Ch 29: Other risk management techniques

Question 1

Medical evidence sources

Answer 1

• Questions on the proposal form completed by the applicant
• Reports from medical doctors that the applicant has consulted
• Medical examination carried out on the applicant at the request of the insurer
• Specialist medical tests on the applicant e.g., HIV test

Question 2

Options when applicant is deemed to represent a higher risk than that assumed in pricing basis

Answer 2

• Higher premiums ro lower benefit
• Postpone cover until acceptable
• Decline cover
• Offer different type of policy (one which is less risk intensive)
• Obtain faculative reinsurance with zero retension
• Exclude certain causes or conditions

Question 3

Ways in which medical underwriting manages risk

Answer 3

• Protects insurer from anti-selection and in particluar from lives whose health is so seriously imparied that it is impossible to assess the risk adequately. Anti-selection can lead to both higher than expected frequency of claims and average cost of claims
• Identify lives with substandard health risk for whom special terms must be quoted.
• For these substandard risks, underwriting will indentify the most suitable approach and premium level for special terms to be offered
• Adequate risk classification within the underwriying process will help to ensure that all risks are rated fairly
• Will help ensure that actual morbidity experience does not depart too far from that assumed in the pricing of the contracts sold.
• Financial underwriting will also be used for larger proposals, reduces the risk from over-insurance

Question 4

Risk management techniques to manage claim costs can be classified into three main categories

Answer 4

• Methods aimed at the policyholders
• Methods aimed at healthcare providers
• Care/utilisation management

Question 5

Risk management methods to reduce claims costs aimed at the policyholder

Answer 5

• Limitations and exclusions on benefits
• Co-payments, levies, deductibles and medical savings accounts
• Approved provider networks
• Precentative medicine and wellness programmes

Question 6

How does restricting choice of healthcare provider to approved provider networks help the insurer to manage costs?

Answer 6

• Insurer may have entered into an agreement with the healthcare provider
• Allows insurer to set service or treatment guidelines
• And to have access to information to monitor and manage cost of treatment
• Agreement may also include level of reimbursement for medical services

Question 7

Risk management methods to reduce claims costs aimed at healthcare providers

Answer 7

• Treatment protocols
• Negotiated fees and fixed payment methods
  * Fee discounts
  * Use of incentives to limit costs (bonus for being within budget)
  * Negotiation of fixed payment methods that partly transfer the risk relating to treatment costs to the healthcare provider

Question 8

Risk management methods to reduce claims costs aimed through care / utilisation management

Answer 8

• Pre-authorisation
  * Doctor is only gateeeper as regards to medical need fro treatment and means of delivery, so some insurers put pre-authorisation procedures in place
  * Claims are authenticated against the conditions in the policy and medical need can be established.
  * Process can help to direct patient into a service provider or hospital that is best equipped to handle the treatment (at a cost acceptable to the insurer)
  * Need to ensure sound basis for the protocols that are used, doctors may perceive it as interferring in relationship with patient and professional decision making, also custmomers may feel it as infringement on their perceived rights to receive treatment where and when they want
• Case management
  * Involves monitoring the patient while they are receiving treatment by communicating with healthcare provider.
• Utilisation reviews
  * Retrospective utilisation reviews can help with identifying trends in treatments, healthcare with excessive costs, fraud and billing errors

Question 9

Checks on policy and claims data

Answer 9

• Recording accuracy
• Regular vetting and spot checks
• Controls on data acceptance
• Comulsory fields
• Staff training

Question 10

Managing the distribution process and customer relationship - protecting relationship insurer must:

Answer 10

• Monitor the sales message
• Beware business churning
• Analyse quality of sales staff
• Beware overgenerous commission
• Monitor premium receipts
• Invest in sales training
  * Salespeople and sales support staff should be adequately trained on sales processes including the need to obtain robust information on customers’ health and care insurance needs and their ability to pay
  * Salespeople and support staff should be adequately trained on products and acceptance procedures

Question 11

Techniques for managing counterparty risk

Answer 11

• Through due dilligence on the counterparty before selection
• Diversification across different counterparties
• Single counterparty exposure limits
• Restriction on the use of counterparties below a specified credit rating
• Credit insurance or derivatives

Question 12

? (seems like additional ones??) Reimbursement methods

Answer 12

• Fee-for-service
• Episode of care
• Capitation
• Pay for performance
• Pay for co-ordiantion
• Pay for participation