THE HISTORICAL AND SOCIAL BASE OF SOCIAL HEALTH INSURANCE SYSTEMS
THE HISTORICAL AND SOCIAL BASE OF SOCIAL HEALTH INSURANCE SYSTEMS
Introduction
The cultural core of social health insurance (SHI) is deeply rooted in the societies
which first spawned it. Germany is often considered to be the source of this
approach to health insurance, as it was the first western European country to
codify existing voluntary structures into mandatory state-supervised legislation
in 1883. The history of SHI in Europe, however, as well as its animating principle
of social solidarity, extends considerably earlier than 1883 and more widely
than Germany. In many respects, the history of SHI and of its particular concept
of solidarity is the history of the evolving social development of western
Europe, starting with medieval guilds in the late Middle Ages through to the
structuring of the modern European welfare state in the aftermath of World War
II. Precisely the fact that the current configuration of institutions and the social
values that undergird them are the result of such a long historical process can
help explain the degree of stability of existing SHI institutions as well as the
difficulty policy-makers confront in seeking to modify those institutions. As
both historians and sociologists recognize, it takes generations to build up a
‘way of life’, and wise political actors rarely seek to disrupt those long-standing
patterns.
This chapter examines two key elements in the base or ‘society’ level of the
four-part pyramid framework presented in Chapter 1. First, it briefly reviews
the history of SHI across western Europe, highlighting the central structural
lineants that led to present-day arrangements in the eight studied countries.
Subsequently, the chapter probes more closely into what many commentators
consider to be the core cultural value that both generates and is generated by
SHI, namely social solidarity, examining in particular its different historical and
cultural roots in the eight countries. The chapter concludes with a brief consideration
of the implications of this historical and social base for policy-makers
as they seek to address current challenges.
A brief history of SHI in western Europe
The present system of nearly universal SHI in Western Europe is the culmination
of a 700-year historical process. Over that period, the number of individuals
covered has grown from a small number of workers in particular trades to
(depending on the national variant) all residents or at least all residents whose
earnings are below a rather high threshold. Equally as important, the central
concept of this form of social insurance also has changed, evolving from wage
replacement and a death benefit into payment for and/or the provision of outpatient
physician services, inpatient hospital care and pharmaceuticals. Lastly,
the administrative character of SHI has shifted over time, having begun as voluntary
worker cooperatives but from 1883 in Germany and subsequently
throughout the twentieth century (from 1941 in the Netherlands to 1996 in
Switzerland) taking on a state-mandated legislative character. All three types of
change demonstrate that the present configuration reflects an extended developmental
process and the deep roots of the current institutional structure in the
social fabric of these countries.
The initial phase of this historical process involved small groups of workers in
the late medieval period, who created mutual assistance associations under the
auspices of their craft guild. The first recorded guild funds date back to the 1300s
(Veraghtert and Widdershoven 2002). These funds generally covered only guild
members, with overall coverage restricted to less than 5 per cent of the total
population. All others were dependent on charitable and/or religious organizations
for care. This precedent of basing health coverage on occupation became a
core tenet of the social insurance model in German-speaking countries and
Sweden (Abel-Smith 1988).
It was not until the late eighteenth century that the state began to take on an
active role in the provision of health services. Two important trends helped
shape the European health sector’s future. One was in the Nordic Region, where
district physicians in Sweden were given royal commissions contingent on
their willingness to see indigent patients without payment (Serner 1980;
Hjortsberg and Ghatnekar 2001). Similar policies were followed in the then
Swedish colony of Finland, as well as in Norway (Furuholmen and Magnussen
2000; Järvelin 2002). This is the first known effort by a state to provide health
services to the poor. The second, parallel trend was more indirect but, in retrospect,
nearly as important. This was the continual effort by various newly consolidating
states to break the economic power of the guilds (Abel-Smith 1988).
This culminated in one of the first acts of the French Revolution when on 4
August 1789 guilds were abolished with the objective of creating a more liberal
labour market, as well as increasing social equality (Veraghtert and Widdershoven
2002). Guilds were similarly prohibited in the Netherlands in 1798
(Veraghtert and Widdershoven 2002) and in Denmark in 1861 (Abel-Smith
22 Social Health Insurance Systems
1988). With the banning of the guilds, their health insurance function continued
as independent (and politically unprotected) mutual assistance societies,
thus setting the stage for the process of consolidating state legislative control
that commenced in 1883.
Once the guilds disappeared, there was an extended period in which various
collective not-for-profit as well as private for-profit attempts were made to
organize the provision of health insurance. These civil society efforts produced
mixed results, varying by country and by historical and/or cultural
situation. In the Netherlands, for example, private commercial insurers tried
to establish a market for health insurance, with unsatisfactory results (Hogarth
1963). In the late 1800s, voluntary health insurance societies grew up
administered by the insured themselves or occasionally by industrial firms or
by charitable foundations (Abel-Smith 1988). Similarly, voluntary health
insurance emerged during this period in the Nordic countries (Hogarth 1963)
and, for more middle-class individuals, in France (Saint-Jours 1983). In Switzerland,
voluntary insurance appeared in response to the ‘bad reputation’
that private commercial insurers acquired, linked in part to their highpressure
door-to-door salesmen (Maurer 1983). In Israel, the first voluntary
sickness fund was established by a small group of agricultural workers in
1911. Later on, in 1920, this fund was taken over by the National Labor
Union. (Carrin and James 2004). The diversity of organizational format,
members covered and services provided among voluntary health insurance
systems is captured in a description of the United Kingdom during the early
twentieth century:
The largest category of health insurers involved ‘friendly societies’ which
provided cash benefits for the sick, treatment by contracted general practitioners,
and drugs. Later, some dental and ophthalmic benefits were added
by some societies. Other insurers included trade union clubs, slate clubs or
tontines (clubs which distributed any annual surplus among the members),
works clubs (based on the factory), and provident dispensaries which were
subsidized by charitable funds. There were also some medical aid societies
run on similar lines by commercial life insurance companies (Green 1985),
but they were in the minority. Membership grew to include not only the
mass of wage earners but small shopkeepers and a substantial proportion of
the middle classes.
