Transcript ONSITE INSPECTION OF INSURERS

SOME ASPECTS OF HEALTH
INSURANCE IN THE USA
IIRM – Workshop on Health Insurance – Global Practices
Edgar Balbin
Senior Manager and Chief of Party
Bearing Point
Hyderabad
7/21/2015
Principal Types of US Health
Insurance

Government Insurance
—
Medicare
—
Medicaid
—
Military Health cover

Employment Based

Other Private Health Insurance Plans
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Some facts and figures – US
Health Insurance
85% of population covered by some insurance
plan


By far the Employment based coverage is the largest – about 60%

Government health insurance schemes cover about 27% of the
population

Direct Purchase of health insurance plans cover about 9% of population

Health expenditure per capita $ 5274

Public expenditure on health 5.8% of GDP

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Source: US Census Bureau reports and World Health report of WHO
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Main Types of Health Insurance
• Medical Expenses coverage
• Benefits treatment of sickness or injury
• Disability income coverage
• Benefits when the insured is unable to work
because of sickness or injury
• Both these types of health insurance coverage are available in India,
but in underdeveloped stages
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Forms of Medical Expenses
Coverage
• Hospital – Surgical Expenses
•
Covers hospital room, board and associated hospital services such as
X-ray, laboratory fees, pathology, medicines, etc.
•
•
Limits in terms of maximum dollar amounts or as equivalent to cost
of semi private room.
Surgeons and physicians fees during hospital stay
•
Amounts are usually specified and covers Surgeons fees,
Anesthesiologist fees other physicians
•
Specified outpatient expenses
•
Extended care like nursing home costs, convalescence costs
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Forms of Medical Expenses
Coverage (contd..)
• Major Medical - designed for economic
protection of the insured and covers:
•
All benefits of hospital-surgical coverage
•
Outpatient treatment
•
Services of Private Nurses and Caregivers
•
Rent or purchase of treatment equipment and medical
supplies
•
Purchase of prescribed medicines
• Generally the maximum benefit is capped
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Forms of Medical Coverage Types of Major Medical
•
Supplemental Policy
• Issued in conjunction with hospital-surgical expense
coverage to pay for expenses that exceed the benefit level
of hospital-surgical expense policy.
-
Insured deductibles as a corridor expressed in fixed dollars
operable on exhaustion of hospital-surgical expenses benefits;
-
Coinsurance and stop loss provision as applicable in
comprehensive policy
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Forms of Medical Coverage Types of Major Medical
• Comprehensive Policy
•
Combines hospital-surgical policy and supplemental
major medical policy and provides;
-
-
-
Insured share of medical expenses in fixed dollars as a
deductible;
Coinsurance by the insured in addition to deductibles;
most policies require a 20% insured participation
Limit of co insurance amount when the policy begins
to pay 100% all all eligible medical expenses
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Forms of Medical Expenses
Coverage (contd..)
•
Social Insurance Supplement
•
These policies pay for specified medical expenses not
covered by government health insurance programs
including deductibles and coinsurance
•
In the US, Social Security includes Medicare benefits
for people receiving social security benefits
•
In Canada, each province provides a health insurance
program for its residents
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Forms of Medical Expenses
Coverage (contd..)
• Hospital Confinement
•
Terms fix the benefits amount for each day the
insured is hospitalized
•
Offers a variety of fixed daily benefits; insured elects
what best suits his needs and ability to pay
•
Some policies offer a higher daily benefit while the
insured is confined to specialized hospital facilities
such as ICU or cardiac care unit
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Forms of Medical Expenses
Coverage (contd..)
•
Specified Expenses Coverage
•
Offered as a standalone policy or as riders to medical expenses
policy
—
•
Reimbursements for treatments obtained and/or purchasing of
medical supplies
Most common specified expense coverage include
•
Dread diseases
•
Dental
•
Prescription drug/s
•
Vision Care
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Forms of disability income
coverage
•
Provides specified income benefit when insured is unable to work
because of an illness or accidental injury
•
Does not provide medical expense coverage because the purpose
is to provide protection for financial losses resulting from the
insured’s inability to work while disabled
•
The nature of disability must meet with the policy’s definition of
total disability
•
Total disability – Each insurer specifies the definition of disability
that qualifies for policy benefit payments. Various definitions are
available in the marketplace.
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Total Disability – Common
Definitions
•
Current and Usual
•
Two stages of disability ; specified period of time
-
•
Own Previous Occupation
•
•
•
•
Benefits at the onset; Benefits at the after completion of a specified
period of time.
Most liberal
Deemed totally disable if unable to perform essential duties of previous
occupation
Adoption of disability income coverage for members of particular profession
Disability – Income Loss
•
•
Income protection insurance – very popular in the upper income market
Deemed disability if suffers from income loss because of disability
•
Benefit payment is a specific maximum in case of total loss of income and
variable in case of partial income loss
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Presumptive Disability
•
Policy provisions classify certain conditions as
“presumptive disability”
•
Insured is entitled to full benefit even if he/she did
not lose or has regained full time employment in a
former occupation
•
Presumptive disabilities include: total or partial
loss of sight; loss of use of any of the two limbs
and loss of speech or hearing.
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Methods of establishing benefit
for disability
•
Express benefits as a % of pre disability earnings
•
Specify a flat amount at the time of coverage and on
issue of the policy
•
Insurers carefully limit the maximum benefit amount
that an individual can purchase
•
Determinants include (i) usual earned income (ii)
unearned income that will continue during insured
disability (iii) additional sources such as group
disability income, government sponsored disability
income programs
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Exclusions from Disability
coverage
• Disability caused by
•
Injuries or sickness that result from military service
or war
•
Self inflicted injuries
•
Occupation-related disability or sickness for which
the insured is covered under worker’s
compensation.
•
Pregnancy and childbirth (rarely used in group
policies).
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Individual Health Insurance
Contracts
•
Policy design and Pricing
• Choice for applicant to choose covers for benefits,
coinsurance, renewals and elimination
• Premiums correspond to the choices of the insured
•
Classes of renewal provisions
• Cancelable
• Optionally renewable
• Conditionally renewable
• Guaranteed renewable
• Non-cancelable
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Individual Health Contracts
•
Common Policy Provisions
• Reinstatement subject to conditions
• Pre-existing conditions
•
To prevent anti or adverse selection
•
Most accepted definition:
-
An injury that occurred or a sickness that appeared or manifested itself before
the policy was issued and that was not disclosed in the application.
Some policies even specify that the insured person must have experienced
symptoms of the condition during a 2 or 5 year period before the policy was
issued in order for the insurer to exclude that condition from coverage.
•
Almost all state regulations in the US limit this period to 2 years
•
Any condition disclosed in the application is not considered pre-existing
•
Insurer can issue the policy specifically excluding a disclosed condition or may cover
that condition but require higher rates.
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Individual Health Contracts
•
Common Policy Provisions (contd…)
• Time limit on certain defenses
• Claims- timely notification, investigation and payment
• Legal actions
• Change of occupation
• Over Insurance
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Group Health Contracts
•
Privity of Contract
•
Employer as a master policy holder; more than
90% of group health business in US is
employment based
•
Cost containment features
•
Premiums linked to experience in addition to
several other factors
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Group Policies-Common
Provisions
•
Physical examination
•
Pre-existing conditions

