Healthcare Products Flashcards
Why are group PMI products experience rated?
- Group PMI experience is likely to differ from employer to employer even if they operate in the same industry.
- Experience may differ because:
*Employers operate in different geographical locations.
*The nature of work leads to different PMI treatment costs.
*Employers may have differences in attitudes to health and safety in the workplace, which can affect the number and size of claims. - Historical claims are usually a good indicator of future experience.
- Single book-rate premium will not accurately reflect expected risk of different group policies, even if risk factors are identical.
- Experience rating should be more attractive to customers, thus improving marketability and sales volumes.
- Since the premium is based on past claims experience, this will encourage the employer to:
*Reduce the occurrence of adverse claims experience.
*Encourage claim cost decreases.
*By reducing premiums via good health management practices, this should improve persistency.
What are the main transactions under unit-linked contracts?
To the unit fund:
- + Allocated premium.
- + Bid-offer spread.
- Management charge.
- Morbidity charge.
- Investment charge.
- Policy fee.
To the non-unit fund:
- + Unallocated premium.
- + Bid-offer spread.
- + Management charge.
- + Morbidity charge.
- + Investment charge.
- + Policy fee.
- Expenses.
- Guaranteed benefits.
How are high initial expenses met with unit-linked contracts?
0% allocation rate for a short period of time.
- Very low allocation rate for a short period of time.
- Higher fund charges throughout the policy lifetime.
- Assign special units (capital units) which have higher fund charge than normal units.
What customer needs does PMI meet?
Needs met depend on the level of state intervention.
- Policyholders can get medical attention without waiting.
- Policyholders can get a better standard of accommodation, e.g., private room.
- Policyholders can get medical attention with their doctor of choice and at the hospital of their choice.
- Policyholders have protection against the inability to meet medical costs in time of need.
- Policyholders can ensure good quality treatment is provided at acceptable cost through treatment protocols, hospital networks, and negotiated fees.
How are benefits paid for PMI policies?
Usually indemnity benefits, so the claim amount is unknown until treatment is complete.
- Benefits are usually paid directly to the provider, or the policyholder is reimbursed.
- To limit the claim amount, upper limits or excesses can be set.
- Cash is only provided for:
- Hospital cash plans.
- Major medical expense plans (lump sum for surgery).
- Accident, death, and disability plans (lump sum on suffering certain injuries or fixed regular payments on accidental death or disability).
How are benefits paid for CI policies?
- Usually a lump sum benefit provided on diagnosis of specified critical illnesses.
- Could convert into an income stream by purchasing an annuity.
- Lump sum is more than just the cost of immediate care, so it can pay for recuperation expenses too.
- As a result, there is a mismatch between benefit and customer need, which can increase the risk of anti-selection and fraud.
- Can use a tiered benefit system to solve the mismatch issues.
How are benefits paid for LTC policies?
- LTC provides lump sum benefits or indemnity benefits.
- Usually not indemnity benefits because it is difficult to predict the probability, duration, and cost of claims.
- Lump sum is chosen at the time of purchase for pre-funded LTC policies.
- Lump sum premium converted into lifetime income for immediate needs LTC policies.
- Income depends on the level of disability at the time of need.
- Benefit might increase as incapacity worsens.
What customer needs does CI meet?
Policyholders can pay for the cost of medical treatments, medications, etc.
- Policyholders can pay for recuperation or rehabilitation treatment after illness.
- Policyholders are provided with income, now that they are no longer able to work after being diagnosed with CI.
- Policyholders can pay for the cost of lifestyle changes, e.g., railings added to showers at home.
- Policyholders can use the benefit to pay off home or car loans.
- Policyholders can pay for costs to replace a key person in the company.
- Policyholders can supplement income if they move to a less stressful job post-heart attack.
What customer needs does LTC meet?
Covers the cost of care in the future.
- Covers the cost of medical facilities, e.g., old age home.
- Covers the cost of lifestyle changes, e.g., add railings to home.
- Covers the cost of nurses or carers.
- Supplements regular income if no longer able to work.
How does PMI provide peace of mind?
No reliance on the state for medical treatment services.
- No longer worried about the ability to afford paying for medical services yourself.
What peace of mind does CI provide?
Policyholders know they can relax if diagnosed with a certain critical illness.
- Since only “certain” CI, policyholders may get more comprehensive cover from PMI + income protection.
What peace of mind does LTC provide?
Policyholders know they’ll have enough money to pay for care when they’re old.
- Policyholders don’t have to rely on the government.
- Policyholders know they’ll have enough money to pay for care for their parents if they cannot do it themselves.
- Policyholders know that they will be supported by the insurer in terms of choosing the correct care service to buy.
How can PMI be made more complex?
All the managed care intervention concepts can be difficult to understand.
- Pre-authorisation might be misunderstood.
- Treatment protocols might mean some care is not covered due to cost-benefit analysis.
- Provider networks might be misunderstood from the outset.