(Abel-Smith 1988:689)
There were, of course, exceptions to this new pattern. In Germany, for
example, the guilds and their health insurance funds were largely maintained
(Veraghtert and Widdershoven 2002). Moreover, the emerging state supervisory
role was presaged in Austria in its 1859 Industrial Code (Hofmarcher and Rack
2001), and by state replacement of private philanthropy in substantial parts of
the Netherlands and Belgium (Veraghtert and Widdershoven 2002).
The modern era in SHI was ushered in by Bismarck in 1883. Worried about
rising political pressure from Marxist-influenced labour unions and consumed
by his desire to build a powerful German state, Bismarck seized upon the idea of
retaining independent occupation-based sick funds but placing their activities
under state tutelage. The resulting legislation established both the legal and
The historical and social base 23
social foundation for sickness funds not just for Germany but for much of
western Europe as well. Indeed, Austria followed suit in 1887/8 (Hofmarcher
and Rack 2001), and in 1892, the Danish government adopted a variant plan
that gave subsidies to existing voluntary funds so that those who were already
ill would be admitted (Abel-Smith 1988; Vallgarda et al. 2001). Belgium adopted
similar legislation, establishing state subsidies for sickness funds in 1894
(Veraghtert and Widdershoven 2002). In Switzerland, although an 1899 referendum
to adopt a German-style model was rejected, a 1911 law required voluntary
funds that accepted federal subsidies to register and abide by state-imposed
regulations (Minder et al. 2000). In the United Kingdom, Lloyd George successfully
passed a health insurance act in the same year.
This process continued after the conclusion of World War I, when France –
confronted by existing health insurance in the re-acquired region of
Alsace-Lorraine – passed a compulsory health insurance law in 1920 which was
not implemented until ten years later (Saint-Jours 1983; Sandier et al. 2004).
One of the last northern European countries to adopt compulsory health insurance
legislation was the Netherlands which, in 1941 under German occupation
(Den Exter et al. 2002) passed legislation that was retained after the end of World
War II in 1945.
This period of growing state activity was characterized by rising rates of population
coverage. The legislation passed during this period not only established
the principle of state supervision and regulation of sick funds, but also required
certain segments of the population (typically various groups of workers) to
obtain coverage – hence the application of the term ‘compulsory’. However,
rates of coverage still fell substantially short of universal. Depending upon the
country, a number of steps were required after 1945 to complete the process of
covering all regular workers below a fixed income threshold, their dependants,
and also the unemployed and pensioners. This process extended through 1996
in Switzerland.
In the largely agricultural southern European countries, where the industrial
revolution began much later than in northern Europe, the first major sickness
funds were created by enterprises in the new industrial sector. Levels of coverage
in southern European countries like Spain and Portugal lagged behind during
the period of dictatorship, in part due to sluggish economic growth, but in the
late twentieth century, these rates were parallel with the rest of Europe (see
Figure 2.1). In Portugal, for example, in the first half of the twentieth century,
coverage was limited to industrial workers, with other sectors of the workforce
added through extensions of coverage in 1959, 1965, 1971 and 1978 (Benges
and Dias 2003). In Spain, coverage was extended substantially by the 1967 Basic
Social Security Act (Rico 2000).
In western Europe, in the post-World War II period, a substantial number of
countries moved from an SHI system to a fully tax-based system. The first
wave, from 1948 to 1973, included the United Kingdom, Denmark and Finland,
while from 1978 to 1986 a second, post-dictatorship (except for Italy)
wave followed in southern Europe from 1978 to 1986 in Italy, Portugal, Greece
and Spain (see Table 2.1). Moreover, during the latter half of the post-WW II
period, the French system increased the proportion of tax-based funding, in
1992 Luxembourg’s government proposed the abolition of sickness funds
24 Social Health Insurance Systems
(unsuccessfully) (Kerr 1999), and in Israel 1995 legislation replaced premiums
paid directly to the sick fund with a progressive national health tax (Rosen
2003).
This process of increasing state power over health insurance, however, is
less apparent in the traditionally SHI heart of western Europe. In Austria,
Belgium, Germany and the Netherlands, there is still strong attachment to the
SHI model, and, as reviewed in Chapter 3, state power is typically exercised with
considerable caution. Indeed, as noted in the political challenges discussed in
Chapter 1, there is substantial concern in these countries over what is seen as
the growing encroachment of state authority in the traditionally self-regulatory
Figure 2.1 Key extension public coverage 1960–2002
Note: countries with more than 90 per cent coverage since 1960 are excluded (Denmark, Norway,
Sweden and the UK). For the Netherlands the population coverage ratios are weighted
averages of share of the population covered by the health insurance funds (public) and the
whole population covered by AWBZ. The weights are the shares in total costs of the costs
covered by health insurance funds and AWBZ. For the social protection ratio, the shares of
public finance (government, social security payments and AWBZ) in total expenditure are presented.
For Israel the data for 1961–4, 1966–9, 1976–80 and 1982–90 were extrapolated from the
available data.
Sources: OECD (2003) and, for Israel, Ben Nun (1999).
