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Certificate in Health Insurance is a course offered by TCS Business Domain Academy. The information given in this course material is merely for reference. Certain third party terminologies or matter that may appear in the course are used only for contextual identification and explanation, without an intention to infringe.
Certificate in Health Insurance is a course offered by TCS Business Domain Academy. The information given in this course material is merely for reference. Certain third party terminologies or matter that may appear in the course are used only for contextual identification and explanation, without an intention to infringe.
Copyright:
Attribution Non-Commercial (BY-NC)
Formati disponibili
Scarica in formato PDF, TXT o leggi online su Scribd
Certificate in Health Insurance is a course offered by TCS Business Domain Academy. The information given in this course material is merely for reference. Certain third party terminologies or matter that may appear in the course are used only for contextual identification and explanation, without an intention to infringe.
Copyright:
Attribution Non-Commercial (BY-NC)
Formati disponibili
Scarica in formato PDF, TXT o leggi online su Scribd
This document should not be carried outside the physical and virtual boundaries of TCS and its client work locations. Sharing of this document with any person other than a TCSer will tantamount to violation of the confidentiality agreement signed when joining TCS.
Notice The information given in this course material is merely for reference. Certain third party terminologies or matter that may be appearing in the course are used only for contextual identification and explanation, without an intention to infringe. Certificate in Health Insurance TCS Business Domain Academy
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Contents
Chapter - 2 Health Insurance Concepts ............................................................................. 4 Introduction ...................................................................................................................... 4 2.1 Healthcare Financing ............................................................................................. 5 2.1.1 Healthcare ......................................................................................................... 5 2.1.2 Healthcare Financing ..................................................................................... 5 2.1.3 Financial Sourcing .............................................................................................. 5 2.1.4 Functions .......................................................................................................6 2.2 Health Insurance ....................................................................................................6 2.2.1 Definition of Health Insurance ........................................................................6 2.2.2 Health Insurance Plan / Policy ........................................................................6 2.3 Principles of Health Insurance Contracts ................................................................ 7 2.4 Basic Terminologies of Health Insurance ............................................................... 7 2.5 General Exclusions under coverage of Health Insurance ........................................9 2.6 Features of Health Insurance ............................................................................... 10 2.7 Health Insurance Framework ............................................................................... 12 2.7.1 Stakeholders .................................................................................................... 12 2.7.2 Transactions .................................................................................................... 13 2.7.3 Functions ......................................................................................................... 15 2.8 Values of health insurance ................................................................................... 16 Summary ........................................................................................................................ 18 References ...................................................................................................................... 20
Certificate in Health Insurance TCS Business Domain Academy
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Chapter - 2 Health Insurance Concepts
Introduction Unlike other types of insurance, where insured is aware and knowledgeable enough of the associated perils and coverages. Health Insurance is one which involves a lot of medical terminologies, declaration of pre-existing medical conditions, covered and uncovered illnesses etc.., which makes it a bit complicated. Without proper knowledge of such concepts it will be difficult to move forward. Hence, this chapter assists you to set aside such complications and get a fair idea on certain vital aspects of Health Insurance. Most of this chapter deals with the explanation of various terminologies inherent to Health Insurance.
Learning Objectives On completion of this chapter, you will understand the: Definition of Health Insurance Basic terminologies in Health Insurance Health Insurance Framework Features of a Health Insurance policy
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2.1 Healthcare Financing 2.1.1 Healthcare The prevention, treatment, management of illness and the preservation of mental and physical well-being through the services offered by the medical and allied health professions is defined as healthcare. 2.1.2 Healthcare Financing Healthcare financing include mobilization of funds for healthcare, allocation of funds and mechanism of paying for healthcare. 2.1.3 Financial Sourcing There are various ways of financing the health system: Through revenues raised from general taxation, e.g. United Kingdom, Denmark Through direct payments by patients, e.g. Myanmar Through health insurance, e.g. Germany (social health insurance) and USA (private health insurance) Mixed a mixture of the above three mechanisms, e.g. India
Figure 1 Sources of healthcare financing Source: Skehri/Savedoff (2005: 128) Certificate in Health Insurance TCS Business Domain Academy
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2.1.4 Functions Health financing systems have three basic functions revenue collection, pooling of revenue and purchasing of healthcare. Revenue collection is the way the healthcare system receives money from households, enterprises and donors. It can be through taxes, contributions to health insurance or direct out-of-pocket payments. Pooling is accumulation and management of revenues in such a way as to ensure that the risk of having to pay for healthcare is borne by all members of the pool and not by any individual contributor. In tax-based systems, pooling is done by the concerned government organization, while in insurance schemes, pooling is done by the insurer. There is no pooling in direct out-of-pocket payments. Purchasing is the process by which pooled funds are paid to providers in order to deliver a specified set of health interventions. Purchasing can be performed passively or strategically.