More liberal than the definitions contained in individual policies

Typical definition: “A condition for which a member received medical care during
the three months immediately prior to the effective date of the coverage”

In addition, a condition will not be deemed pre-existing if:

The member has not received treatment for that condition for 3 consecutive
months, or

The member has been covered under a group plan for 12 consecutive months, or

All eligible members were previously covered by another group plan at the time
the contract becomes effective.
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Group Health Policies-Common
Provisions
•
Conversion
• Gives the member who leaves the group the right to purchase an
individual health insurance policy without poof of insurability
• Right to convert is limited:
• Insurer may not issue a conversion policy if it results in overinsurance of the member
• The benefits available in the individual policy will not be
similar to the benefits offered in the group plan
• The premiums rates will be higher and
• The benefits more restricted.
• Required in the all states in the US. Not required in Canada
[EPB1]
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Underwriting of Health Insurance
- Rating factors
•
Morbidity Risk
•
Morbidity statistics
•
Morbidity factors
•
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Age; Health; Sex; Occupation; Avocations; Work history
•
Habits and Lifestyles
Risk differentiation for Individual policies
•
Standard risk
•
Sub-standard risk
•
Declined risk
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Managed Care – Some Aspects

HMO - group insurance that entitles members to
services of participating hospitals and clinics and
physicians
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What is managed care?


