0 évaluation0% ont trouvé ce document utile (0 vote)
41 vues0 page
The document discusses different types of private health insurance. It describes complementary private health insurance as addressing gaps in the scope and depth of coverage of public healthcare systems. Substitutive private health insurance addresses deficiencies in population inclusiveness by allowing excluded groups to access insurance. Supplementary private health insurance develops where consumers are dissatisfied with public systems and willing to pay more for private options in addition to public coverage. The document provides examples of different countries' approaches to classifying and regulating private health insurance markets.
The document discusses different types of private health insurance. It describes complementary private health insurance as addressing gaps in the scope and depth of coverage of public healthcare systems. Substitutive private health insurance addresses deficiencies in population inclusiveness by allowing excluded groups to access insurance. Supplementary private health insurance develops where consumers are dissatisfied with public systems and willing to pay more for private options in addition to public coverage. The document provides examples of different countries' approaches to classifying and regulating private health insurance markets.
Droits d'auteur :
Attribution Non-Commercial (BY-NC)
Formats disponibles
Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
The document discusses different types of private health insurance. It describes complementary private health insurance as addressing gaps in the scope and depth of coverage of public healthcare systems. Substitutive private health insurance addresses deficiencies in population inclusiveness by allowing excluded groups to access insurance. Supplementary private health insurance develops where consumers are dissatisfied with public systems and willing to pay more for private options in addition to public coverage. The document provides examples of different countries' approaches to classifying and regulating private health insurance markets.
Droits d'auteur :
Attribution Non-Commercial (BY-NC)
Formats disponibles
Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
This document should not be carried outside the physical and virtual boundaries of TCS and its client work locations. Sharing of this document with any person other than a TCSer will tantamount to violation of the confidentiality agreement signed when joining TCS.
Notice The information given in this course material is merely for reference. Certain third party terminologies or matter that may be appearing in the course are used only for contextual identification and explanation, without an intention to infringe. Certificate in Health Insurance TCS Business Domain Academy
Page 3 of 17
Contents
Chapter - 5 Health Insurance Schemes - Private ............................................................... 4 Introduction ...................................................................................................................... 4 5.1 Private Health Insurance ........................................................................................ 5 5.2 Drivers for Improving Private Health Insurance Market ......................................... 5 5.3 Classification of Voluntary Health Insurance (VHI) .................................................6 5.4 Classification of Private Health Insurance (US Perspective) ................................... 8 5.5 Pricing of Private Health Insurance ...................................................................... 10 5.5.1 Price Dimensions ............................................................................................. 12 Summary ........................................................................................................................ 14 References ...................................................................................................................... 16
Certificate in Health Insurance TCS Business Domain Academy
Page 4 of 17
Chapter - 5 Health Insurance Schemes - Private
Introduction Private health insurance is prevalent in countries where public healthcare system has deficiencies and people are willing to spend to purchase an insurance that addresses those issues and also meet their respective needs. It is not mandatory unlike public insurance and is often called as Voluntary health insurance. Under private health insurance premium pricing can be done using underwriting, risk rating and experience rating. Also there are several dimensions of price that would determine the premium. This chapter tries to explain different types of drivers that guide the private health insurance market, their classification across nations and their pricing structures.
Learning Objectives On completion of this chapter, you will understand the: Drivers of private health insurance market Classification of private health insurance Pricing of private health insurance Price dimensions of insurance premium
Certificate in Health Insurance TCS Business Domain Academy
Page 5 of 17
5.1 Private Health Insurance Definition Private health insurance is a mechanism for people to: Protect themselves from the potentially extreme financial costs of medical care if they become severely ill, Ensure that they have access to health care when they need it.
It is an alternative to government-run public health care system. These schemes are run by private for-profit organizations. It is also called as Voluntary Health Insurance (VHI) (Voluntary Health Insurance and Private Health Insurance are used inter-changeably in this Chapter) because there is no government mandate on it, and the contributions (premiums) towards this are to be paid by the policy holders themselves.