2.2 Health Insurance 2.2.1 Definition of Health Insurance Health Insurance can be defined as any form of insurance whose payment is contingent on the insured incurring additional expenses or losing income because of incapacity or loss of good health. Insurer, in order to meet those expenses creates a pool of money collected as premiums (value of which is arrived at by various calculation methodologies (which will be discussed later in the chapter), and disburses them upon a valid claim (subject to the terms and conditions of the policy) by the insured. 2.2.2 Health Insurance Plan / Policy A health insurance provider/ health insurance company would design a product to meet the medical needs of the insured, which is called as a health insurance policy. Each policy has got its own features, terms and conditions depending on which the premiums collectible will be defined.
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2.3 Principles of Health Insurance Contracts
Like in any other insurance contract, health insurance is based on four underlying principles:- Utmost Good Faith: This principle mainly deals with disclosure and undue advantage. Disclosure is where both the parties of the contract should not conceal any vital information that is essential in writing a contract (ex: insured not disclosing medical history) as well not misrepresenting any of the terms of the contract. Undue advantage is where one of the parties of contract tries to take advantage over the other by having prior knowledge of superior information about a certain material aspect of the contract. Indemnity: Upon suffering a covered loss, the insured is entitled to receive a compensation from the insurer, which would make good in full or in part the loss suffered by the insured, but would not place the insured at an advantage over his/her pre-loss position. Insurable Interest: The insured should have an insurable event in the subject matter of insurance, i.e. the insured must suffer a loss if the insurable event takes place, or the insured continues to receive financial gain by the non-occurrence of the event. Insurable interest does exist in the case of ones own illness or that of a close member of the family. Proximate cause: The loss should be directly caused by a covered peril, and should not be due to a peril which is not covered. For example, if complications due to HIV positive status are not covered in the insurance, costs incurred on opportunistic infections occurring because of suffering with HIV will also not be payable by the insurer. 2.4 Basic Terminologies of Health Insurance
Health insurance is like any other form of insurance where people pool the risks of medical expenses. Both government as well as private organizations offer insurance policies. Also there are several non-profit organizations that manage the insurance.
Health insurance is categorized into two types - the individual health insurances and the group health insurances. Group health insurances are available under organization or a Certificate in Health Insurance TCS Business Domain Academy
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company where the coverage is provided only to its employees and their dependants. In exchange the government provides the organization with certain tax benefits.
There are normally the following concepts applicable to any health insurance policy: Premium: This is paid by the policy holder to the policy provider. It is usually paid on a monthly or on quarterly basis. It is dependent on the deductible, co-payments and the coverage.
Deductible: This amount is paid by the policy holder as well. For example, a policy holder of a plan might need to at least pay about $500 in a year, before the health insurer providers cover the expenses of the medical cure. It might take several visits before one reach the full amount of the deductible. After that limit is reached, the insurance company starts paying for the particular care.
Co-payment: This amount is paid by the policy holder as well. This is paid before the insurance provider starts paying the expenses of the service. For example, the policy holder is required to pay $60 dollar to the doctor or when they are obtaining prescription. This co-payment will be done each time they acquire the service.
Co-insurance: Besides paying for the co-payment, an insurer may also be required to pay a certain amount of money as co-insurance. This is a percentage of the total expenses of the policyholder. For example, an insurer is required to may 30% as co- insurance. At this stage, if they undergo any surgery they will pay 30 % of the cost while the insurance company will pay 70 percent. It is over and above the cost of the co-payment.
Exclusions: All different services under the medical service which are not covered under any single insurance policy are exclusion. At this stage, the insurer has to pay the full cost of the service.
Coverage limits: Certain insurance companies pay for a particular service only to a particular dollar amount. The excess charge is paid by the policy holder. Certain companies even engage this limitation to the annual charge coverage or to lifetime Certificate in Health Insurance TCS Business Domain Academy
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charge coverage. The beneficiaries are not paid if the service charge exceeds the mentioned limit.
Out-of-pocket maximums: This is similar to coverage limit, but in this case the insured's out of the pocket limits ends, instead of the insurance provider's limits. Insurance company pays the remaining charge.
Capitation: Capitation is the amount paid by an insurer to a healthcare provider in exchange of which the healthcare provider agrees to treat all the members of insurer.
Pre-Existing Condition: An illness, symptom, disease or a physical condition which already exists prior to commence in coverage of Health Insurance. 2.5 General Exclusions under coverage of Health Insurance
Surgery and other procedures for the purpose of correcting refractive errors In-Vitro Fertilization and Infertility treatment Treatment relating to sexual dysfunction Treatment relating to or forming part of Organ Transplants including maintenance medication in the private sector Treatment for cosmetic purposes Treatment relating to or arising from participation in professional sporting activities Examinations for insurance, school, association, emigration, visa, employment or similar purposes Anti-alcohol and anti-smoking drugs Obesity Educational Therapy Protective gear All costs relating to or forming part of the treatment of HIV/AIDS Costs associated with or arising out of willful self-injury, suicide or attempted suicide Hearing devices including cochlear implant devices, whether introduced internally or not, as well as the maintenance of these devices Certificate in Health Insurance TCS Business Domain Academy
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Household remedies, contraceptives, patent medicines, non-ethical and all proprietary preparations including but not limited to vitamins, minerals, face creams, body lotions, soaps, shampoos, and laxatives All costs arising from injury or illness for which any other party is liable unless the scheme is satisfied that there is no reasonable prospect of the member recovering adequate damages from the other party All treatment and costs incurred for which benefits are not specifically provided 2.6 Features of Health Insurance
Reimbursement system: This system refers to the manner in which the claims are settled. This characteristics of a health insurance system can be described as follows: In the traditional indemnity system, customers first incur expenditure on services and later submit claim to insurance company for reimbursement (e.g. Mediclaim of US). In case of Managed indemnity, a Third Party Administrator (TPA) takes care of the claim settlement of enrollees and directly reimburses service provider. Insurer pays service provider a fixed amount, out of which provider will serve health needs of enrollees for a specific period. Reimbursement can be fee-for-service, which would involve charging for each individual service, such as in-patient bed-days, drugs, investigations, etc.., Case specific reimbursement is based on the category of patient admitted. Under this system admissions are grouped into categories called as Diagnostic Related Groups (DRGs), which is based on their clinical characteristics.