Managed care refers, in general, to efforts to
coordinate, rationalize, and channel the use of
services to achieve desired access, service, and
outcomes while controlling costs.
Care is “managed” through the use of a number of
tools. Most importantly, care is channeled to an
established network of hospitals and outpatient
clinics.
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Key tools of managed care
 Prospective pricing
 Capitation based funding
 Diagnosis related groups and other case-based payments
 Physician gatekeepers
 Formularies
 Utilization reviews
 Preventative medicine/health education
 Pharmacy benefit managers
 Disease management
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Prospective Pricing – Managing
Risk
Capitation – a rupee amount established to cover
costs of health services per person for a defined
period of time, usually specified per month.
DRG – a payment made to a hospital for a case
defined by diagnoses and adjusted for other
variables.
Global budget – a negotiated budget for a specified
volume of services subject to a risk corridor. Services
may be defined by DRGs.
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Tools for coordinating care
while controlling costs
Gatekeeper – a primary care provider who serves as
the patient’s agent, arranges for and coordinates
appropriate medical care and other necessary and
appropriate referrals. (Can be a gate-opener)
Utilization management/review – process of
evaluating the necessity, appropriateness and
efficiency of care against established guidelines and
criteria.
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More tools for achieving
outcomes while controlling costs
Preventative medicine, health education and disease
management – reducing the incidence of expensive
health care services while improving health status.
Formularies and use of generic drugs where available
– establishes the list of drugs that will be fully or
partially covered under the plan. Drugs not listed may
be prescribed but will be paid out-of-pocket.
Negotiated discounts on drug prices based on
volume.
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Why develop managed care tools?

Escalating costs are the biggest problem facing health
care systems across the globe.

Fee-for-service health care encourages provision of
health care services, even if of questionable benefit.

Managed care discourages use of care unless
necessary. Provides only the services absolutely
necessary in treating patients and tries to maintain the
health of its members.

Medical errors and uneven quality of care contribute to
the high cost of care – another global problem.
Managing care is also managing quality.
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U.S. Experience with Managed
Care Organizations MCOs/HMOs



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1930s – beginning of Blue Cross – hospital care
subscription plans, escalating costs
1973 HMO Law – contain costs, emphasize
primary care and prevention to keep people well
1980’s for-profit MCOs
enrollment fraud,
bankruptcies, dissatisfied customers, angry
doctors
1990’s NCQA
pursuing quality of service
and quality of care
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Experience in Europe


Physician Gatekeepers – France, Italy, Spain, UK, and
others, Central & Eastern Europe (CEE)
Use of Formularies/Reference Pricing - France, Italy,
Spain, UK, and others, CEE

Capitation with FFS – many countries

Other prospective pricing – DRGs – many countries

Disease Management – most OECD countries

Subscription plans offered by hospitals – CEE – the
beginning of prepaid care
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Managed Care in India
Hospital Subscription Plans

Tied to Insurance Companies

Various limited inpatient coverage

Limited marketing

Many subscription plans cancelled

Police Health Coverage Plan in Hyderabad has been successful
adverse selection
Disease Management Plan in Hyderabad

Healthy Heart now has 1000 enrolled patients
BreatheEasy Asthma control has 3500 enrollees
Partnership between the hospital and Pfizer

Promotes quality of care associated with the hospital


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Making It Work: pay for choices
How much choice? How much access?

