7. Healthcare products

Question 1

Legislation

Answer 1

• Highly regulated

- May be required by state

Question 2

Features of short term products

Answer 2

• Usually 1 year + renewable
• Can be multiple claims
• Unknown + volatile claim amounts
• Can be delays in reporting + settling claims

Question 3

Features of long term products

Answer 3

• Usually ceases on claim
• Claim amount may be known with certainty
• Protection against ill-health/death
• Group versions usually for 1/2 years but may be renewable

Question 4

Short term underwriting

Answer 4

1. Full medical- Any pre-existing conditions ignored
2. Moratorium- Won’t cover conditions that existed during pre-specified period before start of policy
3. Medical history disregard
4. No worse terms- Cover at least as comprehensive as policyholder’s current policy with no extra underwriting conditions
5. Continued medical extension- carry forward cover for medical conditions that existed under previous policy

Question 5

Long term underwriting

Answer 5

Medical underwriting

Question 6

Provisions

Answer 6

Mainly IBNR

Question 7

Providers

Answer 7

• State
• Subsidised care through donors
• Insurance companies
• Mutuals

Question 8

Reimbusment mechanisms

Answer 8

• Fee-for-service
• Negotiated-fee-for-service
• Global fee
• Capitation

Question 9

Fee-for-service

Answer 9

Providers reimbursed for each service provided

Question 10

Negotiated fee-for-service

Answer 10

Tariff/remuneration for each service is pre-defined

Question 11

Global fee

Answer 11

Fixed tariff/fee per episode of care with service provider assuming some risk for level of services required per patient

Question 12

Capitation

Answer 12

Fixed amount paid per policyholder who has option to use service/not (fee is paid regardless)

Question 13

Medical trends

Answer 13

• Public good characteristics + universal access
• Information asymmetry, oversupply + demand
• Rapidly increasing costs of health care services

Question 14

Products

Answer 14

• Personal medical insurance
• Critical illness
• Long-term care
• Cash benefits

Question 15

PMI

Answer 15

Indemnity based + private medical treatment

Question 16

CI

Answer 16

Lump sum/regular income if policyholder suffers from defined conditions

Question 17

LTC

Answer 17

All forms of continuing personal/nursing care and associated domestic services for those who can’t look after themselves

Question 18

Cash benefits

Answer 18

1. Major medical expenses
2. Hospital cash plans
3. Medical shortfall (gap) cover
4. Personal accident

Question 19

Premium ratings

Answer 19

1. Mutuality: Premiums by policyholders based on policyholder’s risks&raquo_space;> claims paid out of pooled fund.
2. Solidarity: Premiums are based on ability to pay/ are set&raquo_space;> losses are paid according to need.
3. Community rating: Premiums are calculated using community rating factors.