COMPARITIVE STUDY OF HEALTH INSURANCE PRODUCTS SHREERAJ DESHPANDE

COUNTRIES HEALTH CARE EXPENDITURE

% OF GDP

JAPAN GERMANY FRANCE U.K

7.3

10.4 9.8

6.7

IRELAND 6.7

NETHERLAND 8.5

SINGAPORE 3.3

AUSTRALIA 8.5

CANADA USA INDIA 9.2

14.1

5.6

PUBLIC

5.7

8.1

7.7

5.7

5.1

6.2

1.5

5.8

6.3

6.6

1.2

PRIVATE

1.6

2.3

2.1

1.0

1.6

2.3

1.8

2.7

2.9

7.5

4.4

COUNTRIES HEALTH INSURANCE COVERAGE

PUBLIC% MUTULLES% COMMERCIAL% JAPAN GERMANY FRANCE U.K

100 88 99 100 IRELAND NETHERLAND 100 70 SINGAPORE 100 AUSTRALIA CANADA USA INDIA 100 100 42 * # # 65 5.3

30 54 0 0 0 # 0 *ESIS & CGHS NOT INCLUDED # INCLUSIVE/NA # 9 14 11 0 40 0 40 # 69 0.3

HEALTH CARE FINANCING MODELS



Predominantly Tax Funded : Funds Are Raised Through General or Dedicated Taxes. Funds Are Transferred to Regional Authorities Who Act As Third Party Payers by Financing Health Service Providers. Prominent Examples Are UK and

Canada.



Predominantly Social Insurance Based: Membership of Social Insurance Programs(often Called Sickness Funds) Is Compulsory for All or Most Citizens. Sickness Funds Reimburse Health Service Providers Via Negotiated Contracts.

France and Netherlands.



Predominantly Voluntary Insurance Based: Health Care Finance Is Raised By Competing Private Insurance Companies Which Then Reimburse Providers For Services Delivered To Their Members. USA



HEALTH CARE FINANCING

In Countries With Tax Based or Social Insurance Based Systems, People Supplement Their Entitlement With Private Insurance. Private insurance an Alternative to Public System.

 Private Insurance Effected to Cover Co-payments /deductibles Required Under the Public System or Cover Services Which Are Fully Not Covered Under Public System.

 Private Medical Expense Insurance Underwritten on Short Term Basis Except in Germany Where Whole Life Cover.

 Europe 95% of the Population Covered Under Public Health Insurance Coverage, 21% mutulles and 11% PHI  USA 16% Population Still Without Any Health Insurance Cover.

HEALTH CARE COSTS

Fundamental Causes of Increase in Health Care Costs

A) Rapid Medical Technological Progress B) Increasing Demands for Better Care and C) Ageing Populations.

In Some Countries Is Also Partly Attributed to

A) Rising Levels of Remuneration for Medical Personnel and B) Practice of "Defensive Medicine" Due to the Increasing Level of Medical Malpractice Litigation.

Difficult to Measure Rate of Medical Inflation but Observers Suggest That Health Care Costs Are Typically Increasing at Two to Five Times the Rate of General Price Inflation.

INDIAN SITUATION

India Is a High Spender on Health Care Relative to Its Income Though Health Spending in Absolute Terms Is Still Very Low. Per Capita Expense on Health in India Is Only 20 $ As Against 4,093$ in USA, 1454$ in UK, 2,677$ in Germany, 2,349 $ in France and 1,829$ in Canada (World Bank). Indian Demographic Situation Is Very Unique With More Than 65 % of the Population Living in Rural Areas and This Population Being Scattered in Nearly 6 Lac Villages.

Literacy Rates Are Low and So Also the Level Of Insurance Awareness.

Non-governmental Health Care Has Outstripped the Role of Governmental Health Care Amounting to About Three-quarters of All Finances for Health and Most of Which Is by the Household As Out of Pocket Expenditure.

