CH 1_Part 2 (WM) Flashcards
How can insurers manage claims costs (PMI)? [4.25]
- Limitations and exclusions on benefits✓✓ where likelihood of moral hazard is high✓. Eg purchasing designer spectables through PMI.✓
- Co-payments and levies✓✓ require the PH to pay a fixed proportion of cost of the healthcare services used.✓
- Medical savings accounts✓ where policyholders are required to self-fund day-to-day medical expenses.✓
- Approved provider networks✓ where policyholders are encouraged to seek services from healthcare service providers who are registered with the insurer.✓ (Costs are managed through:
1. negotiating fees and service standards ✓✓
2. introducing treatment protocols✓
3. requiring prior authorisation from insurer for healthcare treatements
4. employing their own healthcare professionals to set rules & assess special cases.✓✓
5. regularly reviewing utilisation to identify moral hazard and avoid unnecessary or more expensive treatment.✓✓) - Wellness programmes✓ that encourage healthy living and exercising✓✓ by providing discounts may reduce claims costs.✓
- Preventative screenings detect illnesses early and thus higher chances of successful treatment.✓✓
Additional marks: Robust product design and clear policy wording. [0.5]
What are some of the general exclusions on PMI policies. [3]
- Alcohol and Drug abuse ✓✓
- Self-inflicted injuries ✓
- Cosmetic surgery ✓
- Frail care ✓
- Infertility ✓
- Experimental treatment ✓
- War risk ✓
- Criminal activities ✓
- Search and rescue ✓
- Any cost for which a 3rd party is responsible ✓
- Hazardous pursuits ✓
Additional: Many policies now cover types of treatments such as homeopathy and acupuncture.✓
Depression often excluded.✓
Pre-existing conditions.✓
Some chronic illnesses (non-PMB).✓
How might the use of a WP help in the management of pre-existing conditions for a portfolio of PMI policies? [2.75]
The aim of a WP is to protect the insurer against the risk of anti-selection.✓✓
This is particularly important where UW on the product is limited or not permitted by legislation.✓✓
During the WP (eg 6 months from the start of the contracts)✓ premiums will be payable but no benefits will be paid on ‘natural’ claim causes.✓✓
This may dissuade prospective PHs with pre-existing conditions to take out insurance only when they expect to make a large claim soon.✓✓ If they do buy insurance the WP removes the liability to pay benefits as a result of early claim from pre-existing conditions.✓✓
Define a “Medical Savings Account”. [2]
Day-to-day medical expenses✓ like medication, GP and specialist consultations are self-funded by PHs through a MSA.✓✓✓✓
More comprehensive cover options will cover certain day-to-day expenses above a specified annual threshold as part of the risk benefit✓✓ rather than the MSA.✓
Why are PHs expected to self-fund day-to-day medical expenses? [3.25]
PHs often use more than they need✓ ito GP & specialist consult’s✓✓, medication✓, frames for spectacles✓ etc. when it is covered by insurance.✓
However, when these expenses are self-funded through a MSA✓, PHs treat the funds as their own✓ and are more careful about how they spend them.✓
The PH has to manage their expenses in order to ensure that there are enough funds to cover day-to-day medical expenses for the year.✓✓
The risk of not having enough funds to cover day-to-day medical expense claims is transferred from the insurer to the PH.✓✓
Tip: If insurer pays for it then will often use more than what is required. But if own funds, then more careful about how funds are spent.
Discuss how the following risk mitigation factor allows the PMI insurer to control the costs of claims.
Pre-authorization [3]
Some PMI insurance providers require that they approve intended courses of treatment or surgery before the costs are incurred.✓✓
The primary aim is to ensure that the care is covered by the PMI policy.✓✓
This process also provides an opportunity for the insurer to manage care provision by ensuring that the care being offered is the best i.t.o. value for money and quality of care, example by minimizing the length of stay as an inpatient. [1]
This may also improve PH satisfaction because the care manager provides a single point of contact✓✓,
and can offer additional services, e.g. access to an advice service.✓✓
TIp: Managed Care
Describe how the following risk mitigation factor allows the PMI insurer to control the costs of claims:
Preferred provider agreements [5]
A PMI policy may restrict cover to such treatment as is carried out in certain medical establishments with whom the insurer has special arrangements.✓✓ Also it may limit the scope of reimbursement outside these establishments.✓✓
By buying in bulk the insurer can secure a lower price.✓✓
The financial arrangements will often include fixed-cost pricing for treatments.✓✓ The price includes all treatment irrespective of any complications that result in additional costs for the provider.✓✓
In addition, it may be possible to impose detailed quality controls on the treatments received and the facilities provided.✓✓
Bulk billing, e.g. a monthly bill from a hospital for all PHs treated in that hospital will reduce admin costs.✓✓
The PH has less choice but is made aware of this when policy is issued.✓✓
However, in return the PH gets a more competitive premium than if he/she had the choice of any provider.✓✓
The PH also gets quality-controlled care.✓✓
Additional points:
Costs are managed through:
1. negotiating fees and service standards✓✓
2. introducing treatment protocols✓
3. requiring prior authorisation from insurer for healthcare treatments ✓✓
4. employing their own healthcare professionals to set rules & assess special cases.✓✓
5. regularly reviewing utilisation✓ to identify moral hazard and avoid unnecessary or more expensive treatment.✓✓
Tip: Bulk buying & bulk billing.