The historical and social base 25
aspects of the SHI system. These concerns are magnified by the degree to which
SHI systems have, since World War II, become enmeshed in a wider, bureaucratized
welfare state structure. While there is keen awareness that a new approach
to the broad structure of social welfare has become essential (Esping-Andersen
2002; Vandenbroucke 2002), there are strong reservations about applying these
reforms to SHI. One key concern, as befits SHI’s long history, is that stateinstituted
changes could damage the well-articulated role of civil society,
replacing pluralism and participation with a rigid state bureaucracy that is in
need of reform when it comes to other welfare state services. This same concern
also was raised, conversely, about state efforts during the 1990s in countries like
Germany and the Netherlands to introduce seemingly opposite, liberalizing,
measures to create more market-like relationships inside SHI systems, particularly
between the sickness funds. As the second section of this chapter suggests,
concerns about the growing role of both market and/or state reflect worries that
these changes may damage the existing configuration of social solidarity built
up over centuries on the civil side of society.
Table 2.1 Funding of health care systems
Predominantly
SHI-based
Predominantly
tax-based
Year of major legislative change
from a role for SHI to a
predominantly tax-based system
Austria X
Belgium X
Denmark X 1973
Finland X 1972*
France X
Germany (Federal
Republic until 1990)
X
Greece X 1983
Ireland X 1970*
Israel X
Italy X 1978
Luxembourg X
Netherlands X
Norway X 1967
Portugal X 1979
Spain X 1986
Sweden X 1970*
Switzerland X
United Kingdom X 1946
* SHI never played a significant role and/or the date indicated marks a break-point where
the central state took increased financial responsibility to provide more extended coverage and
the role of the tax-based system was substantially increased.
Sources: European Observatory on Health Care Systems’ Health Care Systems in Transition
reports; Pinto and Oliveira (2001); Guillén (2002); Department of Health and Children
of Ireland (2003).
26 Social Health Insurance Systems
The resilience of solidarity
The concept of solidarity provides the core animating principle of SHI systems.
Its long historical evolution in Europe parallels that of social insurance generally,
running from late-medieval guilds through nineteenth-century mutual aid
societies up to the late twentieth-century welfare state. Moreover, despite the
political upheavals in western Europe in the first half of the twentieth century –
some argue because of those upheavals and in particular World War II – solidarity
remains the dominant political principle that defines key elements of
national and now European Union social policy (Hinrichs 1995; Stone 1995;
Altenstetter 1999; Bayertz 1999; Gevers et al. 2000; Gilbert 2000; Houtepen and
Ter Meulen 2000b). Even in Germany, where fascism during the 1930s played a
role in the evolution of corporatist and self-regulatory relationships (Moran
1999; Veraghtert and Widdershoven 2002), the resulting pattern was both stable
across subsequent governmental regimes and strongly resembled arrangements
that emerged in other western European SHI systems. As a normative value, the
principle of solidarity has been and remains a core tenet of the dominant
Christian religion (both Catholic and Protestant); of Marxian socialism; of the
modern trade union movement; and of both ancient and renascent nationalist
sentiment. In the eyes of western European commentators and policy-makers,
it is simultaneously inconceivable and incomprehensible to discuss the concept
of SHI without basing it in broad societal support for the concept of solidarity.
Solidarity has been defined as ‘a sense of non-calculating co-operation based
on identification with a common cause’ (Houtepen and Ter Meulen 2000a: 334).
The individual is viewed as ‘embedded in social contexts’ rather than as an
independent agent, and thus solidarity is not a characteristic of particular individuals
but instead reflects ‘a specific type of association among people’. This
understanding is consistent with a predominantly German idealist philosophical
understanding of the relationship between the individual and the society:
that individuals obtain their freedom in and through the social group, making
mutual relationships a ‘precondition’ for individual development and freedom.
Similarly, as Chinitz et al. point out in Chapter 6, the degree of solidarity
that inheres within a particular population can be viewed as an important component
of ‘civil society’, of collective resources that serve as a mediating structure
between state and market, and which build social cohesion. More concretely,
solidarity in the health sector is sometimes presented as ‘operationalizing
social justice’; that is, as putting physical flesh on the abstract philosophical
belief that all individuals should be treated equally. Solidarity in this
view grows organically out of the natural needs and behaviours of communities
– it is not an artificial construction that is externally imposed by decree upon an
individual or a community. It sits at the centre of the ‘way of life’, of the social
understanding of SHI systems discussed in Chapter 1.
The ‘communities of mutual recognition’ (Houtepen and Ter Meulen 2000b)
that embody solidarity typically follow a pattern that starts with an individual’s
immediate surroundings and then grows slowly outward, moving from personal
to communal to occupational and finally to national in character. Initially, solidarity
extended from the family to small local groups built around face-to-face
relationships and close interaction: guilds, churches, and, later on, union locals
The historical and social base 27
and political movements. By the late nineteenth century, the need for sustainable
funding instigated a fundamental shift from voluntary and local to mandatory
and national participation, under the aegis of the state. Although this
represented a major change in the organizing agent, it was understood by most
citizens as simply a way to achieve the same objectives but by a different means
(Houtepen and Ter Meulen 2000a). This was evidenced by the degree to which,
regarding health insurance, the new welfare state entities retained both the
institutions and procedures of the former voluntary model. In practice, however,
this change involved a fundamental shift in how the need for care was
conceptualized in these western European countries. It was ‘lifted out of the
context of mutual recognition’ among local groupings and relocated as a ‘general
right’ to be guaranteed and financed by the coercive power of government
(Houtepen and Ter Meulen 2000b). This evolution explains the key structural
shift by which solidarity came to be absorbed by and represented in the institutions
of the welfare state. Of course, as noted in Chapter 1, solidarity in this
welfare state form also exists in countries where health care is directly funded
from publicly collected taxes (e.g. United Kingdom and Nordic countries).
Indeed, many of the peculiarities that restrict achieving full solidarity in SHI
countries are not present in tax-funded systems, such that, while solidarity is
widely discussed within SHI systems, it is in practice more completely achieved
– at least in a formal financial sense – within the universal tax-funded systems.
