HEALTH INSURANCE & MANAGED

CARE
Joko Mulyanto
Department of Public Health & Community Medicine
Faculty of Medicine and Health Sciences
Jenderal Soedirman University
OUTLINE
Definition of Health Insurance
Basic framework of Health Insurance
Classification of Health Insurance
Managed care
DEFINITON of HEALTH
INSURANCE
A way to distribute the financial risk
associated with the variation of individuals
health care expenditures by pooling costs
over time (pre-payment) and over people
(pooling).
KEYWORDS of HEALTH INSURANCE
Pre payment
Collection and management of revenues that
contributions are collected from individuals prior
to (and independently from) the utilization .
Pooling
Collection and management of revenues in such
a way to ensure that the risk of having to pay for
health care is borne by all members of the pool
and not by each contributor individually


ALTERNATIVE for FINANCING
HEALTHCARE

WHY SHOULD HEALTH INSURANCE
?
Uncertainty
The risk of being sick is unknown, uncertain,
and unpredictable.
Catastrophically event.
Economic lost due to sickness condition is
significant, cant be bear by common
individuals.

CONCEPT of HEALTH INSURANCE
Certainty
Transfer from uncertain to certain
Risk distribution
Transfer from individual risk to collective risk
The law of large number
Larger risk-pooling , smaller individual risk
Positive value margin
Economically beneficial

BASIC FRAMEWORK OF HEALTH
INSURANCE

INSURED

HEALTH
PROVIDER
HEALTH
INSURANCE
Cost Sharing
Healthcare
Provision
Reimbursem
ent
Premium
Claim
Benefit
BASIC CLASSIFICATION OF
HEALTH INSURANCE
Sources of Financing
Level of Compulsion scheme
Group of Individual
Method of Premium Calculation
FINANCING SOURCES
Public Health Insurance
Financed through taxation or payroll
contribution to social security scheme.
- Tax-funded
- Social security scheme
Private Health Insurance
Private health premium, voluntary,
government regulate but not intervene
LEVEL OF COMPULSION
Mandatory insurance
Schemes where individual participation is
compulsory by government through legal
stipulation
- Single / Multiple scheme
- Group / Total
Voluntary insurance
Insurance where insurees participate on a
voluntary basis, include participation
conditioned by employment.
GROUP or INDIVIDUAL
Group insurance.
Personal insurance.
PREMIUM CALCULATION METHOD
Income related
Share of earned income, usually in social health
insurance.
Community rating
All members pay the same amount premium
(absolute number).
Risk related
Related to individual risk, calculated by actuarial
principle, usually in private health insurance.

GENERAL CLASSIFICATION
Public Health Insurance
- Tax-based public health insurance
- Social security scheme
Private Health Insurance
- Private mandatory HI
- Private employment group HI
- Private community rated HI
- Private risk rated HI
HEALTH INSURANCE MIX

SPECIAL TYPE OF HI
Mandatory HI financed by individual flat
premium.
Private HI, with government subsidies
Government HI scheme for government
employee.



MANAGEMENT OF INSURANCE
SCHEME
Public entities
Private entities
CONTRACTUAL RELATIONSHIP
WITH PROVIDER
Indemnity insurance
Selective contracting
Integration with provider

CLASSIFICATION BASED ON
FUNCTIONS OF PHI
Contd
Primary PHI
- Principal PHI
- Substitute PHI
Duplicate PHI
Complementary PHI
Supplementary PHI
COST SHARING
Portion of healthcare cost paid out 0f pocket
by the insured, apart from the premium.
Coinsurance
Copayment
Deductible
MANAGED CARE
Systems that integrate financing and delivery of
contractually defined health services to enrollees
arrangements with select providers (networks)
explicit standards to select providers
formal programs for quality improvement, utilization
review, and demand management
focus on prevention, limited cost-sharing
financial incentives for enrollees to use network doctors
Payment typically paid on prospective capitated basis
CLASSIC HEALTH INSURANCE vs
MANAGED CARE
HEALTH INSURANCE
free beneficiary choice of provider
fee-for-service payments to
providers
not integrated with the delivery
system
insurer accepts all the financial risk
little quality measurement and
very limited care management
MANAGED CARE
selected provider network
gatekeeper role of primary care
physician and other utilization
managers
negotiated payments and
incentives for cost control
integrated systems
risk is shared
measures quality &
appropriateness
generally, more covered services /
benefits
low out-of-pocket costs for
members using the network
MANAGED CARE MECHANISM
Establishing risk-adjusted premiums
Determining the benefit package including
consumer cost-sharing
Selection and organization of provider
network
Transferring risk and paying providers
Monitoring quality and controlling service
utilization
BASIC MANAGED CARE MODELS
IPA - contracts with a managed care plan,
physicians remain independent
Network - managed care plan contracts with multiple
physician groups for services
Group - managed care plan contracts with a
medical group for services
Staff - physicians are employees; treat members in the
MCOs facilities
OTHER MANAGED CARE MODELS
Point of Service (POS)
Preffered Provider Organization (PPO)
Exclusive Provider Organization (EPO)

APPROACHES TO CONTROL COST
Reimbursement Methods
Contract negotiations
Choice of Provider(s), then
Credentialing
Profiling
Gatekeeper
Utilization Review
Case Management
Quality Measurement
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