Private health insurance schemes, pool the risk of high healthcare costs across a large number of people, by collecting premiums based on the average cost of healthcare for the entire group of people in the insurance risk pool. Such premiums collected are used to settle the claims of the members of the pool when they fall ill. This risk-spreading function helps to make the cost of healthcare reasonably affordable for most of the people. 5.2 Drivers for Improving Private Health Insurance Market
Since this is an alternative to public health insurance, the drivers of private health insurance would be the deficiencies in existing public healthcare system. There are four aspects of the public system that are of special importance in establishing the range of opportunities available to insurers for the development of a market for VHI.
Scope of coverage (benefits covered by the public system): If a definite benefit package is not defined or if it is a limited benefit package that is the area where these private insurers can work on in attracting people. Depth of coverage (the proportion of benefit cost met by the public system): If the benefits are not fully covered or the user of health care is to make contribution while availing service, then it would be a drawback in public healthcare. Certificate in Health Insurance TCS Business Domain Academy
Page 6 of 17
System inclusiveness (the proportion of the population to which coverage is extended): Private insurers can target people who are not eligible for public healthcare schemes or the people who opt out of it for lack of customer satisfaction. Consumer satisfaction (perceptions about quality of care): If there is any dissatisfaction with the public system, in conjunction with willingness to pay for privately financed healthcare over and above the mandatory contribution made to the public system, then it is a definite driver for the private health insurance market.
Collectively these four drivers can be termed as gaps in coverage. Private insurance will have to fill these gaps in order to attract people. 5.3 Classification of Voluntary Health Insurance (VHI) This classification is highly evident in European nations. There are three types of VHI corresponding to the above mentioned four drivers of market development. They are Complementary VHI, substitutive VHI and supplementary VHI each of which will be explained in detail.
Complementary voluntary health insurance: Complementary VHI tries to address deficiencies in scope and depth of coverage within the public system. Regarding scope of coverage, public systems are increasingly choosing to exclude services that might, under more favourable resource conditions, have reasonably been included in the public benefits package (a typical example being dental care). Where this is taking place, markets in complementary VHI may emerge to facilitate access to such care on an insured basis. Ex: In Spain and Netherlands, complementary VHI covers dental care.
Regarding depth of coverage, public systems might require patients to pay a user charge for accessing services (an example might be a flat-fee payable when visiting a General Practitioner (GP) or specialist). Again, markets in complementary VHI may emerge to enable patients to pay such charges on an insured basis. This type of complementary VHI is found, for example, in France. Hence, when public healthcare is deficient in terms of scope or depth of coverage, a market for VHI that complements (fills the gap) the public system may develop.
Certificate in Health Insurance TCS Business Domain Academy
Page 7 of 17
Substitutive voluntary health insurance: Substitutive VHI addresses deficiencies in system inclusiveness. In some countries, certain population groups (for instance, individuals with an annual income above a threshold, or those below a specified age) may be excluded from, or allowed to opt out of the public system. Markets in substitutive VHI develop to make it possible for these groups to access health care on an insured basis. Substitutive VHI is thus so-called because it substitutes for (i.e. takes the place of) the public system. Ex: Germany and Netherlands follow this type of VHI system.
Markets in substitutive VHI will tend to offer packages that provide a level of cover broadly comparable to that offered by the parallel public system. However, they may also offer a range of alternative packages, some of which will cover a more limited range of services (those that might be considered essential, for instance), and some of which will cover a wider range of services. Different packages may require higher or lower levels of cost sharing. Differences in package design such as these will be reflected in the price of the premium.
Supplementary voluntary health insurance: Supplementary VHI tries to address issues like low levels of consumer satisfaction with the public system, and is designed to provide access to healthcare through alternative insurance packages. Supplementary VHI markets will grow when low levels of consumer satisfaction are coupled with willingness to pay for privately financed healthcare over and above the mandatory contribution made to the public system (to which full right of access is retained). This is the principal form of VHI operating in the United Kingdom.