Exactly who comprises a solidaristic ‘community of mutual recognition’ can
vary quite considerably across historical periods and within countries. Bayertz
(1999) developed a set of four somewhat conflicting types of groups to which, at
various times, the attribute of solidarity has been ascribed:
• reciprocity (brotherhood) as well as asymmetry (help needy)
• individuals (assist the weak) as well as communities (social cohesion)
• individual relationships (altruism, fellowship) as well as institutional
relationships (citizenship duties)
• outsiders (universal brotherhood) as well as one’s own ethnic or political
sub-group (rallying together).
Solidarity can thus take on a variety of different permutations in society. In this
respect, it can be conceived of as having a considerably wider range, central to
the broad process not just of health insurance but also of social organization in
these countries.
When one explores how the concept of solidarity has been applied specifically
within the health sectors of the eight studied countries, one finds substantial
variation in both the predominant cultural/philosophical/political source and
in who are the most influential groups. In broad terms, solidarity in the Netherlands
stems from a cultural predisposition toward pragmatic rationality, which
is itself composed of three related elements: self-interest, political concerns and
true altruism (Dubois 2002). Quite differently, the sources of solidaristic values
in France are the philosophical notions of fraternité and egalité consecrated by
the French Revolution and adopted by all subsequent French republics. Different
again, Belgian notions of solidarity strongly reflect Catholic principles of
obligation while the concept of solidarity as it has emerged in Switzerland
reflects small-scale interpersonal relations tied to local geography (the canton).
28 Social Health Insurance Systems
Not surprisingly, the central agent that carries and sustains solidarity within
the health sector also differs between countries. In France, Germany and
Luxembourg, sickness funds are predominantly defined by professional (labour)
characteristics. In Belgium, the sickness funds are defined by religious and
ideological affiliations. In the Netherlands, sickness funds have lost their prior
pillar-based religious and ideological affiliations to become regional (now
national) non-partisan bodies. In Austria, they are organized by occupational
groups and/or by region. In Switzerland, sickness funds are organized on a wideranging
mix of religious and geographical (local and national) foundations.
Lastly, in Israel, the four sickness funds reflect a mix of ideology (the largest
fund) and non-partisanship.
One can further consider the varying impact of religious and ideological
convictions on the internal administration of the sickness funds. In several
countries, some funds retain the strongly religious (e.g. Catholic in Belgium) or
ideological (e.g. Bernsteinian socialist in Germany) beliefs upon which they
were founded. These carry through to the policies of the funds, and even to the
self-effacing, non-self-interested approach of fund administrators (Glaser 1991).
Given this diversity among country arrangements, it also is not surprising to
find – as explored more fully in Chapter 3 – that the practical organizations and
structural frameworks that have been adopted vary considerably as well. In
Germany, the self-regulatory range of the sickness funds and providers is tightly
constrained by a published code book of federal regulations – Social Code Book V
(Busse 2000). In the Netherlands, quite differently, rather than a published
social code book, there exists a wide range of ‘collegium’ – or ‘colleges’ – that
incorporate most key actors in any particular health-related sub-sector and that
– within broadly defined limits – take many relevant decisions for the health
sector (Den Exter et al. 2002). In France, administration and decision-making for
the sickness funds (and also for the largest hospitals) is handled by state-run
agencies (sometimes acting through regional sick fund offices).
The complexity of solidarity underscores its organic character. Its roots are
embedded in the social fabric of at least six of the studied countries (Israel and
Switzerland are recent additions to SHI arrangements). Solidarity frames how
citizens view health and social security concerns, and it sits at the core of
national policy-makers’ thinking and of the policy judgements they make. It
would not be inappropriate to consider solidarity as the engine that animates
the pluralistic administrative structure of SHI systems. Solidarity, understood as
it is constructed within Belgium, France, Germany, Luxembourg and the Netherlands,
is not just a set of financial cross-subsidies but is a central element in
transforming the technical administration of SHI systems from just health
insurance into ‘a way of life’. It seems fair to conclude that the resilience of
solidarity is a major explanatory factor in the overall long-term stability that SHI
systems have achieved.
Future implications
Looking forward, a critical aspect of SHI’s future will be the degree to which
traditional notions of solidarity – the ‘beating heart’ of an SHI approach – can be
The historical and social base 29
sustained in a period of growing economic volatility. The combined pressures of
cultural atomization in a mass consumer society, along with economic
individualization as highlighted by the slow erosion of wage solidarity, collective
(state) pensions and the power of labor unions, challenge the survival of
solidarity – and thus SHI – at its very core. Pressures to emphasize the separate
individual rather than the collective social dimension of citizenship threaten to
erode key values that underpin social solidarity in all its forms, and especially
SHI with its central focus on socially generated cross-subsidies and social justice.
To be certain, the unpleasant social impact of economic recessions may
remind the broad population of the potential dangers of reducing their commitment
to the collective institutions that operationalize solidarity – such as
an SHI system. Moreover, some commentators suggest that the traditional concept
of solidarity can be reconfigured so as to maintain its position in a post-
Rawlsian, post-individuated world (Houtepin and Ter Meulen 2000b). This
philosophical work seeks to respond to the criticism that solidarity – and thus
ultimately SHI systems as well – were designed for countries in a previous stage
of history and an earlier stage of economic development. Such concepts as
‘dialogic democratization’ (Giddens 1994) and ‘reflexive solidarity’ (Habermas
1992; Dean 1995) seek to focus on the ‘social interchange’ and ‘relational’
characteristics of social solidarity, reinvigorating it to play a central organizing
role in future as well as past institutional arrangements (Houtepin and Ter
Meulen 2000b). Whether the prior balance between social and economic pressures
can be sustained in an era of economic regionalization and globalization
represents one of the greatest challenges that policy-makers in SHI countries
will confront.
