Insurance Markets Flashcards
Adverse selection
occurs when people make insurance purchasing decisions based on their own knowledge of likelihood of making a claim, but the insurer cannot account for this in the price of insurance coverage
Typical scenario of adverse selection
The insurance applicant might have information about their “risk” that is not known to the insurer. For example, a woman may know that in the next year she is going to try to have a child.
Minimizing ___ is key for health insurance to remain a financially viable product.
Minimizing adverse selection is key for health insurance to remain a financially viable product.
Insurance “death spiral”
When adverse selection leads to increase in average cost of health plan, resulting in more healthy individuals leaving the plan, and driving the cost up farther and farther until the plan becomes insolvent.
In an unregulated health insurance market health insurance companies attempt to use ___ to prevent adverse selection.
In an unregulated health insurance market health insurance companies attempt to use underwriting to prevent adverse selection.
The ACA required that insurers accept. . .
any individual, regardless of health status and that insurers charge all individuals of the same age (both healthy and sick) the same price for the same product
“essential health benefits”
Benefits that must be added to all insurance plans on the US market. Legislated by the ACA. Part of prohibiting annual and lifetime limits on benefits.
The two sides of the ACA
- Prevent underwriting by insurance companies to address adverse selection
- Instead, address adverse selection by instituting an individual mandate
The Congressional Budget Office estimates that the elimination of the individual mandate penalty will result in individual market premiums that are ___ higher than they would have been if the penalty had continued.
The Congressional Budget Office estimates that the elimination of the individual mandate penalty will result in individual market premiums that are 10 percent higher than they would have been if the penalty had continued.
ACA subsidies
In addition to addressing adverse selection, the ACA sets up a framework to provide subsidies to individuals of modest income to afford health insurance.
ACA open enrollment period
Limits purchasing of insurance to autumn or to time-limited special enrollment period triggered by certain life events like losing job-based health insurance, getting married, or moving to a new area.
This is part of preventing adverse selection by ensuring people do not just buy insurance as soon as they feel sick.
HMO plan
Health maintenance organization
HMOs have a network of healthcare providers that deliver and manage care. Services not provided by the network are not part of the plan. No “claims” and then reinbursment, instead the insuree pays their share at the time of purchase. Usually requires a PCP and sometimes require referral for specialty care.
Most restrictive.
POS plan
Point of service plan
Builds on the HMO plan in order to cover out-of-network services. There is some form of coverage for these services, but not as much as for network providers.
Somewhat restrictive
PPO plan
Preferred provider organization
Fully covered care within the contracted network, with ability to obtain out-of-network care for higher costs. No “claims” if in network, usually does not require a PCP. PPO usually larger than HMO, so more choices or providers.
Least restrictive.
Nominal benefit design
The list of conditions/services covered by an insurance plan and under what financial terms.
