Ch 2 Flashcards
Pooling of Losses
Losses are spread over a large group of individuals so each individual pays the average loss of the pool rather than the actual loss
Payment Only For Random Losses
Insurance is based on the premise that payments are made only for losses that are random
Risk Transfer
The transfer of risk from insured to insurer, who typically is in a better financial position to bear the risk
Indemnification
Reimbursement to the insured if a loss occurs
What is adverse selection and how do insurers deal with this problem?
Individuals who are more likely to have claims are more inclined to purchase insurance, which can trigger a premium increase
This is mitigated by creating a large, well diversified pool of subscribers
What is the Moral Hazard problem and how is it mitigated?
When someone else is paying the cost, patients consume more healthcare services
Mitigated by co insurance or copays, which require subscribers to pay a certain percentage or amount of eligible medical expenses
Briefly describe the major Third Party Payers
Blue Cross Blue Shield: National Association sets standards that must be met to use the blue cross/blue shield name. A number of separate insurance programs offered by hospitals or physicians, consolidated into larger programs. Majority group policies
Commercial Insurers: organized either as stock or mutual companies. Stock companies are shareholder owned and can raise capital through selling shares of stock, but assume risks of ownership and management. Mutual companies have no shareholders, but instead a board of directors. Both are taxable entities. Mostly group policies covered by employer or union.
Self Insurers: make a conscious decision to bear the risks associated. Most large groups are self insured
Medicare
65+ federal government health insurance program. also covers healthcare costs associated with selected disabilities and illnesses (such as kidney failure) regardless of age. 4 major coverages
A: hospital and skilled nursing home
B: Physician, med surg, outpatient
D: prescriptions
C: combines parts a,b, and d. Called Medicare advantage
Overseen by DHHS (department of health and human services)
HHS has Medicare agency called CMS (center for Medicaid and Medicare services) that administers Medicaid
Medicaid
Fed & state government insurance program that supports low income individuals
Describe Managed Care Plans and the types
Combined effort by the insurer and a group of providers to increase quality of care and decrease costs
HMO: Insured trades decreased access for decreased cost. By combining the financing and delivery of comprehensive healthcare services into a single system, HMOs theoretically have as strong an incentive to prevent as to treat illnesses.
PPO: Do not mandate that users choose specific providers but do incentivize them to use provider panel, typically through a service discount
Capitation
Capitation: provider is paid a fixed amount regardless of amount of services. the key to provider success is to work harder, increase utilization, and hence increase profits; under capitation, the key to profitability is to work smarter and decrease utilization. As with prospective payment, capitated providers have the incentive to reduce costs, but now they also have the incentive to reduce utilization. Thus, only those procedures that are truly medically necessary should be performed, and treatment should take place in the lowest-cost setting that can provide the appropriate quality of care.
Provider incentives under cost based reimbursement
Based on costs incurred in providing services. providers are given a “blank check” in regards to acquiring assets and incurring operating costs. services that may not truly be required will be provided because more services lead to higher costs, which mean higher revenues
Provider incentives under charge based reimbursements
Payers pay billed charges according to a chargemaster (list of services provided and their costs). providers have the incentive to set high charge rates, which leads to high revenues. However, in highly competitive markets, there will be a constraint on how high providers can go. Because billed charges is a fee-for-service type of reimbursement, in which more services result in higher revenue, a strong incentive exists to provide the highest possible amount of services.
Provider incentives under per procedure reimbursement
physicians, have the incentive to perform procedures that have the highest profit potential. Furthermore, the more procedures, the better, because each procedure generates additional revenue
Provider incentives under per diagnosis reimbursement
Providers, usually hospitals, will seek patients with those diagnoses that have the greatest profit potential, and they will discourage (even discontinue) those services that have the least potential.
Provider incentives under per diem reimbursement
the provider is paid a fixed amount for each day that service is provided, regardless of the nature of the services. Per diem rates may be stratified by the type of care; for example, a hospital may be paid one rate for a medical/surgical day, a higher rate for a critical care unit day, and yet a different rate for an obstetrics day. Per diem rates may also vary over the course of a patient’s stay. For example, the early days of a stay may be paid at higher rates than the later days in order to recognize that service intensity is highest when the patient is first admitted. Per diem reimbursement applies only to inpatient settings
Provider incentives under bundled payment for reimbursement
a form of fee-for-service reimbursement in which a single sum covers all healthcare services related to a specific procedure. The objective of bundled payments is to promote more efficient use of resources and reward providers for improving the coordination, quality, and efficiency of care. If the cost of services is less than the bundled payment, the physicians and other providers retain the difference. But if the costs exceed the bundled payment, physicians and other providers are not compensated for the difference
What medical coding systems are used to support fee for service payment methodologies?
ICD: International Classification of Diseases, numerical codes for designating
CPT: Current Procedural Terminology, codes applied to medical, surgical, and diagnostic procedures
Fee For Service
use preadmission certification, utilization review, second surgical opinions, and other managed care strategies to control inappropriate utilization.
Insurance Standards Under ACA
• Children and dependents are permitted to remain on their parents’ insurance plans until their twenty-sixth birthday.
• Insurance companies are prohibited from dropping policyholders if they become sick and from denying coverage to individuals due to preexisting conditions.
• Individuals have a right to appeal and request the insurer to review denial of payment.
Cost Regulations under the ACA
• Insurers are required to charge the same premium rate to all applicants of the same age and geographic location, regardless of preexisting conditions or sex.
• Insurers are required to spend at least 80 percent to 85 percent of premium dollars on health costs and claims instead of on administrative costs and profits. If this is violated, then the insurer must issue rebates to policyholders.
• Lifetime limits on most benefits are prohibited for all new health insurance plans.
Care Regulations under ACA
• All plans must now include essential benefits, such as ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; laboratory services; preventive and wellness services; and chronic disease management and pediatric services, including oral and vision care.
• Preventive services, such as childhood immunizations, adult vaccinations, and basic medical screenings, must be available to patients free of charge.
• Individuals are permitted to choose a primary care doctor outside the plan’s network.
• Individuals can seek emergency care at a hospital outside the health plan’s network.
Individual Mandate
All eligible individuals (US citizens and legal residents) who are not covered by an employer-sponsored health plan, Medicaid, or Medicare are required to have a health insurance policy or face tax penalties. Individuals are required to maintain minimum essential coverage for themselves and their dependents. Individuals who do not have minimum levels of coverage and do not qualify for an exemption are required to pay a penalty to the Internal Revenue Service at the end of each tax year.
Health Insurance Exchange
People who have no employer-sponsored insurance, the unemployed, or the self-employed can purchase coverage through health insurance exchanges (HIEs). HIEs are online marketplaces, where people can research and review their options and purchase health insurance.
