PMI and other health-related products

Question 1

Acute Illnesses

Answer 1

Illnesses or conditions of a non-degenerative nature where a cure is a reasonable prospect.

Question 2

ADLs

Answer 2

Activities of daily living are a number of functional tests against which incapacity can be measured.

Question 3

ADWs

Answer 3

Activities of daily working are an alternative set of functional tests against which disability can be measured.

Question 4

ASU Insurance

Answer 4

Short term insurance covering accident, sickness and unemployment.

Question 5

Affinity group

Answer 5

A group if people with something definitive in common, such as holding a membership or being an employee of a particular organisation, but not common employment.

Question 6

Anti-selection

Answer 6

People will be more likely to take out insurance contract when they believe their risk to be higher than the insurance company has allowed for in the premium, ie the benefits are worth more than the premiums payable.

Question 7

Benefit limitation

Answer 7

Many PMI policies place a limitation on the amounts paid annually for specific treatment as a way of containing claim costs.

Question 8

Capitation

Answer 8

This term relates to the practice of charging for cover by forecasting the likely claims on an individual basis and charging this, adjusted for expenses and profit, as the premium.

In effect, the insurance company separates out a set of medical benefits and passes this risk onto the provider, by giving a proportion of the insurance premium for each person managed to the provider up-front rather than an amount per claim. The risk that funds are insufficient to cover treatment lies with the provider of the healthcare services.

Question 9

Cash plans / health cash plans

Answer 9

This product pays a pre-specified cash sum on the occurrence of certain medical events. Typically the benefits paid are low relative to the true cost and represent cash in hand rather than indemnity benefits. There is also normally coinsurance and an annual limit.

Question 10

Chronic Illnesses

Answer 10

Chronic illnesses are degenerative and/or generally incurable. The purpose if any treatment in palliative.

Question 11

Claims pre-authorisation

Answer 11

Some PMI insurers require that intended courses of treatment or surgery be approved by them for policy coverage before costs are incurred. This process can often provide opportunity for the insurer to manage care provision or reduce after-the-event claim denials.

Question 12

Coinsurance

Answer 12

Coinsurance is the general term given to a PMI policy condition whereby the policyholder is required to pay, at least in part, for medical expenses incurred, maybe on a percentage basis.

In other contexts, coinsurance also refers to the situation where two insurers share the contract with the policyholder and also may refer to reinsurance on an original terms basis.

Question 13

Community rating

Answer 13

Community rating most often refers to the practice of charging all policyholders or a significant subset of the persons insured the same premium rate irrespective of rating factors such as age, gender and medical history.

Community rating sometimes refers to the process of applying tabular rates to applicants irrespective of claims history.

Question 14

Comprehensive cover

Answer 14

The standard or comprehensive PMI cover provides for full reimbursement of all medical costs incurred in hospitals within the appropriate bands and for such other treatments as the policy stipulates. Occasionally some high policy limits will apply.

Question 15

Co-payment

Answer 15

The charge a policyholder is required to pay to the provider for certain health care services under the terms of the policy. Typical co-payments are fixed Rand amounts for doctor visits, prescriptions or hospital admissions.

Question 16

Cost plus

Answer 16

Many of the largest group PMI schemes will self-insure. Some of these will seek to limit the possible downside by insuring against an extreme experience. Insurance will be arranged to cover the excess of a pre-agreed claims fund. Such an arrangement is called cost plus cover or stop loss cover.

Question 17

Day case admissions

Answer 17

This term relates to the increasing practice of treating the more straightforward operations in hospital surgical units on the day of admission, occupying a bed but being discharged on the same day.

Question 18

Diagnostic treatment

Answer 18

Medical treatment for the purpose identifying the medical problem. Diagnostic treatment includes x-rays, laboratory tests and pathology.

Question 19

Elective surgery

Answer 19

This is surgery that is deemed to be non-emergency.

Question 20

Excess, Deductible

Answer 20

These terms are used to describe the policy condition whereby the insured is responsible for the first $x of any claim.

