Ukraine. Healthcare system flowcharts. Voluntary health insurance

VHI still plays a very minor role in health care financing in Ukraine. Despite the relative growth in the number of insured people and insurance premiums, only 2.5% of the population use VHI, and its contribution to total health care expenditure is 0.8%. About 1.6% of the population participates in sickness funds and contributes nearly 0.1% of total resources to the system. The introduction and development of VHI was only made legally possible in 1996 when the Law on Insurance was passed.

VHI in Ukraine is offered exclusively by private insurance companies that are often not specialized in health. According to the State Statistics Committee of Ukraine, there are currently nearly 100 private companies in the VHI market, offering various health care packages (Kiselyev et al., 2004). Corporate (group) insurance, purchased by an employer, is the main form of VHI. Individual cover insurance makes up only a small portion of VHI – individual clients make up only 10% of the total number of VHI contracts. Many companies purchasing VHI prefer to substitute insurance without actuarial settlements, thereby replacing paid services by various financial schemes. The majority of VHI customers receive health services in the same state and community facilities as uninsured patients. Moreover, the same medical equipment is used in treating both groups and often they receive the same level of care. The main difference is that VHI offers partial coverage of pharmaceutical costs.

The framework within which VHI operates in Ukraine is not clearly defined. On the one hand it can be classified as a substitute, since it is used to cover expenses for drugs, laboratory work and other services that are not covered by the state health system in reality. However, these services are not officially excluded from the list of services guaranteed by the government. In fact a VHI customer is often paying for what is supposed to be provided for free. VHI is intruding into the state health care domain by duplicating state commitments to a considerable degree, since the boundary between paid and free services is very unclear. On the other hand VHI can be classified as complementary since its customers receive the right to be treated in the best facilities.

There are several serious obstacles to VHI development in Ukraine. First, VHI premiums purchased by employers for employees do not carry any tax benefits, which means employers do not have any incentive to include health insurance in a benefits package. The structure of financing public medical facilities is based on an expenditure estimate which forbids using VHI resources to create incentives for medical personnel. Doctors (and particularly surgeons) in public medical facilities resent treating insured patients, since they refuse to pay informally. However, medical facilities sign contracts with insurance companies since it is now a legal way of selling medical services to the public.

A significant proportion of VHI contracts are technically quasi-insurance, a disguise for patients paying for health services themselves. Patients pay official premiums into VHI, but the insurance company often acts merely as an agent, transmitting resources between the patient and the facility in purchasing health services. Also there is a noticeably low level of compensation from VHI, which fluctuates between 40% and 60% (Kapshuk, Sitnik & Pashchenko, 2007).

Health insurance for railway workers
There is a special part of the VHI system for insuring railway workers. It started as an experiment initiated by the railway management in 2001. Now the entire sector is covered by health insurance. At first, this insurance covered the rolling stock workers and the operations department. It is gradually spreading to cover other categories of railway workers (Kiselyev et al., 2004). In 2001–2006, the programme insured retired workers as well; until 1 January 2001, health insurance for retirees was substituted by fixed payments during inpatient
care at a rate of 20 hryvnya per day for no more than two hospitalizations per calendar year.

The railway system and its workers pay premiums on an equal footing. The total amount of monthly premiums in 2001–2006 was 4 hryvnya (a little more than US$ 9). In 2007, it was raised to 16 hryvnya per month (US$ 38) (Yavorskiy, 2007). More than 600 000 people are covered, that is, 38% of railway workers. In 2009, more than 40 million hryvnya in premiums was collected, making up 7% of additional revenues for the health care budget of the Ministry of Transport and Communications.

A private insurance company provides insurance for the railway workers. This insurance covers inpatient care primarily in the parallel network of medical facilities. The resources allocated to the medical facilities are designed to cover spending on pharmaceuticals, food and laundry stocks for each individual patient to cover the portion underfunded by the government budget, but only to a fixed maximum amount. In 2007, additional compensations for inpatient and outpatient pharmaceuticals were introduced. Further, the insurance company
makes payments to the medical facility for case administration. Medical facilities keep a personalized record of expenditures on each insured patient.

Sickness funds
As an alternative means to mobilize additional resources for the health system, a number of sickness funds and credit unions are being established in Ukraine, alongside various charitable institutions and funds. Sickness funds represent quite a well-developed network of non government organizations established on a voluntary basis for complementary financing of the health system. Sickness funds function as VHI on a non-profit-making basis. While, legally, VHI companies are profit-making private organizations, sickness funds function in accordance with the Law on charity and charitable institutions, as charitable non-profit-making organizations guided by a common interest to improve health care for their members.

Membership in a sickness fund is voluntary. It may comprise individuals as well as working collectives, enterprises, agencies and institutions paying premiums for their members. The performance of sickness funds depends directly on the number and nature of its members. For this reason, preference is given to corporate membership, where working collectives, enterprises, or institutions cover fees for their employees. However, the individual premiums remain the main source of revenue. In 2009, individual premiums accounted for 95.7% of funds, while enterprises and institutions made up the remainder at 4.3%. Workers make up the majority of members in sickness funds at 64%, while 20.6% are pensioners and 15.4% are other categories of non-working citizens. The major function of sickness funds is to provide pharmaceuticals to their members in case of insufficient coverage from the government – in 2009, 79.8% of sickness funds’ expenditure was on purchasing pharmaceuticals and other medical devices. A number of sickness funds have also committed themselves to cont r ibuting moder n medical equipment to health facilities, developing targeted programmes, training and retraining personnel, advocating for healthy lifestyles, protecting mother and child health, and many other activities. About 17% of collected funds are spent on administration. The income of sickness funds is derived from a number of sources: founders’ and members’ premiums, charitable contributions, and donations and profit from charity transactions. The premiums are determined by the sickness funds’ administration as a percentage of salary (usually no more than 5%) or fixed payment (7–9 hryvnya per month or US$ 10–14 per year).

According to Ministry of Health data, the number of sickness funds increased by 22 times between 1999 and 2006, but in 2009 they shrank as a result of the economic crisis. In 2009, more than 750 000 people, or 1.6% of the population of Ukraine, were covered by sickness funds (see Table 3.5). The popularity of sickness funds differs greatly among various regions (see Table 3.6). In Ukraine, 17 out of 27 regions have a very small percentage of the population covered by sickness funds (1%), but in 7 regions, 1–4% is covered; in 2 regions, 6–10% is covered; and in Zhytomyr oblast, the number of members exceeds 16% of the population. Since 1999, sickness funds’ revenues have increased by more than 50 times, and in 2009 totalled 80 million hryvnya.



Sickness funds reduce the overall cost of drugs and medical devices to members and facilitate better monitoring of prescription practices. However, considering that sickness funds cover only a small proportion of the population, their impact on overall health care spending is rather limited: 0.13% of total health care expenditure. In some regions, however, where municipal sickness funds have been established with the active support of local authorities, opinions are generally very positive about their performance, citing improved accessibility and quality of health care (Bondarenko et al., 2003; Popov et al., 2003). Some of these regions include Zhytomyr oblast, and small cities such as Komsomolsk in Poltava oblast, Priluki in Chernihiv oblast and Voznesensk in Mykolayiv oblast, among others. Further expansion of the VHI sector will depend on a number of conditions, primarily:
  • a clear boundary between state obligations and additional health services and drugs not paid for within state guarantees;
  • an extension of tax incentives for individuals and legal entities aiming to purchase VHI; 
  • the creation of incentives for medical personnel involved in VHI. 
However, even if these conditions are met, an immediate expansion of VHI is unlikely simply because it is not affordable for the general public.
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