Discuss how the following risk mitigation factor allows the PMI insurer to control the costs of claims.
Treatment protocols [2.75]
It is a set of guidelines setting out the optimal sequencing of diagnostic testing and treatment for specific conditions.✓✓
And are usually based on input from recognized specialists as well as based on clinical best-practice.✓✓
They can take account of the efficacy, costs and risks associated with treatment…✓✓
…and limit exposure to experimental treatment.✓
They can also define the course of treatment that is appropriate, e.g. keyhole vs open surgery…✓✓
…and also define eligibility for treatment, eg overweight patients may not be eligible for joint replacements.✓✓
Tip: the last two points each states that it “can define” together with an example.
Describe the characteristics of a Personal Accident policy. [5.25]
PA policies are ST contracts✓ that provide LS benefits to compensate for bodily injury suffered as the result of an accident.✓✓
Usually involves the loss of 1 or more limbs or other specified injury.✓✓ This is not indemnity because it is not possible to quantify the value of the loss, for instance, of an arm.✓✓
Benefit amounts can be large, and may include cover to only the PH or his/her family members.✓✓ The benefit amount is reduced for children✓; this reduces moral hazard risk and help to comply with statutory limits.✓✓
The measure of exposure is usually the person-year (or member/employee-year).✓✓
Claims are usually reported and settled quickly because the incidence of an event is usually very clear✓✓ and claim costs are known, although they are sometimes subject to dispute.✓✓ Claim frequency tends to be reasonably stable.✓✓
The rating factors used are usually very simple✓ (e.g. occupation, but not age or gender).✓✓
Cover for participation in hazardous leisure activities may also attract higher premiums, or be excluded.✓✓
Bonus marks = 0.5
Describe the issues when defining Total Permanent Disability. [6]
Often it is initially difficult to determine if a disability is permanent.✓✓ In these circumstances it is advisable to use a WP (or “DP”) before the claim is accepted as valid.✓✓ However, if diagnosis is unequivocal, most insurers will pay the benefit immediately.✓✓
The definition of disability considers the severity of the condition and the extent of the disablement.✓✓ This contrasts with PA benefits that normally relate to the diagnosis of a condition rather than to its extent.✓✓
The word “permanent is often difficult to define in this context✓ and the insurer’s interpretation does not always match the PH’s understanding and expectation.✓✓ One definition proposed is “beyond the hope of recovery in your lifetime”.✓✓ This means that even if the disability is severe in the ST, if it is expected that recovery will eventually occur, the benefit will not be paid.✓✓
The word “total” in the definition in practise usually means the failure of ability to perform a major or substantial part of the job or function.✓✓ It is unlikely that every single element of the job or function is failed completely.✓✓ Even severe disability will usually still leave the individual able to do something that could be part of the job or function.✓✓ If the elements failed do not comprise a major or substantial part of the role then failure is not considered total.✓✓
List the main types of disability definitions. [1.25]
Occupation-based✓
ADLs✓
ADWs✓
PCAs✓
FATs✓
Describe occupation-based definitions for disability benefits and state the main definitions thereof. [2.25]
Disability is defined by the inability to carry out an occupation✓✓, where the occupation will be specified in the policy contract✓ and could be:
their own occupation✓
all occupations to which suited by education, training or expertise [1]
Any occupation✓
State some of the short-comings of occupation-based definitions. [1]
They cannot be applied to ✓ :
- Housewives/husbands ✓
- Unemployed people ✓
- Those past retirement age ✓
HUT
Define ADL’s and list some of the criteria that will be used to assess the claim. [3.5]
The criteria is based on the PH’s inability to perform a number of normal everyday tasks✓✓, and typically include:
Feeding ✓
Dressing ✓
Washing ✓
Toileting ✓
Mobility ✓
Transferring ✓
A common requirement for the payment of benefit is the failure of the insured to be able to undertake✓, unaided✓, a given number of the ADLs above, commonly three or four.✓✓
It may be harder to satisfy this definition than an occupation-based one.✓✓
What are the advantages of an ADL definition over an occupation-based definition? [1.25]
- It can be applied to a wider range of lives and can be applied beyond retirement.✓✓
- It offers the simplicity of using only one definition throughout the term of the policy.✓✓
- Less subjective.✓