INDIAN SITUATION

Two Thirds of All Spending on Hospitalisation Is Done by Private Financing. Most of the House Holds Expenses Are Being Met Out of Savings Due to Absence of Viable Widespread Health Insurance Mechanism.

The Demand for Healthcare Is Growing Due to Population Increase, Greater Urban Migration, Increase in Per Capita Incomes and Increased Expectations.

The Private Sector in India Is Slowly and Steadily Increasing Its Dominance in Health Delivery, With Majority of House Hold Health Expenditures Being Channelled to It.

Capture a Significant Part of Current Household Spending and Assure That the Total Was Spent on More Cost Effective and Higher Quality Services.

HEALTH INSURANCE

Health Insurance Coverage - Two Categories



Medical Expenses Insurance

Which Is Reimbursement Coverage / Service Contracts / Managed Care 

Disability Income Insurance

Provides Payment When the Insured Is Unable to Work As a Result of Sickness or Injury

Health Insurance Is Transacted BY

 Non-Life Insurance Companies  Life Insurance Companies  Specialist Health Insurance Companies

MEDICAL EXPENSES INSURANCE

Provides One or More of the Following

 Hospital Expense Benefits: Inpatient As Well As Outpatient Care.

Maternity Benefit Optional and Policies May Contain Inbuilt Subsection Limits or an Overall Limit.

 Surgical Expenses Benefit: Cost of Operation and Surgical Procedures.

Maximum for Each Procedure Is Fixed or Overall for Multiple Procedures Is Fixed.

 Physician Non-Surgical Expense Benefits: Provide for in-Hospital/Home Visits /Visit of Patient to Physicians’ Office. Contain Limits on Amount Payable

Per Visit and Per Day.

MEDICAL EXPENSES INSURANCE

Is Broadly Classified As:

A) Basic Medical Expenses Contract B) Major Medical Expenses Contract C) Comprehensive Medical Expenses Contract

BASIC MEDICAL EXPENSE POLICY



Sometimes Called a Hospital Surgical Policy



Provides for Expenses Incurred When a Covered Person Is Ill and in Hospital



Policy Lists the Types of Items for Which It Will Pay



Policy Stipulates the Maximum Amount It Will Pay.

CATASTROPHE/MAJOR MEDICAL EXPENSE POLICY

Provide Broad Coverage With High Limits Protecting Against Large Unpredictable and Un-budgetable Medical Care Expense.

May Be Purchased in Addition to a Basic Medical Expense Policy or in Lieu.

Maximum Benefits Range From $ 25,000 to Unlimited.

Some May Have Subsection Limits and Some Don’t Have Any.

COMPREHENSIVE MEDICAL EXPENSE POLICY

Covers All Types of Medical Expenses Incurred In or Out of a Hospital Typically Contain a Relatively Small Deductible and a High Maximum Benefit Limit May Have Internal Limits or Overall Annual Limit.

MEDICAL EXPENSE POLICY

Characterized By

(A) Deductibles:

  Frequency With Which Deductibles Are Applied Varies May Be Once Per Calendar Year or Once Per Occurrence.   Generally Expressed In Terms Of Amount. Policies have an Individual deductible and a Family deductible. First $200 of expenses for each individual are not reimbursed but if family has a total of $400 unreimbursed expenses, individual deductibles do not apply

MEDICAL EXPENSE POLICY

B) Co-Insurance/co-payment :

Insurer Pays a Specified Percentage (80%) of the Eligible (Covered) Expense in Excess of the Deductible.

(C) Stop-Loss Limit:

After a Fixed Dollar Amount of Medical Expense Is Incurred, Usually Above the Deductible, by the Insured, the Co-Insurance Clause Does Not Apply and the Insurer Pays 100% of the Remaining Covered Expenses

PRE-EXISTING CONDITIONS

Plans Totally Exclude Pre-Existing Conditions Some Cover After a Specific Period of Time Alternate Limit Coverage on All Pre-Existing Conditions, Until the Policy Has Been in Effect for a Specific Period.

