CH 7: Healthcare products Flashcards
Main types of Benefit
2
Indemnity:
* Benefit aims to restore PH to same financial position they were in before loss occurred. Subject to max cover limit.
Stated benefit:
* Pre-defined benefit regardless of the loss incurred.
Key Features
ST/LT 4
Short term:
* Annual cover
* Multiple claims
* Volatile claim amounts
* Delay with reporting and settlement, Largest reserve is IBNR claims
Long term:
* >20 year term
* Single claim
* Fixed claim amount
* Additonal cover against death, illness etc
Who are the stakeholders of health insurance?
5
- Public (both covered/uncovered)
- State (Funding/Supplying/Regulating)
- Insurers
- Healthcare providers
- Employers & Employees
What are the consumer needs in health insurance?
5
- Medical expenses
- Loss of income
- Cost of lifestyle changes
- Debt/Reduced savings
- Nursing/Frail care
Types of underwriting
5
- Full medical underwriting
- Moratorium underwriting
- Medical history disregard
- No worse terms
- Continued personal medial exclusion
Mutuality vs Solidarity
2
Mutuality: Pooling of risks after individual risks are assessed – premiums paid according to the assessed risk. Higher risk lives pay more.
Solidarity: Risks pooled before being assessed; premiums determined without reference to individual risks; may be linked to ability to pay, or overall risk of pool. open medical schemes.
Reinsurance
ST3/LT2
ST:
* Protection against large claims
* Ability to take on larger risks
* Reduce impact of accumulation/catastrophe risks
LT:
* Cope with claim fluctuations
* Assistance data/pricing
List the key risks under healthcare products
10
1.Investment risk
2.Claim frequency, benefit amount, volatility and settlement delays
3.Expenses being higher than expected
4.Credit risk
5.Accumulations, catastrophes, large number of large risks
4.Poor persistency, i.e. high lapses and low renewals
5.Poor plan mix due to upgrades, downgrades and anti-selection.
7.Underwriting risk
9.Operational risk
10.Availability of claims data
ICECAPP UOA
Reimbursement mechanism
1,4
- PMI, healthcare providers reimbursed for services
Types:
* Fee for service: Reimburesed for each service no restrictions
* Negotiated fee for service: Set max rate of reimbursement.
* Global fee: Fixed max fee payable per episode of care
* Capitation: Fixed amount paid per policy holder regardless of use.
Private medical insurance (PMI)
4
- Indemnity-based product that seek to provide compensation for the cost of private medical treatment.
- Exposed to fraud and moral hazard by PH.
- MCN: Higher level of care than state
- GV: Yes, employers compulsory to join, so no exclusions as no anti-selection.
Critical illness cover (CI)
4
- Provides a lump sum/regular income if policyholder suffers one of the defined conditions
- Req that benefit is defined. Size, period, validity.
- MCN: Assists with income/expenses if PH is critically injured.
- GV: Yes
Long-term care insurance
4
- Pre-funded covers all forms of continuing long term care for people who are unable to look after themselves.
- Measure by daily living tasks
- MCN: provides income when unable to provide for self
- GV: None
Cash benefits
4,4
Definitions:
1. Major medical expenses
2. Hospital cash plan
3. Medical shortfall cover
4. Personal accident
MCN:
* Cost of surgery
* Expenses while in hospital
* Avoid out of pocket expenses
* Expenses on injury
What does health insurance have in common with general insurance?
- May be short term
- Uncertainty over frequency of claims or amount of these claims
- Can apply similar reserving techniques (run-off triangles)
- Claims seasonality
- Often regularly renewable with reviewable premiums
What does health insurance have in common with life insurance?
- May be long term (CI, Long-term care, IP)
- Usually then one claim of known amount (or annuity-type)
- Similar investment and reserving requirements
- Often also sold by life insurers