The excess/deductible may operate not on individual claims but on the aggregate of claims over a policy year, or be applied per life or per policy.

Question 21

Exclusions

Answer 21

These are causes of disability that are explicitly excluded from the cover provided by a policy. The most common exclusions are war, drugs, alcohol and failure to seek or follow medical advice.

Question 22

Fixed price surgery

Answer 22

This phrase relates to an agreement between a PMI insurer and a hospital (or hospital chain) whereby all surgical procedures of a particular type will be charged at a particular cost per case rate, regardless of the individual complexity. These rates are commonly referred to as “case rates” or “procedure pricing”.

Question 23

General practitioner (GP)

Answer 23

This phrase refers to the individual’s own doctor, who provides primary medical care and is normally the first port-of-call for all health concerns. The GP may or may not hold all individual health record pertinent to that person.

Question 24

GP referral

Answer 24

Normal medical protocols would involve the patient being referred for secondary care after an initial consultation with his/her GP.

Question 25

Health Maintenance Organisation (HMO) (Health Management Organisation)

Answer 25

This is a form of health organisation akin to insurance that combines a range of coverages on a group basis. A group of doctors and other medical professionals offer care through the HMO for a monthly subscription. However, only visits to professionals within the HMO network are covered by the policy. All visits, prescriptions and other care must be cleared by the HMO in order to be covered. A primary doctor within the HMO handles referrals. They are more common in the USA.

Question 26

Indemnity

Answer 26

Under the principle of indemnity, the insured is restored to the same financial position after a loss as before the loss.

Question 27

Individual business

Answer 27

This is insurance covering an individual under a single policy document. Where the insurance additionally covers immediate family members on a joint life basis, this is also considered to be individual business.

Question 28

In-patient

Answer 28

This is a person who is admitted to hospital and occupies a bed overnight.

Question 29

Investigative surgery

Answer 29

This is surgery that is undergone in order to advance the diagnosis (nature and extent of the complaint). It is generally covered under PMI products but may not be so under MME products.

Question 30

Low cost options (budget policies)

Answer 30

These are cheaper policies with restricted cover. Examples include PMI policies with excesses and policies contingent on public service waiting periods.

Question 31

Major medical expenses (MME)

Answer 31

MME in the UK is a PMI product variant that pays a fixed amount to policyholders who undergo surgery of a non-investigate and non-cosmetic nature.

MME in the USA is a comprehensive PMI product type offering reimbursement for the costs of primary, secondary and tertiary care as defined in the policy.

Question 32

Managed care

Answer 32

This is the term given to a process whereby an insurer intervenes in the provision of medical care with the dual objective of optimising the quality of treatment for policyholder and controlling the cost (by such means as preferred provider utilisation and claims pre-authorisation).

Question 33

Medical savings account

Answer 33

This a fund contributed to by a PMI policyholder. The fund may be used to pay for co-payments and amounts above maximum benefit levels as well as treatment not covered by the PMI cover. Amounts contributed are often tax-deductible.

Question 34

Medical scheme

Answer 34

This is a South African mutual fund that covers health benefits on an indemnity basis.

Question 35

Micro-insurance

Answer 35

This is the term used for the growing market in insurance products that are characterised by low premiums and low coverage limits. Based on a pooling or community approach, microinsurance is generally targeted at the low wealth segments of a population and provides a social benefit in providing access to insurance cover for such socio-economic groups.

Question 36

National Health Insurance (NHI)

Answer 36

A universal system offering healthcare to both those who contribute and those who cannot afford to do so. There is usually a split between purchaser and provider. The purchaser may either be a single entity such as the State or multiple entities such as insurers.

Question 37

National Health Service (NHS)

Answer 37

This is the UK’s public health service, originally formed to provide free medical care to all throughout life, funded by general taxation.

Question 38

No Claims Discount (NCD)

Answer 38

Under PMI, an NCD system refers to an increasing discount to some reference premium applied for each year that no claims are made, to a limit. For each claim made, the level of discount reduces and could result in a premium higher than the reference premium.