TERMS OF RENEWAL

Medical Expenses Policies Also Differ on the Terms of Their Renewal

 Renewable at the Option of the the Insurer and Conditionally Renewable  Guaranteed Renewable  Non-cancelable and Guaranteed Renewable

COMMON EXCLUSIONS

 War or Any Act of War,While on Active Duty in Military, Navy, or Air Force, Participate in  Riots, Rebellion.

Care Outside Country   Loss Covered Under W.C or Employer Liability,Etc.

Medical Care, Services or Supplies Paid for the National, State or Local Government       or Agency Alcoholism, Drug Addiction Cosmetic Surgery Except That Necessitated by Injury Eye Glasses Hearing Aids or the Process of Fitting Them Transport, Except Local Ambulance Service to or From Hospital Custodial Care.

OTHER COVERS

        Dental Care Expenses Insurance Hospital Indemnity Policies Travel Accident Plans Long Term Care Insurance Dread Disease Cover Prescription Drugs/Out Patient Treatment Plans Managed Care High Risk Pools, Etc

DENTAL CARE EXPENSE INSURANCE

Coverage Can Be Provided

  Under an Integrated Plan in Which the Dental Expenses Are Blended Into the Covered Expenses of a Major/Comprehensive Plan Under an Non Integrated Plan   Emphasis on Prevention Care Lower Maximum Limits  Most Covers Have Business Calendar Year or Policy Year Maximum on All Dental Services .  Separate Maximum Limits and Co-Insurance Requirement on Certain Kinds of Services.

HOSPITAL INDEMNITY POLICIES

Hospital Indemnity Contracts Pay Only When Hospitalized Valued Contract Rather Than a Contract of Indemnification.

Benefit Is Normally Stated in Terms of a Flat Amount Per Day,Week or Month Maximum number of DAYS for which cover is available is specified

PRESCRIPTION DRUGS INSURANCE

Designed to cover the cost of drugs and medicines prescribed by a physician Coverage is written on a group basis On reimbursement basis for UCR charges - covered drugs and prescriptions Deductible to be borne by the insured, may be annual deductible or per drug deductible Coverage subject to annual maximum

MEDICAL SAVINGS ACCOUNT

 Allow individuals to make tax-sheltered contributions into a fund to be used to cover medical expenses.

 Fund is used in connection with a high deductible health insurance plan  Covers the expenses that fall within the policy deductible  By giving consumer a stake in the level of expenditure will serve as an incentive to consumers to control medical care expenses  Insurance company, Bank can be an MSA trustee

DREAD DISEASE COVERS

      Generally Issued As Riders on Life Policies Provide for Pre-Payment of Some Percentage of the Sum assured Under the Main Life Policy in the Event of Occurrence of Specific Diseases: Myocardial

Infarction, Stroke, Coronary Artery Surgery, Cancer, Renal Failure, etc.

Amount Is Payable Only Once in Full and Final Settlement Under the Rider Benefits May Be Part Of S.I or Inaddition to Basic S.I.

Maximum Age at Entry Is Stipulated Waiting Period of 3 Months and Deferment Period of 30 Days Between Disease and Death

LONG TERM CARE INSURANCE

Policy Features Cover Services Such As:

 Skilled and Intermediate Nursing Facility Care    Custodial Nursing Facility Care Home Health Care Adult Day Care

Policies Are Characterised By

 Day Limits, Benefit Period and Elimination Periods  Inflation Protection & Waiver of Premium  Coverage Trigger

LTC - COVERAGE TRIGGER

 Critical Policy Provision That Determines Who Is Eligible to Receive Benefits  Person Qualifies for LTC Coverage If He or She Is Unable to Perform a Specified Number(2 or3) of a List of Activities Of Daily Living(ADLS) Contained in the Policy  ADLS Typically Include: Bathing, Dressing, Eating, Using the Toilet, Walking, Maintaining Continuity, Taking Medicine, Transferring From Bed to Chair.

