Chapter 1 - Health and care insurance products (PMI & other health related products) Flashcards
The product cycle
- Product design
- Pricing
- Marketing sales
- Underwriting
- Claims management
- Experience monitoring (which feeds also into pricing)
- Valuation
How can insurers manage claim costs?
CALM
- CO-payments and levies require policyholders to pay a fixed amount or proportion of the cost of the healthcare services used
- APPROVED provider networks where policyholders are encouraged to seek services from healthcare service providers who are registered with the insurer
- LIMITATIONS and exclusions on benefits where the likelihood of moral hazard is high
- MEDICAL savings account, where policyholders are required to self-fund day-to-day medical expenses
By developing relationships with a network of healthcare service providers the insurer is able to manage claim costs through:
NEAT R
- NEGOTIATING fees and service standards with healthcare service providers
- EMPLOYING their own health professionals to set rules and assess special cases
- requiring prior AUTHORISATION from the insurer for hospitalisation and more expensive procedures
- introducing TREATMENT protocols that prescribe the appropriate treatment for major medical events
- regularly REVIEWING utilisation to identify moral hazard and reduce the occurrence of unnecessary or more expensive treatments
Major medical expenses
Provides a Lump sum when the policyholder undergoes surgery.
The lump sum is estimated to be sufficient to cover the in-patient costs with a balance for incidentals and recuperation expenses.
The product does not cover out-patient episodes
Health cash plans
Are defined-benefit defined-premium products. For premiums as low as R50 per month, the subscriber and family are entitled to a range of specified payouts.
Limits may apply to ensure that the claim payments to the customers are not more than say 50% of the medical bill.
The purpose of such an arrangement is to provide a defined cash benefit in the event of a claim, rather than to indemnify the individual.
As the cash benefit is generally small compared to the full cost of indemnity, there is less financial incentive for potential policyholders to take out a policy of they know they are to claim shortly. This reduces the risk of anti-selection for the insurer.
Hospital cash plans
Are defined-benefit defined-premium insurance products.
For low premiums, the policyholder and family are entitled to a fixed rand amount per day in hospital.
The term of the policy usually extends over the lifetime of the insured until death or the maximum insured age is reached (e.g 75)
In South Africa, these are provided by insurers. Individual risk rating to determine the premium is permitted. (this is allowed under medical scheme legislation because benefits are fixed amount per day (which helps reduce anti-selection)).
Medical gap cover
Designed to cover the difference between the cost of medical treatment and the amount covered by conventional PMI products
Waiting list plans
Provides standard medical insurance benefits in circumstances where the public health service is not in a position to provide treatment within a specified period.
if the policyholder can find free public healthcare for his or her condition in that period and within reasonable radius of residence, the insurer will not reimburse private expenses.
Travel insurance policies
The insured will receive medical care in the foreign country until they are well enough to travel. Medical evacuation and repatriation are also covered by the policy.
Benefits are usually limited to a maximum amount per trip.
Premiums are individually risk rated and usually depend on:
- age
- gender
- destination
- cost of healthcare at destination
- length of trip
- type of trip
Personal accident
Lump sum benefits to compensate for bodily injury suffered as the result of an accident.
Usually has a rider benefit that pays reduced benefits of the insued’s children suffer an accident
Death or total permanent disability as a result of an accident is often included within a personal accident product.
3 main types of disability
- Occupation based
- disability is established by the inability to carry out an occupation. This could relate to the inability of the life insured to perform:
- their own occupation,
- all occupations to which suited by education, training or experience,
- any occupation. - Activities of daily living
- If the policyholder is unable to perform a number of normal everyday tasks. WTF DMT - Activities of daily work, personal capacity assessments (PCAs), Functional assessment tests (FATs)
- the activities include skills like dexterity, mobility, and communication
How might the use of a waiting period for pre-existing conditions help in the management of a portfolio of PMI policies
- Help prevent/reduce anti-selection
- This is important where underwriting on the product is limited or not permitted by legislation
What are the factors that give rise to different premium rates observed by different insurers
CLAIM
- CLAIMS underwriting and managment
- LEVEL of benefits/terms and conditions offered
- ACCESS to medical services providers
- INITIAL underwriting and waiting periods
- the MIX of business by main rating factors -e.g. a greater proportion of older policyholders would lead to higher claim rates
What is selective lapsing
- Healthier lives reduce cover whilst those with high claims or poor health lives remain
Give examples of individual risk factors
- Age
- Gender
- Health status
- Geographical area
- Access to healthcare services
- Occupation
- Past claims experience
- The extent of cover provided
