Ch 2 Test Flashcards
What are the basic characteristics for insurance to work? List and explain each
Pooling of Losses: losses are spread over a larger group, each individual pays the average loss instead of the entire amount
Risk Transfer: transfer of risk from insured to insurer who is in a better financial position to bear
Indemnification: Reimbursement to the insured if a loss occurs
Payment for Random Losses: The premise that insurance only pays for losses that occur randomly
What are the two main problems that arise in insurance programs?
Adverse Selection: Those with a greater risk are more likely to buy insurance
Moral Hazard: the overuse of health services or forgoing prevention because the insured doesn’t bear the full cost
Why does adverse selection exist?
Asymmetric information, applicants have more knowledge of their health status than insurers
What are the two opposing positions insurers have taken regarding underwriting?
Community Rating: calculated based on everyone’s medical claims within a community (risk pool)
Experience Rating: calculated based on each individuals claims history
Insurance used to include a preexisting condition clause, which are now banned by the ACA
What are some techniques insurers use to protect themselves from moral hazard
Deductibles, Copayments, Coinsurance, Stop-Loss Limits, Policy Restrictions
List and define the major third party payers
BCBS
Commercial Insurers
Self Insurers
Medicare
Medicaid
Define the goal of managed care plans and the different types
combine both the provision of healthcare services and the insurance function in a single organization
HMO
PPO
POS
What were some of the reforms from the ACA
New insurance standards
Individual mandate
Establishment of fed/state health insurance exchanges
Medicaid expansion
Price transparency
HDHP
New insurance markets
Increased focus on chronic care
What are the two categories of reimbursement? Define
Fee for service: payment is tied to amount of services provided
-cost based
-charge based
-prospective
Capitation: payment is tied to the size of covered population
Define charge based FFS and the main users
Payer pays billed gross charges for services rendered, historically all third party providers use this reimbursement, they often negotiate a discount ranging from 20-50%
Define cost based reimbursement and the main users
Payer pays all allowable costs incurred in providing services
Typically periodic payments are made with a final reconciliation at end of year
Medicare used to use this, now only used in Medicare payment to critical access hospitals
Define prospective payment FFS and it’s main users
a fixed payment determined beforehand that is unrelated to either costs or charges
-per procedure
-per diagnosis
-per diem
-bundled
Define capitation, how it’s paid out, and who uses it
Payment is not tied to utilization, but rather to the number of covered lives. Paid out on Per member per month basis. Used primarily by managed care plans
Define the three main Medical coding systems used
ICD: international classification of disease, used to specify disease, only used in hospitals
CPT: current procedural terminology, used to specify procedures
HCPCS: healthcare common procedure coding system, used to include non physician services like ambulance services and prosthetic devices
Define the three main Medicare reimbursement methods
IPPS: each discharge is assigned to a Medicare severity diagnostic related group (MS-DRG). Payment rates are calculated using a base amount, then multiplying by MS-DRG relative weight
OPPS: same thing but each discharge is assigned to an ambulatory payment classification (APC)
Physician Fee Schedule: Each service has a RVU assigned that reflects the amount of physician work, expenses, and liability costs, first adjusted for local prices then multiplied by the RVU conversion factor