 Subject to Individual Underwriting, Age, Medical Condition, History  Policies Are Often Guaranteed Renewable.

MANAGED CARE

EVOLUTION OF HEALTH INSURANCE

 INDEMNITY (HOSPITALISATION ONLY)  INDEMNITY(ALL EXPENSES)  MANAGED CARE

EVOLUTION OF MANAGED CARE

Increasing Healthcare Costs Compelled Employers to Insist That Insurance Companies Evolve Their Role From Risk Distributors to Risk Managers.

- Moral Hazard - Large Investments in Health Infrastructure - Malpractice Issues

MANAGED CARE

Managed Care Encompasses a Variety of Innovations in Both the Delivery and Financing of Health Care That Are Intended to Eliminate Unnecessary and Inappropriate Health Care and Reduce Costs.

MANAGED HEALTH CARE

Utilisation Review and Control of Decisions About Health Services Provided Limiting or Influencing Patients Choice of Providers Negotiating Different Payment Terms or Levels With Certain Providers (i.e Discounts, Capitation)

UTILISATION CONTROLS INVOLVE

     

Second Surgical Opinions Prior Authorisation for Hospital Admissions Use of Primary Care Physicians - Gatekeepers - Subsequent Referrals Concurrent Review of Hospital Use i.e ., Ongoing Monitoring While the Patient Is in Hospital Discharge Planning Profiling of Physician Practices

UTILISATION CONTROL MAY LEAD TO

Refusal to Pay for a Particular Service Establishment of Guidelines for Anticipated Utilisation(Eg. Authorisation for a Specific Number of Hospital Days for a Particular Diagnosis) Efforts to Educate Physicians Whose Practice Patterns Vary Substantially From Accepted Norms.

MANAGED CARE PLANS

 HEALTH MAINTENANCE ORGANISATIONS (HMOs)  PREFERRED PROVIDER ORGANISATIONS (PPOs)  POINT-OF-SERVICE (POS) PLANS

AND MANY MORE

HMOs

Provide Wide Range of Comprehensive Health Care Services to a Group of Subscribers in Return for a Fixed Periodic Payment.

Not Only Provides for Financing of Health Care Also Delivers Care.

Merging of Provider and Financing Mechanisms.

May Be Sponsored by a Group of Physicians, a Hospital, Employer, Labour Union, Insurance Company, Not for Profit Organisations.



HMO - PROCESS

Member Enrolls in HMO to Receive Health Care in Exchange for Premium  Member Is Encouraged to Remain Healthy by Being Offered Free Preventive Care Treatments  In the Event of an Illness / Injury, Member Goes to the Primary Care Physician(PCP).  PCP Provides Care or Referral to a Specialised Network Provider.

 Insured Pays Co-payments to PCP and the Specialised Network Provider

HMO PROCESS

Specialised Network Provider Submits Bill to the HMO.

HMO Pays Fixed Formula - Based Capitation Amount Per Member to PCP Independent of Actual Usage by Member.

HMO Pays Pre-Determined and Discounted Rates to Specialised Network Provider Depending on Actual Usage.

For Pharmaceuticals and Appliances,These Items Must Be Obtained From a Select Group of Suppliers With Whom the HMO Has Negotiated Predetermined and Discounted Rates. Co-payments Also Apply to Pharmaceuticals and Appliances.

REGULATIONS FOR HMOs

        Requirement of License HMOs Must Provide Certain Prescribed Minimum Benefits Prohibited From Limiting Care Based on Pre-existing Diseases Must Show There Is an Adequate Number of Providers to Meet Health Care Needs of Its Members.

Emergency Treatment - Covered Even If Outside the Network.

HMO Must Provide Members With Advance Notice Before a Doctor or Dentist Is Dropped From Network Change in PCP, Minimum of Four in a Year.

