COMPARITIVE STUDY OF HEALTH INSURANCE PRODUCTS

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COMPARITIVE STUDY OF HEALTH INSURANCE PRODUCTS

• SHREERAJ DESHPANDE

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COUNTRIES HEALTH CARE EXPENDITURE

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

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COUNTRIES HEALTH INSURANCE COVERAGE

• PUBLIC MUTULLES COMMERCIAL
  
• JAPAN 100
  
• GERMANY 88
  9
• FRANCE 99 65
  14
• U.K 100 5.3
  11
• IRELAND 100 30
  0
• NETHERLAND 70 54
  40
• SINGAPORE 100 0
  0
• AUSTRALIA 100 0
  40
• CANADA 100 0
  
• USA 42
  69
• INDIA 0
  0.3
• ESIS CGHS NOT INCLUDED
• INCLUSIVE/NA

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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

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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.

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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.

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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.

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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.

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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

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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.

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MEDICAL EXPENSES INSURANCE

• Is Broadly Classified As
• A) Basic Medical Expenses Contract
• B) Major Medical Expenses Contract
• C) Comprehensive Medical Expenses Contract

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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.

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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 Dont
  Have Any.

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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.

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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

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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

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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.

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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

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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.

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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

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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.

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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

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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

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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

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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

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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

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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.

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MANAGED CARE

• EVOLUTION OF HEALTH INSURANCE
• INDEMNITY (HOSPITALISATION ONLY)
• INDEMNITY(ALL EXPENSES)
• MANAGED CARE

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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

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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.

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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)

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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

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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.

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MANAGED CARE PLANS

• HEALTH MAINTENANCE ORGANISATIONS
• (HMOs)
• PREFERRED PROVIDER ORGANISATIONS
• (PPOs)
• POINT-OF-SERVICE (POS) PLANS
• AND MANY MORE

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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.

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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

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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.

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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

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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

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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 ????

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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

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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

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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
  Insurers 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

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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

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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.

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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

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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
  workers wages to prevent moral hazard

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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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