There are several possible causes of low levels of consumer satisfaction with publicly financed healthcare. Important causes are those related to the non-clinical dimensions of quality like: Presence of long waiting times Unhappiness with the facilities environment (ward accommodation, impersonal service or unattractive surroundings) Restrictions on product availability (for instance, patients not given the choice of a brand drug based on non-coverage, instead asked to choose an available generic version) Certificate in Health Insurance TCS Business Domain Academy
Page 8 of 17
Scope and depth of coverage offered by supplementary VHI is reflected in the price of the premium. Supplementary VHI usually covers many of the services covered by the public system this being sometimes referred to as its duplicatory function, while seeking to maintain non-clinical dimensions of quality at a comparatively high level. It may also extend to cover benefits that are excluded from the public system, such as access to alternative therapies (here, supplementary VHI might be thought of as partially serving a complementary function).
There are two classes of benefits which supplementary VHI usually extend their cover for: Benefits pertaining to resource-intensive aspects (ex: accidents & emergency services) Benefits that place insurers at a higher level of moral hazard (instances where insured can extend significant control over situation and take undue advantage thus raising predicted costs of the insurer)
5.4 Classification of Private Health Insurance (US Perspective)
Organizations that provide Private Health Insurance in US are broadly categorized into two types (based on the regulatory body monitoring)
State Licensed Health Insurance Organizations These organizations are generally regulated by the state law, and at times additional standards are imposed by the federal law or entirely supersede the state authority. These state licensed Health Insurance Organizations are further sub- divided into three types. They are: Commercial Health Insurers: They usually are for-profit organizations offering health insurance policies. They are organized (based on their capitalization structure) in two ways, one as a stock company where stockholders have ownership and other by way of mutual insurance company where the organization is owned by the policyholders itself. Ex: Aetna Health Insurance is a stock company, MICA (Mutual Insurance Company of Arizona) is an example of mutual insurance company. Certificate in Health Insurance TCS Business Domain Academy
Page 9 of 17
Blue Cross and Blue Shield Plans: When these plans were started, they are not-for-profit organizations regulated by the special state laws of state hospital called as Blue Cross and state medical associations called as Blue Shield. These laws vary from state to state in terms of insuring all the applicants and providing financial advantage for enrolling these plans. Presently some states still are operating under the special state laws and the rest are organized as commercial health insurers.
Health Maintenance Organizations (HMOs): HMOs are generally licensed under the state laws. They ensure healthcare services are provided through health insurance. Hence they perform two functions, one as an insurer where the healthcare costs are spread across the people who are enrolled in the HMO and the other as a healthcare provider by providing the necessary healthcare facilities to the enrolees. Ex: Kaiser Permanente and Harvard Pilgrim are few examples of state licensed HMOs
Self-funded Employee Health Benefit Plans They are operated under the federal law. They are usually sponsored either by employers or the employee organizations or a combination of them. In this case, sponsor assumes the entire risk of bearing the cost of healthcare of the enrolled members. In this type of plans, sponsors partner with one or more TPAs (Third Party Administrators) who are specialized in administering the benefit plans. Here the third party administrators perform a role similar to an HMO, with the difference being that the sponsor reimburses the healthcare costs incurred by the administrator in due course. Certificate in Health Insurance TCS Business Domain Academy
Page 10 of 17
5.5 Pricing of Private Health Insurance
Pricing of any insurance product is the job of an actuary, and this is done by taking various risk and cost factors into consideration. There are several methods of pricing a private health insurance: Underwriting Risk rating Experience rating
After applying any of these methods, there are four dimensions which need to be considered to compute the price of the premium, they are: Scope of cover purchased Risk characteristics of the purchaser Product options Loading charge
Each of these methods is explained in detail below: Underwriting It is the process by which the insurer decides the nature and amount of risk that he is willing to assume. Underwriters generally exclude all the pre-existing conditions because of the difficulty of assessing their future cost implications and at the same time in order to help avert adverse selection. There are two key forms of underwriting: Full Medical Underwriting: In this form of underwriting, individual is required to complete a form giving details of his/her medical history and current health status which is called as medical history declaration. The insurer may also contact the applicant or the GP (General Practitioner) for verification or for further information (if necessary). Insurer also tries to assess the extent and severity of pre-existing conditions and make an assessment of the probability of a recurrence. On the basis of the information provided on the form and by the GP, the insurer will decide whether pre-existing condition will be covered or not. Based on the associated risk of such coverage, premium charged will be decided accordingly. Certificate in Health Insurance TCS Business Domain Academy
Page 11 of 17
Moratorium underwriting: Moratorium underwriting does not require details of an individuals medical history at the time of taking the policy. Information about the subscribers relevant medical history is requested at the time of claim. On the basis of this information, the insurer decides whether or not to meet the claim (moratorium underwriting is also known as point-of-claim underwriting). When the subscriber does not experience symptoms or receive treatment, tests or advice for the condition or for related conditions for a specified duration post purchase of insurance, then it cant be excluded from the cover.
