Chapter 1 Health & Care Insurance products Flashcards
Describe the main types of health and care insurance contracts: -private medical insurance -health cash plans -main example variations of contracts issued.
Private Medical Insurance: Definition & types of cover
Is usually an indemnity-based product that seeks to provide compensation for the cost of private medical treatment.
This refers to products that cover medical expenses that would be funded by individuals or employers. In SA insurers are prevented from providing indemnity benefits for health related benefits.
- Renewable annually. Premiums can be changed annually.
- Cover not guaranteed from one year to the next.
- Typically underwriting on first application but not at renewal
- Short term(PMI) initial UW can be;
- full medical UW
- moratorium underwriting
- medical history disregard,
Can choose to renew with different insurer and the acceptance/UW may be one of the above or simplified to:
- No worst terms (NWT)
- Continued personal medical exclusion (CPME)
Moratorium UW explained: https://www.aviva.co.uk/health/health-products/health-insurance/understanding-medical-underwriting-types/
What are the main elements of a product cycle?
- Product design
- pricing
- marketing sales
- underwriting
- claims management
- experience monitoring
- valuation
Product Cycle: What does product design need to consider?
- The needs of customers
- roles of stakeholders
- cover provided & premiums
- risks involved in providing health insurance
Product cycle: Pricing considerations
- Experience may vary widely by provider.
- Stricter claims underwriting should be reflected with lower premiums.
Product cycle: Marketing and sales
-This product may be seen as a genuine need by customers. However, the product may still need to be marketed to maintain a competitive position in the market.
Product cycle: Claims management & underwriting
- Underwriting, waiting periods and claims management have fundamental implications for the resulting claims experience and subsequently premium rates.
Product cycle: Experience monitoring and valuation
- Premiums are usually reviewed annually.
- National or industry statistics on treatment costs covered by PMI products will not be applicable to the customers of individual insurance provider. Hence monitoring is important part of premium rating.
Risk benefits of PMI
- Usually covers in-patient treatment covering both diagnostic tests and operations.
- In-patient stays, the room costs, drugs, dressings, theatre fees, specialists.
- Out-patient treatment may be covered subject to benefit limits.
MSA
Day-to-day medical expenses like medication, GP and specialist consultations are self-funded by policyholders through a MSA.
General exclusions
- Alcohol & drug abuse
- self-inflicted injuries
- cosmetic surgery
- frail care
- infertility
- war risks
- costs for which 3rd party is responsible.
Policy excess
- The insured is liable for the first tranche of any claim (a pre-specified monetary amount known as the excess).
- The premiums discount obviously increases as the level of excess rises.
PMI: Claims experience and risk rating
- Cost of treatment made up of various components: medical practitioner fees, medication, medical supplies and nr of days in hospital.
- When reviewing premiums insurer needs to consider premium increases that will be tolerated by the market.
- Premiums reflect changes in expected claims experience over period of cover.
- Insurers may elect to introduce additional limits than introducing excessive increases.
- Community rating does not use individual information for premium rating. Only income and number of dependants are the factors used.
How can insurers manage claims costs (PMI)?
- Robust policy design
- Clear policy terms and conditions
Additional methods include: - Limitations and exclusions on benefits where likelihood of moral hazard is high. Eg purchasing designer spectables through PMI.
- Co-payments and levies require a policyholder to pay a fixed proportion of cost of the healthcare services used.
- Medical savings accounts where policyholders are required to self-fund day-to-day medical expenses.
- Pre-authorisation (x.1.6)
- Approved provider networks where policyholders are encouraged to seek services from healthcare service providers who are registered with the insurer. Costs are managed through:
1. negotiating fees and service standards (SLA)
2. introducing treatment protocols
3. requiring prior authorisation from insurer for hospitalisation.
4. employing their own healthcare professionals to set rules & assess special cases.
5. regularly reviewing utilisation to identify moral hazard and avoid unnecessary or more expensive treatment. - Wellness programmes that encourage healthy living and exercising by providing discounts may reduce claims costs.
- Preventative screenings detect illnesses early and thus higher chances of successful treatment.
PMI products?
- Major medical expenses (UK)
- Health cash plans
- Dental plans
- Optical plans
- Waiting list plans
- Health benefits in travel insurance policies
Major medical expenses
- Provides a lump sum when a policyholder undergoes a surgery.
- Lump sum varies with the severity of the case.
- There is no guarantee the benefit will cover the in-patient costs from complications.
- Does not cover out-patient episodes.
- One big advantage is that this is a fix benefit.
