Naima Onamika
Oniket Research Group
The first article in this series on health insurance could not cover every relevant issue and dimension of the subject. It is therefore necessary to examine the remaining questions in a second part.
Why Is Private Wealth Bangladesh’s Invisible Health Insurance?
This is one of the most concerning features of Bangladesh’s health economy. When no formal risk pooling mechanism exists, households effectively become their own insurers. Savings, land, gold, business capital and loans from relatives become informal sources of healthcare financing. If a family needs to spend BDT 500,000 on medical treatment, for example, that money does not come from a pooled insurance fund. It comes from the family’s accumulated assets.
In this sense, private wealth itself has become a form of informal health insurance in Bangladesh. But this form of protection is deeply unequal. The more assets a person has, the greater their financial security. The fewer assets they have, the more limited their ability to access healthcare. This is where the question of health insurance becomes a question of social justice.
The World Health Organization has also emphasized the importance of reducing reliance on direct out of pocket payments for healthcare by expanding mechanisms based on prepayment and risk pooling.
Why Has the Market Not Developed After All These Years?
The weakness of Bangladesh’s health insurance market cannot be explained by a single factor. Rather, several problems have reinforced one another.
First: limited public investment in health financing. Government spending on health has remained relatively low for many years. As a result, the public healthcare system has not developed into a strong mechanism for financial protection. The International Monetary Fund has also identified low public health spending and high out of pocket healthcare expenditure as major challenges for Bangladesh.
Second: health insurance has not been established as a central component of health policy. Bangladesh’s Health Care Financing Strategy 2012 to 2032 emphasized financial protection through risk pooling and prepayment mechanisms. Subsequent assessments, however, identified weaknesses in implementation, particularly in risk pooling and financial protection.
Third: private healthcare and insurance regulation have evolved separately. For a health insurance provider to function effectively, these two regulatory systems need to be connected in practice.
Fourth: the absence of common standards. If the price and method of treatment for the same disease, surgery or diagnostic test vary substantially from one healthcare provider to another, it becomes difficult for insurers to price policies accurately and negotiate treatment costs with hospitals.
Fifth: weak health data. Without reliable information on how many people suffer from diseases, the types of treatment required at different ages, the average cost of different treatments and complication rates across healthcare facilities, accurate insurance pricing becomes extremely difficult.
Sixth: affordability and public awareness. For many Bangladeshi households, health insurance premiums may appear to be an additional expense, particularly when people believe they can simply raise the money when a medical emergency occurs.
This creates a vicious cycle:
People do not buy insurance → the market remains small → administrative costs remain relatively high → insurance products become less attractive → even fewer people buy insurance.
Breaking this cycle could require greater use of employer-based insurance and publicly supported risk pooling mechanisms.
Is Mandatory Private Health Insurance the Only Solution?
Directly copying the health insurance models of the United States or the United Arab Emirates would not necessarily provide an appropriate solution for Bangladesh. What Bangladesh needs is an integrated health financing framework suited to its own socioeconomic realities. A possible structure could have four levels:
First level: tax funded public health protection for low income and vulnerable populations.
Second level: social health insurance jointly financed by employers and employees for people in formal employment.
Third level: publicly supported voluntary risk pooling for people working in the informal economy, with the possibility of gradually moving towards broader mandatory participation.
Fourth level: supplementary or complementary health insurance provided by private insurance companies.
Under such a framework, private insurance would have a role, but the entire health financing system would not depend on private insurance.
What Needs to Be Done to Build a Health Insurance Market?
Creating a health insurance market in Bangladesh will require more than encouraging insurance companies to sell more health policies. The country needs a national framework for health insurance and health financing.
The first step could be the creation of a dedicated regulatory framework for health insurance and health financing. The respective roles of the Insurance Development and Regulatory Authority, the Ministry of Health and other relevant regulatory institutions should be clearly defined.
Second, Bangladesh needs a modern regulatory framework for private healthcare providers. Regulation should go beyond licensing and approval. It should include quality assessment, service standards, clinical quality indicators, treatment guidelines, transparent pricing and standardized billing procedures.
Third, a common contractual framework should be established between insurance companies and healthcare providers. Fourth, Bangladesh needs a national or interoperable health insurance claims database. Such a system could generate aggregate information on diseases, treatment methods, healthcare providers, costs and treatment outcomes.
Fifth, a standardized health insurance benefits structure is necessary. People should clearly understand which treatments are covered under basic insurance protection, which are excluded, the maximum annual benefit available and how much of the cost the patient is expected to pay. Sixth, special protection is needed against catastrophic health expenditure. The most important function of health insurance is not simply to pay for routine medical expenses. Its greater purpose is to prevent a serious illness from financially destroying an entire household.
The Biggest Reform: From a Healthcare Service Market to a Healthcare Purchasing System
One of the most important changes in the health insurance debate may need to be a change in perspective. Under the current system, patients go to hospitals and pay their own medical bills. In a mature health financing system, patients are not the sole purchasers of healthcare. Behind them stands an insurance company or a public healthcare purchasing agency that purchases healthcare services from providers under defined and regulated terms. This creates an institutional relationship between healthcare providers and insurers.
Once such a relationship is established, an insurance provider can require that:
- specific treatments have standardized prices;
- prior authorization is required for certain treatments or surgical procedures;
- unnecessary diagnostic tests are not reimbursed by insurance;
- healthcare providers that fail to meet defined quality standards cannot remain within an insurance network;
- fraudulent insurance claims are subject to penalties; and
- patients have an independent mechanism for filing complaints.
Such a system can reduce risk for insurance providers while improving transparency in healthcare quality and pricing.
Conclusion
Bangladesh’s health insurance crisis is, in many ways, a reflection of the wider crisis in health financing. It is true that a substantial health insurance market has not developed in Bangladesh. But the explanation cannot end with the assumption that people do not want to buy insurance or that insurance companies are not interested in selling it.
The problem is deeper. Bangladesh has a regulatory framework for general insurance. It also has systems for approving private healthcare providers. What remains insufficiently developed is an integrated framework that brings together insurance regulation, healthcare regulation, provider payment systems, quality assurance, health data and risk pooling for the operation of a large-scale health insurance market.
As a result, Bangladesh’s healthcare sector has become increasingly commercialized, while its health financing system has not developed institutionally at the same pace. This is why access to healthcare remains closely tied to an individual’s ability to pay. The problem is not simply a failure of the insurance sector. It reflects the combined weaknesses of public health financing, private healthcare regulation and financial protection against health-related risks.
The question for Bangladesh should therefore not simply be how to increase health insurance sales. The more fundamental question is how to build a health financing system in which a person does not become impoverished or financially devastated simply because they fall seriously ill. The answer will shape the future of health insurance in Bangladesh.
That answer does not lie in introducing a new insurance product alone. It lies in bringing together public financing, mandatory or publicly supported risk pooling, stronger regulation of private healthcare, standardized healthcare pricing and payment systems, health data infrastructure and effective insurance regulation within a coherent framework.
If Bangladesh genuinely wants to move towards universal healthcare, health insurance can no longer be treated as a peripheral financial product. It needs to be understood as part of the infrastructure for protecting both the right to healthcare and households from financial hardship.