HMOS Cannot Ask Members to Settle Disagreements by Arbitration Rather Than Legal Action

PREFFERED PROVIDER ORGANISATION (PPO)

Panel of Providers Who Negotiate With Employers, Insurance Companies or Other Organisations to Provide Service at Reduced Fees to Members of Specific Groups.

Typically Employers Allow Their Employee to Use Other Providers but Will Cost More.

Differ From HMOs in That Employees Are Not Restricted to Them but Can Choose to Use or Not Use a PPO Provider Each Time Care Is Needed.

Fee for Service at Reduced Cost

COST-EFFECTIVENESS ?

Debate Over Efficacy and Acceptability of Managed Care.

Less hospitalisations and on admissions less time in hospitals thus reduction in cost.

Quality of health care suffers?

Debate - Administrative Cost May Outweigh Potential Savings Cost Savings or Cost Shifting ????

DISABILITY INCOME INSURANCE(PHI)

Designed to Replace a Portion of the Income a Worker Loses When He or She Becomes Unable to Work As the Result of Accident or Sickness Different Definitions of Disability Are Followed by the Insurers, Own Occupation, Any Occupation,etc.

Marketed as group schemes or on individual basis

DISABILITY INCOME INSURANCE(PHI)

(A) Short - Term Disability Insurance

 Provides Coverage for Disability Upto Two Years  Usually Underwritten With Benefit Periods of 13,26,52 or 104 Weeks

(B) Long - Term Disability Insurance

 Protects Individual Often Until Age 65 for Illness and for Life in Case of Accident  Generally Provide Benefits for 5years, 10years, Until Age 65, or Even for the Lifetime of the Insured

DISABILITY INCOME INSURANCE(PHI)

Types of Benefits

Stipulate That the Periodic Benefit Is a Proportion of an Insured Income Before Disablement (Group) Policy May State the Benefit on a Specified Dollar Amount Per Week or Month of Disability. (Individual) Difference in Pricing, Underwriting and Breadth of Coverage for Short-term/ Long- Term Policies Most Disabilities Are Short-term Thus the Insurer’s Risk Decreases As the Contract Lengthens Longer the Contract the Lower Is the Cost of Additional Protection: A 26 Week Plan Will Not Cost Twice of a 13 Week Plan

DISABILITY INCOME INSURANCE(PHI)

 Unlike Life and Group Medical Expense Insurance in the Disability Income Field, Group Policies Are Often More Restrictive in Their Coverage Than Individual Policies  LTD Contracts Are More Liberal Than Short Term Plans  Most Blue-collar Workers Are Offered Short-term Covers or Long Term to a Maximum of 5 Years  White-collar Offered LTD Covers up to 65years

DISABILITY INCOME INSURANCE

 Cover Total / Partial Disability  Provide for Waiver of Premium in Case of Disability  Extension of Rehabilitation Benefits  Optional Benefits Such As Cost of Living Provisions, Guaranteed Insurability Which Allows Insured to Periodically Increase the Benefits Payable As His/Her Income Increases Over Time.

DISABILITY INCOME INSURANCE

Waiting or Elimination Period

 Is a Time Deductible i e., Between the Disability Injury or Sickness and the Start of the Disability Income Benefit.

 Short - term disability coverage have shorter waiting periods than LTD  Waiting period may differ for accident and sickness

DISABILITY INCOME INSURANCE

 Most common in short-term disability is 1-8-26 formula  Provides benefits from 1st day incase of an accident, 8th day in case of sickness and 26 indicates the number of weeks for which the benefits are payable  In long-term coverage 90 days elimination periods are most common  Most Disability income covers typically limit the amount of coverage to about 60-80% of the worker’s wages to prevent moral hazard

INDIAN SITUATION

General Insurers Dominate the Health Insurance Segment .

In-hospitalisation Benefits / Hospital Fixed Benefits and Critical Illness Are The Major Products.

Unregulated And Unmonitored Health Care Sector.

Rate Of Medical Inflation Is Very High In Sufficient Data And Non Standardised Costs Make It Very Difficult For Pricing And New Product Development.

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