Access to specialists and hospitals -gatekeepers

Preferred Providers/Network - may not include customary doctor

Access to tests - clinical protocols to establish norms for ordering
tests

Access to medications - based on formulary

Point Of Service Plan–expanded choice for higher co-pay

Rural areas – a cautionary tale
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Making it work: incentives
•
Incentive: Under-service in managed care to minimize
costs and maximize profit.
•
Goal: align incentives to create a more effective delivery
system – all stakeholders benefit if illness is prevented or
treated before it requires hospitalization and other
expensive services.
•
Solution: mixed payment system to balance incentives,
e.g., capitation + FFS + withholds/bonuses + co-insurance.
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Making it work: risk-sharing



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Capitation paid by insurer - provider at risk
Capitation paid by insurer with co-pays - the provider and the
patient share risk
Fees for Service (FFS) paid by insurer - insurer at risk
Fees for Service with co-insurance - risk is shared by the insurer and
the patient
Capitation,FFS & co–insurance - risk is shared by insurer, provider
and patient
Salaries or Capitation plus Bonuses - performance is included in the
risks borne by the provider
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Making it work: Managing Care
Disease management is a system of coordinated
healthcare interventions and communications for
populations with conditions in which patient self-care
efforts are significant



Think in terms of episodes of care rather than simple incidents: bundled
grouping of services into a single payment
Use evidence-based practice guidelines
Aggressively monitor high-risk patients to reduce the subsequent use of
expensive hospital care
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Making it work: Managing Costs

Lower costs for individual services – e.g., negotiated
discounts

Improve the efficiency of service across the full
spectrum of an individual's illness, for examples,


More effective care early
Less costly modes of care (out-patient instead of in-patient
surgery, nursing home care instead of hospital care, nurse
practitioner instead of M.D.)

Reduce/eliminate redundant/duplicated services

Use generic medications
,
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Making it work: Cost & Coverage


Health risks are different from other insurable
risks: insurer is able to modify both the
probability of occurrence and the cost of the
event.
Cost effective policy = focus on primary care,
define an essential benefit package, include a
strong preventive component.
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Making it work: Managing
Quality

Encounter Forms - Reports cards
 Process improvement - Medical Record
 Pay for performance
•
•
•
•
•
Productivity
Procedures
Relative Value Units
Adherence to clinical practice guidelines,
CME and eventually, outcomes
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Measuring Performance

Productivity

Number of patients actually seen

Per provider

Per nurse

Per other staff

Per clinic or health center
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Measuring Productivity: RVUs
Resource Value Utilization (RVUs can be simple
evaluation and management codes)

Code from 1-5

1 is least labor intensive (immunization or recheck blood pressure)


5 is most labor intensive (evaluate complicated history, review
referral result, evaluate lab, change medications, require additional
referrals)
Encourages treating complicated patients in the primary care setting
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Measuring Quality

Continuing medical education (CME)

Define what is considered CME

Reward compliance with recommended CME hours
Adherence to clinical practice guidelines (CPGs)


Develop CPGs for common problems

Evaluate compliance with a limited number of CPG’s

Bonus partially based upon CPG compliance
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Measuring Quality by Outcomes
Eventually monitor health of the enrolled population,
for examples

Percentage of diabetic patients who are in ideal blood sugar control

Percentage of chronically ill who are in DMPs

Percentage of children with age appropriate immunizations
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Legislation/regulation of MCOs
in U.S.




Federal Qualification: conferred by the Ministry of Health after
conducting an extensive evaluation of the HMO's organization and
operations under the HMO Act
Fiscal Soundness: must have sufficient operating funds, on hand or
available in reserve, to cover all expenses associated with services for
which they have assumed financial risk.
Insolvency: a legal determination occurring when a managed care
plan no longer has the financial reserves or other arrangements to
meet its contractual obligations to patients and subcontractors.
NCQA Accreditation- - Voluntary but important to employers and
consumers
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Regulatory Authorities



External Quality Review Organization (EQRO)-- An independent
organization to review quality of care of MCOs/HMOs annually
including appropriateness of admissions, readmissions and
discharges for State or Central government subsidized
beneficiaries.
State Licensing--A process which involves the review and
approval of applications from HMOs prior to beginning operation.
Areas examined include:

fiscal soundness,

network capacity,

Management Information System, and

quality assurance.
The applicant must demonstrate it can meet all existing statutory
and regulatory requirements prior to beginning operations.
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