Week 11 Flashcards
Prepare for final exam
In a basic insurance contract, what do R, E(B), and loading fee, refer to? How are they are related in an equation?
R is the total insurance premium, E(B) is the expected medical benefit, and loading fee is all contractual expenses (processing insurance claims and making appropriate payments)
How does an insurance company spread risk?
An insurance company pools risk by spreading average risk - if risks are independent, average risk of an group with n members is expressed as 1/n
The higher the “real” return on capital for the insurance company, the ______ the loading fee
Lower
Describe the non for profit insurance companies and the major players
The NFP companies, most commonly known as the “blue” plans were organized under special legislation passed during the first half of the 20th century. These plans are exempt from taxation, and do not face the same extent of regulation that other insurers do.
Describe the major for-profit insurance companies and the major players
The for-profit model generally dominates the U.S. insurance market (UHG, Wellpoint, Anthem, Aetna, Humana), profits represent a substantial proportion of these firms overall revenue.
Describe the pressure of conversion from NFP TO FP
1) NFP did not do well in capturing economies of scale
2) the blues had emphasized traditional health insurance with coverage for a specific number of days and fee-for-service
3) the rise of managed care has demanded more expensive claims management processing. NFP cannot access equity markets, consequently NFP organizations could not keep pace with the modern insurance world.
what are the two benefits of group insurance over individual insurance
1) lower loading fees due to economies of scale. loading fees decrease as the size of the insured group go up
2) reduced adverse selection
Each ___ % increase in group size creates about a ___% relative decline in loading fees
10%, 2.7%
Describe how the PPACA established insurance exchanges
the PPACA established a set of regional “insurance exchanges” one for small employer groups, and one for individuals
- 12 states established their own exchanges
- 28 states used healthcare.gov as a source of primary exchange
- 11 states worked with the federal program in a state-federal partnership
What were the 4 levels of plans under the PPACA?
Bronze plan (60% of costs covered)
Silver plan (70% of costs covered)
Gold plan (80% of costs covered)
Platinum plan (90% of costs covered)
Catastrophic: level restricted for enrollees under the age of 30, all other plans must exceed 8% of income
Describe the individual mandate in the PPACA including the phase out
Initially, people had to have at least the bronze plan, or they would face a tax penalty. It was “phased in” so the first year that the maximum penalty enacted would be in 2016, and then the tax penalty was phased out in 2017
Describe how the tax penalty under the PPACA would work
Calculated either on an individual or per family level. The maximum of 695 per person or 2.5% of income past a threshold of 10,300 for an individual. For families, maximum of 2,085 or 2.5% of family income. In no case would paying the tax penalty exceed the cost of the bronze plan.
Unlike every other developed country, the U.S. lacks ________ for all citizens
universal guaranteed insurance
most Americans find health insurance coverage through one of three avenues
employer insurance (the majority), medicaid, medicare (although some receive insurance through the individual market)
describe the American model of health insurance
the American model reflects the American political preference for liberty and free choice
- patients (usually) have a free choice surrounding their doctor, hospital, and insurance plan
- doctors (usually) have a free choice surrounding prices to charge, where to practice, and whom to treat
describe who receives employer-sponsored health insurance and how it combats adverse selection
most insured non-elderly Americans have coverage through an employer-sponsored plan. it combats adverse selection by providing a reason for all employees to pool together
define differential wage pass through
differential wage pass through occurs when employers observe elevated health risks among employees and pay them less in consequence
the process of health insurance hinders social mobility via job lock (define job lock)
Job lock occurs when an employee is unable to freely leave a job as a result of lost benefits, leading to modest welfare and social losses
Why do Americans prefer employer-provided health insurance
Employer-provided health insurance is exempt from federal, state, and social security taxes. An employee will prefer to purchase insurance through work rather than through his or her own.
Describe the blues early private insurance model and why it was problematic
indemnity insurance (fee for service), did not discourage moral hazard, and resulted in substantial physician-induced demand
characterize the prepaid group practice through the story of kaiser permanente
early example of a managed care organization. kaiser realized it would be cheaper to provide medial care directly to employees rather than paying for it at outside hospitals. - following the apparent success of this plan more insurers began offering managed care plans due to apparent cost savings
define managed care
a Philosophy of health insurance that employs tactics intended to reduce moral hazard, physician induced demand, and premiums
how does managed care accomplish this task
- gatekeeping (such that patients can only visit specialists after receiving approval from a primary care doctor)
- coverage networks and vertical integration (patients can only receive care for a specific set of providers)
- monitoring - doctors and hospitals are monitored for costs and health outcomes
- salaries and fixed - insurer pays a fixed amount for care
- denials of coverage if care is deemed not cost effective
define HMO and give examples
A type of managed care organization. An HMO is a health maintenance organization, used to denote vertically integrated managed care organizations like Kaiser Permanence. Plan is paid on a “capitation basis” i.e. “per head.”
define a PPO
Preferred provider organization. A type of managed care organization. A PPO is a less restrictive version of an HMO, which does not integrate insurer and provider. Lower price and lower insurance premium
US consumers for insurance have gradually transitioned from ____ to ____
expensive fee for service to HMOs and PPOs.
define a FFS in terms of flexibility as well as premiums
opposite of HMOs, with traditional insurance offered defined coverage for billed charges. least amount of constraints on both the provider an consumer, but higher costs for a given level of financial protection
What are the types of MCOs
HMOs PPOs IPAs POSs HDHPs ACOs
Describe market share trends for health insurance
no one uses FSS anymore HDHPs are the most popular
Studies have found that
HMOs have a reduced propensity to use hospitalization, a result confirmed by the RAND HIS
do managed care organizations lower overall cost
yes, studies show that HMOs provide medical cost savings 15-20%
describe the effect of managed care organizations on earnings
PCP earnings increase, cutting into the earnings of hospital-based specialists
Describe how market segmentation might occur through an MCO
A primary outcome of MCOs may not be so much to control costs as to
create a viable mechanism by which insurance carriers can identify
relatively healthy people and attract them to a plan that relatively sickly
people will find undesirable.
- Managed care plans tend to attract healthier customers due to adverse selection