Introduction
The cultural core of social health insurance (SHI) is deeply rooted in the societies
which first spawned it. Germany is often considered to be the source of this
approach to health insurance, as it was the first western European country to
codify existing voluntary structures into mandatory state-supervised legislation
in 1883. The history of SHI in Europe, however, as well as its animating principle
of social solidarity, extends considerably earlier than 1883 and more widely
than Germany. In many respects, the history of SHI and of its particular concept
of solidarity is the history of the evolving social development of western
Europe, starting with medieval guilds in the late Middle Ages through to the
structuring of the modern European welfare state in the aftermath of World War
II. Precisely the fact that the current configuration of institutions and the social
values that undergird them are the result of such a long historical process can
help explain the degree of stability of existing SHI institutions as well as the
difficulty policy-makers confront in seeking to modify those institutions. As
both historians and sociologists recognize, it takes generations to build up a
‘way of life’, and wise political actors rarely seek to disrupt those long-standing
patterns.
This chapter examines two key elements in the base or ‘society’ level of the
four-part pyramid framework presented in Chapter 1. First, it briefly reviews
the history of SHI across western Europe, highlighting the central structural
lineants that led to present-day arrangements in the eight studied countries.
Subsequently, the chapter probes more closely into what many commentators
consider to be the core cultural value that both generates and is generated by
SHI, namely social solidarity, examining in particular its different historical and
cultural roots in the eight countries. The chapter concludes with a brief consideration
of the implications of this historical and social base for policy-makers
as they seek to address current challenges.
A brief history of SHI in western Europe
The present system of nearly universal SHI in Western Europe is the culmination
of a 700-year historical process. Over that period, the number of individuals
covered has grown from a small number of workers in particular trades to
(depending on the national variant) all residents or at least all residents whose
earnings are below a rather high threshold. Equally as important, the central
concept of this form of social insurance also has changed, evolving from wage
replacement and a death benefit into payment for and/or the provision of outpatient
physician services, inpatient hospital care and pharmaceuticals. Lastly,
the administrative character of SHI has shifted over time, having begun as voluntary
worker cooperatives but from 1883 in Germany and subsequently
throughout the twentieth century (from 1941 in the Netherlands to 1996 in
Switzerland) taking on a state-mandated legislative character. All three types of
change demonstrate that the present configuration reflects an extended developmental
process and the deep roots of the current institutional structure in the
social fabric of these countries.
The initial phase of this historical process involved small groups of workers in
the late medieval period, who created mutual assistance associations under the
auspices of their craft guild. The first recorded guild funds date back to the 1300s
(Veraghtert and Widdershoven 2002). These funds generally covered only guild
members, with overall coverage restricted to less than 5 per cent of the total
population. All others were dependent on charitable and/or religious organizations
for care. This precedent of basing health coverage on occupation became a
core tenet of the social insurance model in German-speaking countries and
Sweden (Abel-Smith 1988).
It was not until the late eighteenth century that the state began to take on an
active role in the provision of health services. Two important trends helped
shape the European health sector’s future. One was in the Nordic Region, where
district physicians in Sweden were given royal commissions contingent on
their willingness to see indigent patients without payment (Serner 1980;
Hjortsberg and Ghatnekar 2001). Similar policies were followed in the then
Swedish colony of Finland, as well as in Norway (Furuholmen and Magnussen
2000; Järvelin 2002). This is the first known effort by a state to provide health
services to the poor. The second, parallel trend was more indirect but, in retrospect,
nearly as important. This was the continual effort by various newly consolidating
states to break the economic power of the guilds (Abel-Smith 1988).
This culminated in one of the first acts of the French Revolution when on 4
August 1789 guilds were abolished with the objective of creating a more liberal
labour market, as well as increasing social equality (Veraghtert and Widdershoven
2002). Guilds were similarly prohibited in the Netherlands in 1798
(Veraghtert and Widdershoven 2002) and in Denmark in 1861 (Abel-Smith
22 Social Health Insurance Systems
1988). With the banning of the guilds, their health insurance function continued
as independent (and politically unprotected) mutual assistance societies,
thus setting the stage for the process of consolidating state legislative control
that commenced in 1883.
Once the guilds disappeared, there was an extended period in which various
collective not-for-profit as well as private for-profit attempts were made to
organize the provision of health insurance. These civil society efforts produced
mixed results, varying by country and by historical and/or cultural
situation. In the Netherlands, for example, private commercial insurers tried
to establish a market for health insurance, with unsatisfactory results (Hogarth
1963). In the late 1800s, voluntary health insurance societies grew up
administered by the insured themselves or occasionally by industrial firms or
by charitable foundations (Abel-Smith 1988). Similarly, voluntary health
insurance emerged during this period in the Nordic countries (Hogarth 1963)
and, for more middle-class individuals, in France (Saint-Jours 1983). In Switzerland,
voluntary insurance appeared in response to the ‘bad reputation’
that private commercial insurers acquired, linked in part to their highpressure
door-to-door salesmen (Maurer 1983). In Israel, the first voluntary
sickness fund was established by a small group of agricultural workers in
1911. Later on, in 1920, this fund was taken over by the National Labor
Union. (Carrin and James 2004). The diversity of organizational format,
members covered and services provided among voluntary health insurance
systems is captured in a description of the United Kingdom during the early
twentieth century:
The largest category of health insurers involved ‘friendly societies’ which
provided cash benefits for the sick, treatment by contracted general practitioners,
and drugs. Later, some dental and ophthalmic benefits were added
by some societies. Other insurers included trade union clubs, slate clubs or
tontines (clubs which distributed any annual surplus among the members),
works clubs (based on the factory), and provident dispensaries which were
subsidized by charitable funds. There were also some medical aid societies
run on similar lines by commercial life insurance companies (Green 1985),
but they were in the minority. Membership grew to include not only the
mass of wage earners but small shopkeepers and a substantial proportion of
the middle classes.
