Midterm 1 Flashcards
Medical underwriting
Subscribers are charted different monthly premiums depending on how much medical care they are likely to require.
Estimated by considering age, sex, location, self-reported health status, and medical history.
Deductible
Requires patients to pay for their own healthcare expenses until a specified dollar amount has been reached during a given period of time, usually one year
Copayment
Requires patients to pay a specified dollar amount every time a service is received (e.g., $50 per hospital admission or $5 per prescription)
Coinsurance
Requires patients to pay a specified percentage of the cost of covered services (e.g., 20% of an emergency department visit)
Out of Pocket Max
= deductibles + copayments + coinsurances
Catastrophic Hazard
Problem: Widespread, catastrophic event that would exceed a company’s ability to pay
Solutions: Exclusion criteria, avoid insuring large numbers of policyholders in the same situation
Adverse Selection
Problem: Individuals or companies purchase insurance because the expect a loss. Applies to health insurance as individuals at low risk of illness less likely to purchase insurance leaving high risk and costly individuals
Solutions: Group policies, waiting periods, medical underwriting, coverage limitations, coordination of benefits
Incentive to Create Losses
Problem: Individual gains from an apparent loss. Applies to health insurance as physicians, who act as the patient’s agent, can create a demand for a service they supply (i.e., fee for service)
Solutions: Difficult to avoid - - > New payment models
Supplier - Induced Demand
Problem: Demand for medical services does not come purely from the provider
Solutions: Prior authorizations
Primary Agent Problem
Problem: Occurs when one person or entity (“agent”) is able to make decisions on behalf of or that impact another person or entity (“principal”).
Solution(s): Provider education
Moral Hazard
Problem: Overconsumption. When price of a product or service decreases, the quantity demanded increases
Solutions: Cost sharing (deductibles, copayments, coinsurance)
Three sources of Insurance
Individual, employer, government
Employee Sponsored Insurance
Most common in US
Employer contributes 50-90% of monthly premium
Fully insured (employer INS)
Employer buys insurance from a private company for its employees. Insurance company is the payer and assumes the risk.
If there is profit, then it goes to the insurance company. Regulated by the state
Self insured (employer INS)
Employer acts as payer and assumes the risk. The private company is contracted to handle the day to day administration of the plan.
If there is profit, then it goes to the company.
Regulated by the federal government.
