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Health Insurance: Major Finance Mechanism. Chapter 6 Dr. Tracey Lynn Koehlmoos. Chapter Overview. Insurance Concepts Evolution of Health Insurance Private Health Insurance Public Health Insurance Pending Policy Reforms This chapter will not cover managed care. General Concept.

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health insurance major finance mechanism

Health Insurance:Major Finance Mechanism

Chapter 6

Dr. Tracey Lynn Koehlmoos

HSCI 678 Intro to US Health Services System

chapter overview
Chapter Overview
  • Insurance Concepts
  • Evolution of Health Insurance
  • Private Health Insurance
  • Public Health Insurance
  • Pending Policy Reforms
  • This chapter will not cover managed care
general concept
General Concept
  • Insurance protects against infrequent, large loss by establishing contractual relations between the insured and the insurance provider and spreading the risk across a larger population.
general risk assessment
General Risk Assessment
  • Underwriting Process-actuarial risk
  • Experience Rating
  • Cherry Picking/Cream Skimming
  • Adverse Selection
  • Redlining
  • Insurers goal:

premium $ received > benefit $ paid

specific health concepts
Specific Health Concepts
  • Early days:
    • Linked to Employment
    • Hospitalization Only (1:13 among non-elderly)
  • Conceptual Shift
    • Expanded scope of interactions
    • Non-random, non catastrophic events
    • Commercial v. social purpose
risk assessment
Risk Assessment
  • 35% of insured—no claims
  • 5% of insured = majority of claims
  • Most insurers require medical screening
  • Pre-existing conditions
    • Excluded
    • HIPAA (1996)
direct risk adjustment
Direct Risk Adjustment
  • Medical Underwriting
    • Tier rating—by member and industry
    • Durational rating—Low $ to start, increases over time
  • Redlining
    • Excludes individuals or groups based on perceived hazards, life-style or claims history
indirect risk adjustment
Indirect Risk Adjustment
  • Co-payments
  • Limited Benefits Packages (procedures/pharmaceuticals)
  • Caps/Ceilings
  • Waiting period for effectiveness
  • Results in inequitable access across the US
growth of commercial health insurance
Growth of Commercial Health Insurance
  • Provider-Organized Plans—dominant before WWII
  • Post-WWII: Growing Non-for Profit Hospitals, more plans based on employment groups
  • 1947 Taft-Hartley Act: Health benefits as a condition of employment for which labor was entitled to negotiate
availability in small businesses
Availability in Small Businesses
  • Smaller businesses <100 employees
  • 50% of US labor firms
  • Nature of business too high risk
  • Unaffordable premiums—cannot spread risk
  • Part-time work force
  • One claim could increase all premiums
  • 10 to 40% higher cost to small v. large business
retiree health insurance
Retiree Health Insurance
  • Larger companies offer this as a benefit
  • Hard to capture this group as data
  • Jeopardy of benefits due to shake-ups in the mid-1980’s
  • Medicare eligible—Medicare 2nd payor
  • Employers seek higher cost share
  • Medicare Part D; Patient’s Bill of Rights
self funded health insurance
Self-Funded Health Insurance
  • Large group of employees
  • Eliminates need for insurance company
  • ERISA exemptions
  • Pay only what is used
  • Can negotiate rates
  • Insurance companies can be hired to bear excessive financial risk
  • Third Party Administrator can handle admin.
the cost of doing business
The Cost of Doing Business
  • Health Insurance is a major expense
  • Premium growth rates—on the rise, again
  • $4,692 per employee & family per year
  • $2,088 per employee per year
  • 75% of business health expenditures are on health insurance premiums
  • 16% Medicare Contributions
  • 8% Workman’s Compensation
cost containment measures
Cost Containment Measures

Cost Sharing/Co-payments

  • Limiting Scope of Benefits
  • Caps on Insurance Expenditures
  • Controls on Utilization
    • Prior Authorization
    • Second opinions
    • Pre-certification (nursing home stay)
  • Employee Retirement Income and Security Act of 1974
  • Allows large employers to self-insurer
  • Response to concerns on pension mismanagement
  • Protects health services benefits packages
  • Established requirements for carriers at the individual, small and large group markets
  • Portability from group to individual plan
  • Limits pre-existing condition waiting periods
  • Also, state reforms in the early 1990’s
  • Health Insurance Portability and Accountability Act of 1996
  • Allows employees to “carry” insurance to the next job without a waiting period
  • Allows employees in small companies to bring in previous insurance
  • Addresses confidentiality issues
summary of private insurance
Summary of Private Insurance
  • Covers 2/3 of US population
  • Mostly as employee benefit, large group
  • New laws and regulations to protect the benefits of the insured
  • Ineligible people—may use individual policies
public health insurance
Public Health Insurance
  • Tricare
  • Medicare
  • Medicaid
  • State insurance programs for the uninsurable
  • State Child Health Insurance Programs
  • Military dependents and retirees
  • Supplemental to Military Health Service System
  • 8.4 million beneficiaries
  • Outside of the military system, Tricare functions as an HMO with contracts awarded to regional civilian companies.
  • Social Security Act of 1965
  • Originally only for >65 years of age
    • Currently: 87% of beneficiaries
  • 1972: End Stage Renal Disease (ESRD)
  • 1973: Any age, Medicare disability
    • Currently: 13% of beneficiaries
do you know your abcd s
Do you know your ABCD’s?
  • Part A: Hospital Insurance (HI)
    • SNF, HH, Hospice
    • Deductible $840 per benefit period
    • Financed by Fed Trust Fund (payroll deduction, employer contributions)
  • Part B:
    • Supplemental Medical Insurance (SMI)
    • Physicians, tests, outpatient services
    • Monthly premiums 75% & by Fed Trust Fund
more medicare abcd s
More Medicare ABCD’s…
  • Part C: Medicare + Choice, 1997
    • Managed Care with mixed results
    • Patients were slow to sign up
    • Providers found it costly
  • Part D: Prescription drug plans
    • New and confusing
    • Threats to Medicaid/Medicare
    • Slow patient sign up
  • Social Security Act of 1965
  • State and Federal Program 50/50
  • No or Low co-pay or deductibles
  • State offerings vary

All include: Inpatient, outpatient, x-ray, HH, preventive services for children, family planning

Some: Podiatrist, Dentist, Physical therapy,

case management, eyeglasses

medicaid eligibility
Medicaid Eligibility
  • Eligibility varies—almost all “Low Income”
  • Pregnant woman
  • Infants, children < 6
  • Elderly, blind, disabled, poor Medicare
  • Special groups who qualify because of the disease (HIV/AIDS, NBCCEDP)
other state run programs
Other State Run Programs
  • Medically Indigent Programs
  • State Sponsored Health Insurance Programs for the Uninsurable
  • State Children’s Health Insurance Program (SCHIPs)—BBA 1997
other types of insurance
Other types of insurance
  • Workers’ Compensation Insurance
  • Viatical Settlements
  • Health Ins Purchasing Cooperatives
  • 70% of US and almost all elderly have health insurance
  • Medicaid covers 10% of US population
  • 20% of US population NO insurance
  • Cost of premiums continue to rise
  • Employer sponsorship remains link
  • No basic set of benefits in the US