.g. Sandiford et al. 2018; Galea and Vaughan 2019; Galea 2021).
While insurance markets inside the European Union (EU) considerably differ between member states, Europeanisation since the early 1990s contributed to changes in the public-private mix in health care and has led to a decoupling of PHI from the traditional welfare state and its institutions. This results in ongoing institutional and financial sedimentation in health care and health policy. Additional marketisation, segmentation of insurance coverage and growing influence of private financial entities in health care are among the outcomes (Benoît et al. 2021). In the USA ‘risk privatisation’ has led to fragmentation and corrosion of collective insurance pools that provide discounted protection to higher-risk and lower-income citizens. Instead, Americans and their families were increasingly left to their own devices in coping with social risks (Hacker 2004).
People who possess PHI might cut short waiting times and lists, get different drugs or have access to private health care providers, thus distorting fair medical priority setting and aggravating health inequities (e.g. Borrell et al. 2001; Blendon et al. 2002; Schoen and Doty 2004; Van Doorslaer et al. 2008; Allin and Hurley 2009; Grignon et al. 2010; Lapidus 2017). For Austria Czypionka et al. (2018, p. 13) note: “Although illegal to prioritize patients with VHI, empirical evidence shows that VHI policy holders can obtain faster access to elective care in public hospitals”. Similar observations can be made for instance in Germany (Lungen et al. 2008; Ramos et al. 2018) and in Ireland (Whyte et al. 2020). Filc et al. (2020) compare the public-private mixes in Israel and Spain. They conclude that the increasing involvement of private actors in health care eroded trust in the public systems, promoted market failures and systemic inefficiencies, as well as raised health inequity in terms of accessibility.
A related pivotal argument is that PHI reproduces and magnifies asymmetrically distributed socio-economic determinants of health, e.g. income and socio-economic status. So, rather wealthy, healthy and high-status persons receive access to PHI coverage and thus to higher quality health care and shorter waiting times. Yet, treatment of pre-existing conditions, emergency medicine, highly specialised health care and continuous chronic care are left to the state because their provision is not profitable, as for instance evidence from Sweden shows (Kullberga et al. 2019). Addressing these issues, Starfield and Birn (2007) suggest that universal social programmes together with greater income redistribution would significantly reduce inequity in health. Schmidt et al. (2015) propose that for achieving universal health coverage a very holistic approach of health policy must be taken, i.e. (nearly) all policy areas also affect health and should thus be analysed for their potential impact on people’s health. The authors further advocate for fixing health care budgets and strengthening the robustness, resilience and preparedness of the health care workforce. Reeves et al. (2015) conduct an extensive study among LMICs and find that taxes on capital gains and on profits, as well as a general progressive taxation could substantially improve health coverage and help those nations to approach global health targets. Finally, Sen (2015, p. 8) puts the potential benefits of universal health coverage like this: “There is, thus, plenty of evidence that not only does universal healthcare powerfully enhance the health of people, its rewards go well beyond health. There is, indeed, a strong relationship between health and economic performance, and we have every reason to base public policy on a proper understanding of the nature and reach of what is clearly a positive interdependence”. Verguet et al. (2021) suggest that global universal health coverage may be the only sensible way ahead in the post-COVID-19 era and Hiam and Yates (2021) emphasise the need for systematic health care reforms and the usefulness of universal coverage from a health, an economic, and a political perspective.
Employing Game Theory, Slavov (2014) summarises that in a static setting provision of a public good, which is financed by proportional taxation and determined by majority rule, outperforms private provision in most cases. Private provision fares better in dynamic settings than it does in static ones. However, private provision often results in relatively invariant benefit taxation, whereas public provision permits a more varied range of tax rates and tends to produce a progressive tax regime. Therefore, as the real world is realistically a rather dynamic environment, PHI may end up in regressive health care financing, while SHI is potentially progressive. When looking closer this is exactly in line with analyses of various real world health insurance schemes: PHI is regressive, whereas SHI is progressive in high-income countries (Hsiao and Liu 2001). Additionally, PHI is not equally accessible to all social strata, minorities and vulnerable groups alike (e.g. King 2005; Kiil 2012; Jin et al. 2016). Hence, we see that fostering private health care financing, particularly through PHIs, does indeed exacerbate the asymmetry of socioeconomic determinants of health and also potentially fosters health inequity.
Particularly in regions with weak public health insurance infrastructure and coverage, PHI schemes may help to expand the range of public health services and to take steps towards universal insurance coverage (e.g. Sekhri and Savedoff 2005; Pauly et al. 2006; Waters et al. 2008; McPake and Hanson 2016; Rao et al. 2018). However, main concerns are the regulating role of the public sector, appropriate involvement of all relevant stakeholders, focus on long rather than short-term costs and benefits, and emphasis on fairness and health equity (Torchia et al. 2015). Field (2015) highlights that the guiding principles of utilitarianism (aggregate utility maximisation), beneficence (catering to the ones in need), justice (fair distribution) should be fulfilled when thinking about market-based expansion of health care provision.