Health Insurance: Major Finance Mechanism

1
Health InsuranceMajor Finance Mechanism

• Chapter 6
• Dr. Tracey Lynn Koehlmoos

2
Chapter Overview

• Insurance Concepts
• Evolution of Health Insurance
• Private Health Insurance
• Public Health Insurance
• Pending Policy Reforms
• This chapter will not cover managed care

3
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.

4
General Risk Assessment

• Underwriting Process-actuarial risk
• Experience Rating
• Cherry Picking/Cream Skimming
• Adverse Selection
• Redlining
• Insurers goal
• premium received gt benefit paid

5
Specific Health Concepts

• Early days
• Linked to Employment
• Hospitalization Only (113 among non-elderly)
• Conceptual Shift
• Expanded scope of interactions
• Non-random, non catastrophic events
• Commercial v. social purpose

6
Risk Assessment

• 35 of insuredno claims
• 5 of insured majority of claims
• Most insurers require medical screening
• Pre-existing conditions
• Excluded
• HIPAA (1996)

7
Direct Risk Adjustment

• Medical Underwriting
• Tier ratingby member and industry
• Durational ratingLow to start, increases over
  time
• Redlining
• Excludes individuals or groups based on perceived
  hazards, life-style or claims history

8
Indirect Risk Adjustment

• Co-payments
• Limited Benefits Packages (procedures/pharmaceutic
  als)
• Caps/Ceilings
• Waiting period for effectiveness
• Results in inequitable access across the US

9
Growth of Commercial Health Insurance

• Provider-Organized Plansdominant 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

10
Availability in Small Businesses

• Smaller businesses lt100 employees
• 50 of US labor firms
• Nature of business too high risk
• Unaffordable premiumscannot spread risk
• Part-time work force
• One claim could increase all premiums
• 10 to 40 higher cost to small v. large business

11
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-1980s
• Medicare eligibleMedicare 2nd payor
• Employers seek higher cost share
• Medicare Part D Patients Bill of Rights

12
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.

13
The Cost of Doing Business

• Health Insurance is a major expense
• Premium growth rateson 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 Workmans Compensation

14
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)

15
ERISA

• 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

16
HIPAA

• 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 1990s

17
HIPPA

• 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

18
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 peoplemay use individual policies

19
Public Health Insurance

• Tricare
• Medicare
• Medicaid
• State insurance programs for the uninsurable
• State Child Health Insurance Programs

20
Tricare

• 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.

21
Medicare

• Social Security Act of 1965
• Originally only for gt65 years of age
• Currently 87 of beneficiaries
• 1972 End Stage Renal Disease (ESRD)
• 1973 Any age, Medicare disability
• Currently 13 of beneficiaries

22
Do you know your ABCDs?

• 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

23
More Medicare ABCDs

• 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

24
Medicaid

• 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

25
Medicaid Eligibility

• Eligibility variesalmost all Low Income
• Pregnant woman
• Infants, children lt 6
• Elderly, blind, disabled, poor Medicare
• Special groups who qualify because of the disease
  (HIV/AIDS, NBCCEDP)

26
Who is on Medicaid?
27
Where does the money go?
28
Other State Run Programs

• Medically Indigent Programs
• State Sponsored Health Insurance Programs for the
  Uninsurable
• State Childrens Health Insurance Program
  (SCHIPs)BBA 1997

29
Other types of insurance

• Workers Compensation Insurance
• Viatical Settlements
• Health Ins Purchasing Cooperatives

30
Summary

• 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