CH 7: Healthcare products Flashcards

1
Q

Main types of Benefit

2

A

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.

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2
Q

Key Features

ST/LT 4

A

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

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3
Q

Who are the stakeholders of health insurance?

5

A
  • Public (both covered/uncovered)
  • State (Funding/Supplying/Regulating)
  • Insurers
  • Healthcare providers
  • Employers & Employees
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4
Q

What are the consumer needs in health insurance?

5

A
  • Medical expenses
  • Loss of income
  • Cost of lifestyle changes
  • Debt/Reduced savings
  • Nursing/Frail care
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5
Q

Types of underwriting

5

A
  1. Full medical underwriting
  2. Moratorium underwriting
  3. Medical history disregard
  4. No worse terms
  5. Continued personal medial exclusion
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6
Q

Mutuality vs Solidarity

2

A

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.

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7
Q

Reinsurance

ST3/LT2

A

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

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8
Q

List the key risks under healthcare products

10

A

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

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9
Q

Reimbursement mechanism

1,4

A
  • 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.

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10
Q

Private medical insurance (PMI)

4

A
  • 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.
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11
Q

Critical illness cover (CI)

4

A
  • 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
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12
Q

Long-term care insurance

4

A
  • 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
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13
Q

Cash benefits

4,4

A

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

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14
Q

What does health insurance have in common with general insurance?

A
  • 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
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15
Q

What does health insurance have in common with life insurance?

A
  • 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
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16
Q

Why does demand for healthcare keep increasing as time goes by?

A
  • Technological developments
  • Demographic changes e.g. ageing populations in many countries
  • The burden of disease e.g. lifestyle diseases
  • Increased exposure, access and expectations
  • Supplier induced demand
  • Existence of a third party payer
  • Information asymmetry
  • Cultural overlay (C-section vs natural births)
17
Q

The impact of information asymmetry in healthcare

A
  • Healthcare pays for consults, cannot get a second opinion
  • Difficulty making comparisons or questioning advice
  • Difficulty assessing quality of treatment
  • Emotional situations
  • Making decisions in life threatening situations