(Abel-Smith 1988:689)
There were, of course, exceptions to this new pattern. In Germany, for
example, the guilds and their health insurance funds were largely maintained
(Veraghtert and Widdershoven 2002). Moreover, the emerging state supervisory
role was presaged in Austria in its 1859 Industrial Code (Hofmarcher and Rack
2001), and by state replacement of private philanthropy in substantial parts of
the Netherlands and Belgium (Veraghtert and Widdershoven 2002).
The modern era in SHI was ushered in by Bismarck in 1883. Worried about
rising political pressure from Marxist-influenced labour unions and consumed
by his desire to build a powerful German state, Bismarck seized upon the idea of
retaining independent occupation-based sick funds but placing their activities
under state tutelage. The resulting legislation established both the legal and
The historical and social base 23
social foundation for sickness funds not just for Germany but for much of
western Europe as well. Indeed, Austria followed suit in 1887/8 (Hofmarcher
and Rack 2001), and in 1892, the Danish government adopted a variant plan
that gave subsidies to existing voluntary funds so that those who were already
ill would be admitted (Abel-Smith 1988; Vallgarda et al. 2001). Belgium adopted
similar legislation, establishing state subsidies for sickness funds in 1894
(Veraghtert and Widdershoven 2002). In Switzerland, although an 1899 referendum
to adopt a German-style model was rejected, a 1911 law required voluntary
funds that accepted federal subsidies to register and abide by state-imposed
regulations (Minder et al. 2000). In the United Kingdom, Lloyd George successfully
passed a health insurance act in the same year.
This process continued after the conclusion of World War I, when France –
confronted by existing health insurance in the re-acquired region of
Alsace-Lorraine – passed a compulsory health insurance law in 1920 which was
not implemented until ten years later (Saint-Jours 1983; Sandier et al. 2004).
One of the last northern European countries to adopt compulsory health insurance
legislation was the Netherlands which, in 1941 under German occupation
(Den Exter et al. 2002) passed legislation that was retained after the end of World
War II in 1945.
This period of growing state activity was characterized by rising rates of population
coverage. The legislation passed during this period not only established
the principle of state supervision and regulation of sick funds, but also required
certain segments of the population (typically various groups of workers) to
obtain coverage – hence the application of the term ‘compulsory’. However,
rates of coverage still fell substantially short of universal. Depending upon the
country, a number of steps were required after 1945 to complete the process of
covering all regular workers below a fixed income threshold, their dependants,
and also the unemployed and pensioners. This process extended through 1996
in Switzerland.
In the largely agricultural southern European countries, where the industrial
revolution began much later than in northern Europe, the first major sickness
funds were created by enterprises in the new industrial sector. Levels of coverage
in southern European countries like Spain and Portugal lagged behind during
the period of dictatorship, in part due to sluggish economic growth, but in the
late twentieth century, these rates were parallel with the rest of Europe (see
Figure 2.1). In Portugal, for example, in the first half of the twentieth century,
coverage was limited to industrial workers, with other sectors of the workforce
added through extensions of coverage in 1959, 1965, 1971 and 1978 (Benges
and Dias 2003). In Spain, coverage was extended substantially by the 1967 Basic
Social Security Act (Rico 2000).
In western Europe, in the post-World War II period, a substantial number of
countries moved from an SHI system to a fully tax-based system. The first
wave, from 1948 to 1973, included the United Kingdom, Denmark and Finland,
while from 1978 to 1986 a second, post-dictatorship (except for Italy)
wave followed in southern Europe from 1978 to 1986 in Italy, Portugal, Greece
and Spain (see Table 2.1). Moreover, during the latter half of the post-WW II
period, the French system increased the proportion of tax-based funding, in
1992 Luxembourg’s government proposed the abolition of sickness funds
24 Social Health Insurance Systems
(unsuccessfully) (Kerr 1999), and in Israel 1995 legislation replaced premiums
paid directly to the sick fund with a progressive national health tax (Rosen
2003).
This process of increasing state power over health insurance, however, is
less apparent in the traditionally SHI heart of western Europe. In Austria,
Belgium, Germany and the Netherlands, there is still strong attachment to the
SHI model, and, as reviewed in Chapter 3, state power is typically exercised with
considerable caution. Indeed, as noted in the political challenges discussed in
Chapter 1, there is substantial concern in these countries over what is seen as
the growing encroachment of state authority in the traditionally self-regulatory
Figure 2.1 Key extension public coverage 1960–2002
Note: countries with more than 90 per cent coverage since 1960 are excluded (Denmark, Norway,
Sweden and the UK). For the Netherlands the population coverage ratios are weighted
averages of share of the population covered by the health insurance funds (public) and the
whole population covered by AWBZ. The weights are the shares in total costs of the costs
covered by health insurance funds and AWBZ. For the social protection ratio, the shares of
public finance (government, social security payments and AWBZ) in total expenditure are presented.
For Israel the data for 1961–4, 1966–9, 1976–80 and 1982–90 were extrapolated from the
available data.
Sources: OECD (2003) and, for Israel, Ben Nun (1999).