- Cost-sharing arrangements might be difficult to understand.
- Policyholders might think it is an indemnity product, but it also has limits.
- The medical underwriting process might be misunderstood.
- Exclusions might vary between products in the market.
What might customers not understand about CI products?
The concept of tiered benefits might be difficult to explain and lead to claims disputes.
- Some illnesses will not qualify policyholders for a claim, e.g., injury due to an accident or CI not on the list.
- Lump sum payout should be easy to explain.
- Claims trigger on diagnosis should be easy to explain.
What might customers not understand about LTC products?
That this is not an indemnity product.
- Benefits may be payable for a limited period of time.
- Benefits may be subject to a maximum amount.
- There might be different benefit levels depending on the severity of incapacity.
- Triggers of benefits (Activities of Daily Living, or cognitive impairment) need to be explained to the customer.
What are the advantages and disadvantages of tiered benefits?
Advantages:
- Fairer to policyholders.
- Customer needs better matched to benefit paid at the time.
- Policy no longer lapses after a claim is made.
- Cheaper premium because usually 100% of the benefit is not paid.
- Reduced anti-selection risk to insurer.
- Seen as more comprehensive to policyholders (wouldn’t have paid for less severe conditions before).
- can be seen as product differentiator
Disadvantages:
- Difficult to define additional stages that trigger benefits.
- Definitions might be weak and lead to more claims.
- Difficult to compare products within the market as no consistency in approach.
- Need four times as much data for severity levels
- need to train staff and build systems
What are some of the alternatives to PMI cover?
- Dental and optometry benefits
- Health cash plans
- Major medical expenses
- Travel insurance health cover
- Waiting list plans
What are health cash plans?
- There is a defined benefit (NOT INDEMNITY) that may be limited to 50% of the medical bill.
- Defined benefit and defined premium products
- For super low premiums, subscriber and family can get a range of different payouts.
- Payouts depend on certain health events including hospitalisation, gap cover, dental and optical, hearing aids etc.
- Schedules of benefits are bought in “units”, you and pick and choose your benefit and pay an associated contribution.
- Premiums are low so difficult to recoup initial expenses, best way is to:
- PH loyalty - persistency is important to ensure initial expenses can be recovered over a period of years.
- Cost efficient claims admission
- Volumes in force - more policies, the more the initial expenses can be spread across them
Prev said he only has a hospital cash plan. So he’s only covered for fixed Rand amount. But the cover extends over his whole life. There’s waiting period for accident claims, but he didn’t tear his meniscus due to running fault. And even though he wasn’t really underwritten he’s still risk rated for premiums.
- Entitled to a fixed rand amount per day spent in hospital.
- Benefits are paid from first/second day spent in hospital, if they are expected to be hospitalised for at least two days.
- Not renewed annually, but extends over lifetime of insured (death/max age)
- Benefits/conditions that may apply:
- escalating benefits that increase with premium.
- individual risk rating (no indemnity and fixed daily amount)
- limited underwriting
- waiting period except for accident related claims
- pre-existing condition exclusions.
Dental plans
- Insurer works closely with dentists to insure patient does not have pre-existing conditions or needs imminent treatment.
- There are two principle methods
- Capitation basis: insurer and dentist agree on a sum for each insured mouth per annum
- Patient pays regular fee to insurer who deducts an amount for expenses
- Insurer passes the rest to dentist who administers the treatemnt
- Risk of cost of treatment being more than expected lies with dentist
- Insurer deals with all admin and might cover cost of accident and emergency treatment
- Indemnity basis: insurer covers actual cost of treatment.
- Insurer bears all the experience risk
- Often limits and coinsurance will apply.
- Capitation basis: insurer and dentist agree on a sum for each insured mouth per annum
Optometry plans
- Provide cover for spectacles, optical treatments and eye-tests
- Waiting periods and pre-existing condition exclusons apply
Health cash plans: What is medical gap cover?
- Covers difference between cost of medical treatment and amount covered by PMI
- Focuses on in-hospital medical and surgical treatment and out-patient treatment for chemotherapy, radiotherapy and renal dialysis
- Benefits limited to annual amount per life event.
What are waiting list plans?
- For a reduced premium, provide medical insurance benefits only when public health services cannot provide treatment within a specified period (often 6 weeks).
- Insurance will not reimburse if state health provider found.
- Product appropriate where quality of state healthcare is good but there are long waiting periods.
What are health insurance travel insurance?
- Covers emergency medical expenses when insured is not in their home country.
- Receive medical care until well enough to travel.
- Medical evacuation and repatriation also covered.
- Insurer usually had medical assistance provider to liaise with healthcare providers.
- Benefits limited to maximum amount per trip and PH can select benefit limit most appropriate to them.
- Premiums are individually risk rates are depend on: age, gender, destination, cost of healthcare at destination, length of trip, type of trip.
- Hazardous activities are usually excluded unless specialised policy purchased.
- Pre-existing medical conditions usually excluded.
