A made-in-Canada prescription – Duplicate insurance likely in a fully parallel private health sector

Last May, a Supreme Court ruling struck down two articles of Quebec laws forbidding patients from buying private insurance or paying directly for publicly insured health care treatments. The ruling opened the door to private health insurance in the province. As of now, Canada is the only OECD member country whose health care system relies exclusively on public financing for services considered medically necessary.

The Quebec government is expected to announce its response to the court’s decision in December. Although the ruling only applies to Quebec, most observers believe that whatever new system emerges there could have profound repercussions on the Canadian health care system as a whole. If the Quebec experience is perceived as a successful way to reduce long waiting lists and runaway health care costs, it may encourage other provincial governments to adopt similar reforms.

What form could this new health insurance take without violating the Canada Health Act, which was not affected by the ruling? Elsewhere in the world, private health insurance fills widely varying roles, from fully comprehensive insurance to plans that merely substitute for or complement the public system.

  • Private primary principal insurance exists in several countries, including the Netherlands, Belgium and the United States, where the public system only covers some groups within the population and excludes others. In the Netherlands, for example, persons who in 2004 were earning more than 32,600 (about $48,000) per year had to buy primary principal insurance. Some 28% of the Dutch hold such insurance.
  • Primary substitute insurance is available in Austria and Germany, where it is possible to leave the public system completely (and to cease paying premiums for it). This option, equivalent to opting out, applies for example to high-income earners in Germany (over 45,900 per year in 2003, or about $67,000) and the self-employed. Some 9% of the German population takes out private primary substitute insurance.
  • Duplicate insurance, which provides for care in private establishments while still being covered by the public system, is not illegal in any country other than in some Canadian provinces. Available in many countries, including Finland, Italy, New Zealand, Ireland and the United Kingdom, duplicate insurance can attract a large share of the population, as in Australia where nearly 45% of citizens have this form of insurance.
  • Complementary insurance is available in countries such as France, Sweden, Australia and Italy, where the public system requires co-payments for certain medical services. This is not the case in Canada, where insured services are offered free of charge.
  • • Finally, supplementary insurance exists in every country, including Canada, where it is already well established. About two Canadians in three have this form of coverage for uninsured items such as medication, dental care, etc.

Among the five categories of insurance, only supplementary insurance is currently available in Canada. And because of continuing legal obstacles, it is unlikely that three of the others can be offered, even after the Supreme Court ruling ruling.

In effect, the universality requirement in the Canada Health Act stipulates that public insurance must be offered to every resident of the provinces and territories. As a result, primary principal insurance, which excludes certain people from the public system, would violate federal law. Furthermore, although federal law does not prohibit people from opting out of Medicare, Quebec requires all its residents to be registered with the Quebec Health Insurance Board and, more importantly, to finance it through taxes, with no possibility of opting out and taking out private substitute insurance.

Complementary insurance could not be sold either: Once an insured service is provided under the public system, any payment – whether extra billing by doctors or facility fees – runs counter to federal law. A province violating this principle would lose a corresponding portion of the federal health care transfer.

The form that seems certain to end up emerging is thus duplicate insurance. While remaining insured under the public system, individuals could pay additional amounts for the option of being treated in a parallel private system. As long as no public funds are pledged to cover this care, this form of insurance for treatment in a fully parallel private sector would comply with the Canada Health Act.

Private insurance beyond the complementary or supplementary categories would be a way of increasing the overall resources devoted to health care and, eventually, of reducing waiting times. The private health care sector – to be financed by private insurance – could serve as a safety valve and fill in when the public system falls short and waiting lists grow too long. The existence of a private health care sector is thus likely to benefit not only those who are privately insured but also those still using the public system. According to OECD economists, “in countries where [private health insurance] plays a prominent role, it can be credited with having injected resources into health systems, added to consumer choice, and helped make the systems more responsive.”

Valentin Petkantchin is research director at the Montreal Economic Institute and author of the Economic Note Using private insurance to finance health care.

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