The historical and social base 25
aspects of the SHI system. These concerns are magnified by the degree to which
SHI systems have, since World War II, become enmeshed in a wider, bureaucratized
welfare state structure. While there is keen awareness that a new approach
to the broad structure of social welfare has become essential (Esping-Andersen
2002; Vandenbroucke 2002), there are strong reservations about applying these
reforms to SHI. One key concern, as befits SHI’s long history, is that stateinstituted
changes could damage the well-articulated role of civil society,
replacing pluralism and participation with a rigid state bureaucracy that is in
need of reform when it comes to other welfare state services. This same concern
also was raised, conversely, about state efforts during the 1990s in countries like
Germany and the Netherlands to introduce seemingly opposite, liberalizing,
measures to create more market-like relationships inside SHI systems, particularly
between the sickness funds. As the second section of this chapter suggests,
concerns about the growing role of both market and/or state reflect worries that
these changes may damage the existing configuration of social solidarity built
up over centuries on the civil side of society.
Table 2.1 Funding of health care systems
Predominantly
SHI-based
Predominantly
tax-based
Year of major legislative change
from a role for SHI to a
predominantly tax-based system
Austria X
Belgium X
Denmark X 1973
Finland X 1972*
France X
Germany (Federal
Republic until 1990)
X
Greece X 1983
Ireland X 1970*
Israel X
Italy X 1978
Luxembourg X
Netherlands X
Norway X 1967
Portugal X 1979
Spain X 1986
Sweden X 1970*
Switzerland X
United Kingdom X 1946
* SHI never played a significant role and/or the date indicated marks a break-point where
the central state took increased financial responsibility to provide more extended coverage and
the role of the tax-based system was substantially increased.
Sources: European Observatory on Health Care Systems’ Health Care Systems in Transition
reports; Pinto and Oliveira (2001); Guillén (2002); Department of Health and Children
of Ireland (2003).
26 Social Health Insurance Systems
The resilience of solidarity
The concept of solidarity provides the core animating principle of SHI systems.
Its long historical evolution in Europe parallels that of social insurance generally,
running from late-medieval guilds through nineteenth-century mutual aid
societies up to the late twentieth-century welfare state. Moreover, despite the
political upheavals in western Europe in the first half of the twentieth century –
some argue because of those upheavals and in particular World War II – solidarity
remains the dominant political principle that defines key elements of
national and now European Union social policy (Hinrichs 1995; Stone 1995;
Altenstetter 1999; Bayertz 1999; Gevers et al. 2000; Gilbert 2000; Houtepen and
Ter Meulen 2000b). Even in Germany, where fascism during the 1930s played a
role in the evolution of corporatist and self-regulatory relationships (Moran
1999; Veraghtert and Widdershoven 2002), the resulting pattern was both stable
across subsequent governmental regimes and strongly resembled arrangements
that emerged in other western European SHI systems. As a normative value, the
principle of solidarity has been and remains a core tenet of the dominant
Christian religion (both Catholic and Protestant); of Marxian socialism; of the
modern trade union movement; and of both ancient and renascent nationalist
sentiment. In the eyes of western European commentators and policy-makers,
it is simultaneously inconceivable and incomprehensible to discuss the concept
of SHI without basing it in broad societal support for the concept of solidarity.
Solidarity has been defined as ‘a sense of non-calculating co-operation based
on identification with a common cause’ (Houtepen and Ter Meulen 2000a: 334).
The individual is viewed as ‘embedded in social contexts’ rather than as an
independent agent, and thus solidarity is not a characteristic of particular individuals
but instead reflects ‘a specific type of association among people’. This
understanding is consistent with a predominantly German idealist philosophical
understanding of the relationship between the individual and the society:
that individuals obtain their freedom in and through the social group, making
mutual relationships a ‘precondition’ for individual development and freedom.
Similarly, as Chinitz et al. point out in Chapter 6, the degree of solidarity
that inheres within a particular population can be viewed as an important component
of ‘civil society’, of collective resources that serve as a mediating structure
between state and market, and which build social cohesion. More concretely,
solidarity in the health sector is sometimes presented as ‘operationalizing
social justice’; that is, as putting physical flesh on the abstract philosophical
belief that all individuals should be treated equally. Solidarity in this
view grows organically out of the natural needs and behaviours of communities
– it is not an artificial construction that is externally imposed by decree upon an
individual or a community. It sits at the centre of the ‘way of life’, of the social
understanding of SHI systems discussed in Chapter 1.
The ‘communities of mutual recognition’ (Houtepen and Ter Meulen 2000b)
that embody solidarity typically follow a pattern that starts with an individual’s
immediate surroundings and then grows slowly outward, moving from personal
to communal to occupational and finally to national in character. Initially, solidarity
extended from the family to small local groups built around face-to-face
relationships and close interaction: guilds, churches, and, later on, union locals
The historical and social base 27
and political movements. By the late nineteenth century, the need for sustainable
funding instigated a fundamental shift from voluntary and local to mandatory
and national participation, under the aegis of the state. Although this
represented a major change in the organizing agent, it was understood by most
citizens as simply a way to achieve the same objectives but by a different means
(Houtepen and Ter Meulen 2000a). This was evidenced by the degree to which,
regarding health insurance, the new welfare state entities retained both the
institutions and procedures of the former voluntary model. In practice, however,
this change involved a fundamental shift in how the need for care was
conceptualized in these western European countries. It was ‘lifted out of the
context of mutual recognition’ among local groupings and relocated as a ‘general
right’ to be guaranteed and financed by the coercive power of government
(Houtepen and Ter Meulen 2000b). This evolution explains the key structural
shift by which solidarity came to be absorbed by and represented in the institutions
of the welfare state. Of course, as noted in Chapter 1, solidarity in this
welfare state form also exists in countries where health care is directly funded
from publicly collected taxes (e.g. United Kingdom and Nordic countries).
Indeed, many of the peculiarities that restrict achieving full solidarity in SHI
countries are not present in tax-funded systems, such that, while solidarity is
widely discussed within SHI systems, it is in practice more completely achieved
– at least in a formal financial sense – within the universal tax-funded systems.