Question 39

Open enrolment

Answer 39

This refers to the process in some markets whereby an insurer is obliged to accept all proposers for insurance at standard rates.

Question 40

Out-of-pocket costs

Answer 40

Amounts for medical treatment that are not covered by PMI or State health care and are paid for by the person seeking treatment themselves. These could arise as a result of co-payments, deductibles, benefit limits or exclusions.

Question 41

Out-patient

Answer 41

This is a person who attends hospital for treatment or consultation but who does not occupy a bed. In some markets, this is known as “ambulatory treatment”.

Question 42

Permanent

Answer 42

This term is used to describe a health condition that is expected to last throughout the insured person’s life, irrespective of when the cover ends or the insured person retires.

Question 43

Personal accident insurance

Answer 43

This type of insurance provides specified fixed benefit amounts in the event that the insured suffers the loss of one or more limbs, or other specified injury.

Question 44

Personal capability assessment (PCA)

Answer 44

An alternative way of assessing disability that is largely independent of the age and the occupation of the person being assessed.

PCA involves assessment of the ability to complete everyday tasks of living.

Question 45

Policy limit

Answer 45

This is the maximum amount that can be paid out under a policy, sometimes expressed over a defined period of time.

Question 46

Pre-exisiting conditions (PEC) exclusions

Answer 46

Under the terms of such an exclusion, cover is not provided in respect of any of the conditions listed in the policy that the life insured has already suffered. It is also usual to exclude cover for any condition where the life insured has previously suffered from another medical condition that gives a materially greater risk of that condition occurring.

Question 47

Preferred Provider Organisation (PPO)

Answer 47

A PMI policy may restrict cover to such treatment as is carried out in certain medical establishments or may limit the scale of reimbursement outside these establishments. The premium for such policies where treatment must take place in a PPO will usually be cheaper than if the claimant had the choice of any possible provider.

Question 48

Primary care

Answer 48

Primary care is the term given to such advice and treatment as provided by a general practitioner.

Question 49

Private Medical Insurance (PMI)

Answer 49

This is a product under which in return for premiums, an insurer promises to pay certain sums of money on the occurrence of certain medical events. The product is generally classified as short-term insurance, the events are frequently surgical in nature and the amounts paid usually indemnify costs incurred by the individual in receiving treatment.

Question 50

Secondary care

Answer 50

Secondary care is the term given to such advice and treatment as provided by hospitals, consultants and other specialists, usually after referrals by the patient’s general practitioner.

Question 51

Social Heath Insurance (SHI)

Answer 51

SHI refers to a system that provides only to those who can afford to contribute. Those who can afford to contribute are compelled to do so and services are provided by the private sector. The public sector provides for those who cannot afford to contribute.

Question 52

Tertiary care

Answer 52

Tertiary care is medical care that is only provided in specialist centres eg neurosurgery.

Question 53

Total permanent disability (TPD)

Answer 53

This disability cover is often included within a critical illness product. It is the permanency of the disability that distinguishes it from income protection cover, although “permanent” needs to be defined carefully. “Total” in practice means the failure of ability to perform a major or substantial part of the job or function.

Question 54

Treatment protocol

Answer 54

A set of guidelines setting out the optimal sequencing of diagnostic testing and treatment for specific conditions.

Question 55

Waiting period

Answer 55

This is a feature adopted by insurers under which benefits will not be paid for a specified period after the policyholder first takes out the insurance policy.

This waiting period may also be applied to any additional benefit from the date that the member buy the additional units of cover. It might also be called a no-claim period.

Question 56

World Health Organisation (WHO)

Answer 56

This is an autonomous health organisation set up in 1948, with the aim of assisting the population in the attainment of the highest possible level of health. WHO proposes conventions, agreements, regulations and makes recommendations about international nomenclature of diseases, causes of death and public health practices. It also develops, establishes, and promotes international standards concerning foods and biological, pharmaceutical and similar substances.