Risk Rating Underwriting is concerned with delimiting the risk that the insurer will assume, while risk rating is more directly related to the pricing of the risk. Certain criteria (like age) are taken into consideration while determining the premium. General information pertaining to the applicant like gender, age, occupational, smoking status and place of residence etc.., becomes the criteria in assessing premium.
Supposing if age is considered to be the sole criteria, applicants in higher age group are supposed to pay a higher premium, compared to the ones in a lower age group. And also there will be a ceiling age (generally 65 years) beyond which policies wont be issued because insurers find it difficult to determine an appropriate price for the premium.
An example of risk rated premium: Age Indexed Premium (%) 35 100 40 116 45 125 50 148 55 161 60 208 65 268 Table: Average indexed premium, by age (Source: Association of British Insurers, 2003)
Certificate in Health Insurance TCS Business Domain Academy
Page 12 of 17
Experience rating This is applicable in case of group insurance, where the market is divided into groups based on their sizes. Usually in case of employee group insurance, they are categorized into small groups (generally group size less than 50) and large groups (generally group size greater than 50).
Small group schemes are generally underwritten and priced in a similar way to that used in the individual market, but will take account of claims history, group size and age composition, type of industry and company location. Large-group schemes, in contrast, tend not to be underwritten but are priced solely on the basis of the groups claims experience for the previous year. Experience rating in the corporate market is often thought of as a form of community rating, as all employees within the group will be accorded the same risk value (i.e. the average for the group). However, experience rating can equally be thought of as a form of risk rating, as it is the single employer who pays the premium (even if it is those who are covered who are referred to as the subscribers), and past claims expenditure is, in effect, a reflection of the risk presented by the group as a single entity.
Large-group schemes require cover to be extended to all employees within given categories such as age group, status within the company, and length of service. This is to ensure that risk is spread widely, and that adverse selection is avoided. Renewal of group schemes rests in the hands of insurer, so there is no guarantee of cover being extended for subsequent years. 5.5.1 Price Dimensions Of the four dimensions considered for pricing premium, scope of the cover and risk characteristics of the purchaser are considered as fundamental dimensions and the price of the premium will always reflect a combination of these two. It means there is no single price for a given level of cover that is applicable to all in an actuarially fair market (which comprised of individuals who are non-alike across the dimensions of consideration).
Scope of cover: The extent and the characteristics of the cover vary for each of the health insurance products, and these products are categorized into three types. Comprehensive policies: Comprehensive policies offer the widest range of benefits and are the most expensive to purchase. Beyond the core benefits, Certificate in Health Insurance TCS Business Domain Academy
Page 13 of 17
they offer a significant level of outpatient care and access to a wide range of further benefits. Standard policies: Standard policies offer fewer benefits beyond the core benefits, but are cheaper to purchase. They may impose restrictions or give a limited choice like monetary limit on outpatient benefits, fewer empanelled hospitals etc.., Budget policies: Budget policies are the least expensive. These enable consumers to purchase a relatively limited quantity of cover for a significantly lower premium.