Exactly who comprises a solidaristic ‘community of mutual recognition’ can
vary quite considerably across historical periods and within countries. Bayertz
(1999) developed a set of four somewhat conflicting types of groups to which, at
various times, the attribute of solidarity has been ascribed:
• reciprocity (brotherhood) as well as asymmetry (help needy)
• individuals (assist the weak) as well as communities (social cohesion)
• individual relationships (altruism, fellowship) as well as institutional
relationships (citizenship duties)
• outsiders (universal brotherhood) as well as one’s own ethnic or political
sub-group (rallying together).
Solidarity can thus take on a variety of different permutations in society. In this
respect, it can be conceived of as having a considerably wider range, central to
the broad process not just of health insurance but also of social organization in
these countries.
When one explores how the concept of solidarity has been applied specifically
within the health sectors of the eight studied countries, one finds substantial
variation in both the predominant cultural/philosophical/political source and
in who are the most influential groups. In broad terms, solidarity in the Netherlands
stems from a cultural predisposition toward pragmatic rationality, which
is itself composed of three related elements: self-interest, political concerns and
true altruism (Dubois 2002). Quite differently, the sources of solidaristic values
in France are the philosophical notions of fraternité and egalité consecrated by
the French Revolution and adopted by all subsequent French republics. Different
again, Belgian notions of solidarity strongly reflect Catholic principles of
obligation while the concept of solidarity as it has emerged in Switzerland
reflects small-scale interpersonal relations tied to local geography (the canton).
28 Social Health Insurance Systems
Not surprisingly, the central agent that carries and sustains solidarity within
the health sector also differs between countries. In France, Germany and
Luxembourg, sickness funds are predominantly defined by professional (labour)
characteristics. In Belgium, the sickness funds are defined by religious and
ideological affiliations. In the Netherlands, sickness funds have lost their prior
pillar-based religious and ideological affiliations to become regional (now
national) non-partisan bodies. In Austria, they are organized by occupational
groups and/or by region. In Switzerland, sickness funds are organized on a wideranging
mix of religious and geographical (local and national) foundations.
Lastly, in Israel, the four sickness funds reflect a mix of ideology (the largest
fund) and non-partisanship.
One can further consider the varying impact of religious and ideological
convictions on the internal administration of the sickness funds. In several
countries, some funds retain the strongly religious (e.g. Catholic in Belgium) or
ideological (e.g. Bernsteinian socialist in Germany) beliefs upon which they
were founded. These carry through to the policies of the funds, and even to the
self-effacing, non-self-interested approach of fund administrators (Glaser 1991).
Given this diversity among country arrangements, it also is not surprising to
find – as explored more fully in Chapter 3 – that the practical organizations and
structural frameworks that have been adopted vary considerably as well. In
Germany, the self-regulatory range of the sickness funds and providers is tightly
constrained by a published code book of federal regulations – Social Code Book V
(Busse 2000). In the Netherlands, quite differently, rather than a published
social code book, there exists a wide range of ‘collegium’ – or ‘colleges’ – that
incorporate most key actors in any particular health-related sub-sector and that
– within broadly defined limits – take many relevant decisions for the health
sector (Den Exter et al. 2002). In France, administration and decision-making for
the sickness funds (and also for the largest hospitals) is handled by state-run
agencies (sometimes acting through regional sick fund offices).
The complexity of solidarity underscores its organic character. Its roots are
embedded in the social fabric of at least six of the studied countries (Israel and
Switzerland are recent additions to SHI arrangements). Solidarity frames how
citizens view health and social security concerns, and it sits at the core of
national policy-makers’ thinking and of the policy judgements they make. It
would not be inappropriate to consider solidarity as the engine that animates
the pluralistic administrative structure of SHI systems. Solidarity, understood as
it is constructed within Belgium, France, Germany, Luxembourg and the Netherlands,
is not just a set of financial cross-subsidies but is a central element in
transforming the technical administration of SHI systems from just health
insurance into ‘a way of life’. It seems fair to conclude that the resilience of
solidarity is a major explanatory factor in the overall long-term stability that SHI
systems have achieved.
Future implications
Looking forward, a critical aspect of SHI’s future will be the degree to which
traditional notions of solidarity – the ‘beating heart’ of an SHI approach – can be
The historical and social base 29
sustained in a period of growing economic volatility. The combined pressures of
cultural atomization in a mass consumer society, along with economic
individualization as highlighted by the slow erosion of wage solidarity, collective
(state) pensions and the power of labor unions, challenge the survival of
solidarity – and thus SHI – at its very core. Pressures to emphasize the separate
individual rather than the collective social dimension of citizenship threaten to
erode key values that underpin social solidarity in all its forms, and especially
SHI with its central focus on socially generated cross-subsidies and social justice.
To be certain, the unpleasant social impact of economic recessions may
remind the broad population of the potential dangers of reducing their commitment
to the collective institutions that operationalize solidarity – such as
an SHI system. Moreover, some commentators suggest that the traditional concept
of solidarity can be reconfigured so as to maintain its position in a post-
Rawlsian, post-individuated world (Houtepin and Ter Meulen 2000b). This
philosophical work seeks to respond to the criticism that solidarity – and thus
ultimately SHI systems as well – were designed for countries in a previous stage
of history and an earlier stage of economic development. Such concepts as
‘dialogic democratization’ (Giddens 1994) and ‘reflexive solidarity’ (Habermas
1992; Dean 1995) seek to focus on the ‘social interchange’ and ‘relational’
characteristics of social solidarity, reinvigorating it to play a central organizing
role in future as well as past institutional arrangements (Houtepin and Ter
Meulen 2000b). Whether the prior balance between social and economic pressures
can be sustained in an era of economic regionalization and globalization
represents one of the greatest challenges that policy-makers in SHI countries
will confront.
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