COMPARITIVE STUDY OF HEALTH INSURANCE PRODUCTS

SHREERAJ DESHPANDE

                                      

COUNTRIES HEALTH CARE EXPENDITURE

% OF GDP PUBLIC PRIVATEJAPAN 7.3 5.7 1.6GERMANY 10.4 8.1 2.3FRANCE 9.8 7.7 2.1U.K 6.7 5.7 1.0IRELAND 6.7 5.1 1.6NETHERLAND 8.5 6.2 2.3SINGAPORE 3.3 1.5 1.8AUSTRALIA 8.5 5.8 2.7CANADA 9.2 6.3 2.9USA 14.1 6.6 7.5INDIA 5.6 1.2 4.4

                                      

COUNTRIES HEALTH INSURANCE COVERAGE

PUBLIC% MUTULLES% COMMERCIAL%

JAPAN 100 # #GERMANY 88 # 9FRANCE 99 65 14U.K 100 5.3 11IRELAND 100 30 0NETHERLAND 70 54 40SINGAPORE 100 0 0AUSTRALIA 100 0 40CANADA 100 0 #USA 42 # 69INDIA * 0 0.3

*ESIS & CGHS NOT INCLUDED # INCLUSIVE/NA

                                      

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.

                                      

THANK YOU