Risk characteristics of the purchaser: The unique aspect of a medical insurance is that the risk characteristics of each purchaser will be unique because of the differentiating factors like age, gender, profession, location etc.., and hence premium needs to be assessed accordingly.
Product Options: As explained in scope of cover, depending on the subscribers choice of accepting constraints accordingly will be his/ her premium level. Applying constraints will reduce the insurers claims-related expenditure, hence this reduction will reflect in lower price of premium. Such constraints/ options that affect the price include: Restrictions on choice of hospital Level of hospital accommodation permitted Depth of coverage (level of cost sharing) Application of a no-claims discount
And if subscriber wishes to extend the cover to dependants, the premium will get increased.
Loading Charge: The fourth dimension is the loading charge. This reflects the insurers administrative costs and profit. It also reflects insurance premium tax that is levied by the government.
Certificate in Health Insurance TCS Business Domain Academy
Page 14 of 17
Summary Private Health Insurance is a mechanism for people to: Protect themselves from the potentially extreme financial costs of medical care if they become severely ill, Ensure that they have access to health care when they need it. Private Health Insurance is an alternative to government-run public health care system Private health insurance schemes, pool the risk of high healthcare costs across a large number of people, by collecting premiums based on the average cost of healthcare for the entire group of people in the insurance risk pool Drivers for private health insurance market are- Scope of coverage being less in the public system Insufficient depth of coverage System inclusiveness (public system that does not cover entire population) Lack of customer satisfaction in the public system Classification of Voluntary Health Insurance (VHI): Complementary voluntary health insurance Substitutive voluntary health insurance Supplementary voluntary health insurance Reasons for low customer satisfaction are:- Presence of waiting times Unhappiness with the facilities environment (ward accommodation, impersonal service or unattractive surroundings) Restrictions on product availability (for instance, patients not given the choice of a brand drug based on non-coverage, instead asked to choose an available generic version) Classes of benefit package for supplementary VHI are:- Benefits pertaining to resource-intensive aspects Benefits that place insurers at a higher level of moral hazard
Certificate in Health Insurance TCS Business Domain Academy
Page 15 of 17
Classification of Private Health Insurance (US Perspective) State Licensed Health Insurance Organizations which include Commercial Health Insurers, Blue Cross and Blue Shield Plans, Health Maintenance Organizations (HMOs) Self-funded Employee Health Benefit Plans Methods of pricing a private health insurance: Underwriting, where the insurer decides the nature and amount of risk that he is willing to assume. It is of two types: o Full Medical Underwriting o Moratorium underwriting Risk rating takes into consideration certain general information about the applicants in determining the price Experience rating takes into consideration the risk rating experiences of individual groups in calculating the premium Four dimensions of price are:- Scope of cover whether they are comprehensive, standard or budget in terms of the cover Risk characteristics of the purchaser Product Options Loading Charge
Certificate in Health Insurance TCS Business Domain Academy
Page 16 of 17
References http://www.euro.who.int/__data/assets/pdf_file/0007/98422/Private_Medical_Insurance_UK. pdf Ajay Mahal , Health Policy Challenges for India: Private Health Insurance and Lessons from the International Experience Musgrove, Philip. 1996, Public and Private Roles in Health: Theory and Financing Patterns, Discussion paper #339. Washington, D.C.: The World Bank, Human Development Department Private Health Insurance Provisions, Congressional Research Service July 27, 2009 Francesca Colombo and Nicole Tapay , Private Health Insurance in OECD Countries: The Benefits and Costs for Individuals and Health Systems, OECD HEALTH WORKING PAPERS Gary Claxton, How Private Insurance Works: A Primer, Georgetown University, Institution for Health Care Research and Policy
Notice The information given in this course material is merely for reference. Certain third party terminologies or matter that maybe appearing in the course are used only for contextual identification and explanation, without an intention to infringe.