Transcript Lecture 2 - Florida State University

Health Insurance Basics
Page  1
Health Care Problems in the US
Rising health care expenditures
Uneven quality of medical care
Waste and inefficiency
Many people do not have health insurance
Page  2
Healthcare Problems in the U.S.

Rising health care expenditures
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Increase in consumer demand
-
Advances in technology
-
Cost insulation because of third-party payers
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Employment-based health insurance
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State-mandated benefits
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Increased spending on prescription drugs
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Cost shifting by Medicare and Medicaid
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Higher administrative costs
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Rising prices in the health-care sector
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Health-care fraud and abuse
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Rising Healthcare Expenditures
Large number of uninsured persons in the
population (46.3 million)
Uneven quality of medical care
- Quality dependent on physician, geographic location, and
type of disease being treated
Considerable waste and inefficiency
- Duplicate tests, defensive medicine, duplication of
expensive technology, fraud, preventable medical errors
Page  4
Health Insurance Denials 12.7% (2009)
Page  5
Problems Insuring Health Risks
Insurers struggle with two main problems
when selling insurance:
- Moral hazard
- Adverse selection
In the health context, additional concerns
include:
- Risk adjustment for health conditions (underwriting)
Page  6
Death Spiral
What is it?
How does it affect individuals?
How does it affect costs?
Page  7
Health Insurance Plans
Fee for Service (FFS) (aka Indemnity Plans)
Health Maintenance Organization (HMO)
Preferred Provider Organization (PPO)
Point of Service (POS)
Health Savings Account (HSA)
Page  8
Fee for Service (Indemnity Plans)
 Under a traditional indemnity plan:
-
Physicians are paid a fee for each covered service.
Insured’s have freedom in selecting their own physician
Plans pay indemnity benefits for covered services up to certain limits
Cost-containment has not been heavily stressed.
 These plans have declined in importance over time.
 Some plans have implemented cost-containment provisions.
 Common types include basic medical expense insurance and
major medical insurance.
Page  9
Managed Care Plans
 Managed care is a generic name for medical expense plans
that provide covered services to the members in a costeffective manner.
- An employee’s choice of physicians and hospitals may be limited.
- Cost control and cost reduction are heavily emphasized.
- Utilization review is done at all levels.
- The quality of care provided by physicians is monitored
- Health care providers share in the financial results through risk-sharing
techniques.
- Preventive care and healthy lifestyles are emphasized.
Page  10
Health Maintenance Organization (HMO)
Health Maintenance Organization Act of 1973
Heavy emphasis on controlling costs
- Capitation fee
- A physician or hospital receives a fixed annual
payment for each plan member regardless of the
frequency or type of service provided
- Gatekeeper physician
- Emphasis on preventative care
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Preferred Provider Organization (PPO)
Plan that contracts with health care providers to
provide medical services to members at reduced
fees
- Not required to use PPO providers
- No gatekeeper
Deductibles and copayments are reduced when
using PPO providers
Patients may be charged lower fees for routine
treatments
Page  12
Point of Service Plans (POS)
Structured as an HMO, but members are allowed to
go outside of the network for medical care.
What is the major advantage?
- Freedom of choice
What is the major disadvantage?
- Higher cost to see out-of-network provider
Page  13
Health Savings Accounts (HSA)
What is a HSA?
- A tax-exempt or custodial account established exclusively
for the purpose of paying qualified medical expenses of the
account beneficiary who is covered under a high-deductible
health insurance plan.
What is necessary in order for an HSA to receive
favorable tax treatment?
- High deductible health policy ($1,200 indiv., $2,400 family)
- Investment account specific for the HSA
Page  14
Health Savings Accounts (HSA)
 Contribution Limits
- $3,100 (2012 individual)
- $6,250 (2012 family)
 Out of pocket expense limitations
- $6,050 (2012 individual)
- $12,100 (2012 family)
 Favorable tax treatment
- Contributions are tax deductible (paying with pre-tax dollars)
- Earnings are income tax free
- Distributions for qualified medical expenses are income tax free
Page  15
Cautions when looking for Insurance
Cheaper isn’t always better!
Watch “limited benefit” coverage
See how deductibles, co-pays and maximums
work
Consider insurer
If it’s too good to be true…
Page  16
Fixing the Insurance Market
 On March 23, 2010, President Obama signed the Patient
Protection and Affordable Care Act of 2010 (H.R. 3590)
- This is the legislation adopted by the Senate on December 24, 2009,
and adopted without amendment by the House on March 21, 2010.
 On March 30, 2010, President Obama signed the Reconciliation
Act of 2010 (H.R. 4872)
- This legislation amends the Patient Protection Act to: increase subsidies
for low-income persons and penalties on employers; phase-out the
“doughnut hole” in Medicare Prescription Drug coverage; modify tax
provisions; amend federal student loan programs; and implement
several other changes to the underlying law.
Page  17
Key Reforms – Early Implementations
 High Risk Pool Grants ($5 billion – 2010-2013)
- For individuals who currently do not have coverage and have a preexisting condition
- Challenge to provide grants to states without high risk pool and to
guarantee issue states
 Health Plan Reforms
- No lifetime limits; restricted annual limits
- First-dollar coverage for preventive services
- Appeals process (includes external review)
- Dependent coverage up to 26 years of age
- No Pre-existing condition exclusions for children
Page  18
Key Reforms – Early Implementations
Grants for State Ombudsman
National Web Portal
Medical Loss Ratios (2011)
Page  19
Key Reforms – 2014 Implementation
 Health Plan Reforms
- No pre-existing condition exclusions for adults
- Guaranteed issue and renewal for all markets
- No charging for health status or gender
- No annual limits
- Minimum benefit package required
- State-Based Exchanges for Individual and Small Group markets that will
provide standardized information on insurance choices and help
consumers enroll in plans
- Individual Mandate to ensure consumers do not wait until they are sick
to seek coverage
Page  20
Key Reforms – 2014 Implementation
 Health Plan Reforms
- Employer Responsibility through a fine if employers with 50 or more
employees do not offer coverage and an employee receives subsidies
through the Exchange
- Subsidies for lower-income persons and Medicaid Expansion (with
enhanced federal match) to help make coverage truly available to
everyone
- Limited provisions to address Quality, Cost-Containment, and Fraud
Page  21