Services covered by insurance: Coverage of services varies with each insurance policy. Some cover only curative services whereas others cover primary OPD (Out Patient Department) care as well. Coverage varies according to the extent of hospitalization also.
Role of the insurer: The insuring institution can play either an active or a passive role. If it is a mere funding entity and is not directly involved in the provision of healthcare services, controlling of costs becomes difficult. It develops mechanisms Certificate in Health Insurance TCS Business Domain Academy
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of cost sharing to mitigate the negative impacts and beneficiaries are asked to pay an amount each time they use the services as deductibles (the insured pays a specific amount before receiving insurance benefits) or co-payment (a fixed percentage of cost of service is paid by the beneficiary to the insurance company). On the other hand, if the insurance company is a managed care organization (directly involved in organizing and providing healthcare services) it can enforce cost discipline more rigorously. Certificate in Health Insurance TCS Business Domain Academy
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2.7 Health Insurance Framework
Depending on the situation and requirements various constituents make up a health insurance system. They are termed as design features. In order to get an understanding on the system, some of the generic constituents are depicted below. This framework assists in understanding the functioning and the structure of a health insurance system.
Figure 2 Framework of Health Insurance Source: http://www.whoindia.org/LinkFiles/Health_Insurance_Health_Insurance_Training_Manual.pdf 2.7.1 Stakeholders All together there are 4 types of stakeholders in this whole gamut of framework. They are:- Community: In any health insurance system people are the recipients of the benefits. They are the ones who would contribute towards the health insurance fund (except in the case of social healthcare schemes). They can take several forms, depending on the situation, like:- Civil servants in a country Voluntary participants in case of a private health insurance scheme Villagers in a village or employees in an organization Certificate in Health Insurance TCS Business Domain Academy
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Providers: They can either be public or private providers, and at times they can be a combination of both. Depending on the penetration of insurance, efficiency of the system, policies and the economic status of the country, it may choose between public and private or both to provide social healthcare schemes. E.g. in Belgium, both public and private providers are contracted by the insurers. In India, public providers are used to provide social health insurance for industrial workers and private health insurance schemes empanel private hospitals.
Organizer: An organizer is an institution which manages the policy/scheme. It could be an entity within the government, an NGO (Non-Government Organization) or a community-based organization and in some cases the organizer is not relevant (ex: private health insurance). An organisers primary function is to orchestrate various stakeholders and take charge of the operations. It performs a dual role, in governance and as an administrator. Operations include following activities:- Creating awareness Collecting and pooling the revenue Purchasing healthcare Reimbursing claims and monitoring the entire system
Insurer: Insurers primary responsibilities include, managing the fund and accepting the risk. Many a times it is the same institution that acts as an organizer and an insurer. The insurer develops the product and manages the risk, so that the insured get their benefit. Every country has got its own regulatory bodies for insurance, which lays policies and guidelines for issuing licenses, functioning of insurance activity and handling of fraud & grievances. Registration is a must in order to become a private insurer. 2.7.2 Transactions Also there are 3 kinds of transactions or exchanges that take place in the whole of the process. They are:- Premium: Premium is the amount collected from the insured. It may be a onetime premium or collected monthly/ quarterly/ annually. The premium is determined Certificate in Health Insurance TCS Business Domain Academy
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based on the probable size of expense (in accordance with associated risk) that an insurer can incur.
It can be calculated based on the following methods: Risk-rated premium Here the premium calculation is based on the risk covered. So a person with a chronic illness and a high probability of falling sick will have a higher premium compared to a young and healthy adult who has a low probability of falling sick. Hence in this kind of calculation, the premium for different individuals may vary for same amount of insurance cover. Thus the elderly or those with poor health generally pay more. Risk-rated premiums will be in terms of equity issues, as those who need healthcare more (and probably cannot afford it) are asked to pay more. This type of premium is mainly deployed by private insurers for insuring individuals. Community-rated premium Here it is a mix of all risk categories (high risk and low risk) and a common premium is applicable to the entire group reflecting the average risk of illness. This brings down the premium to an affordable level, enabling everyone in the group to participate. This is more equitable than the risk-rated premium as everybody shares the cost of illness equally. This is usually used in community health insurance schemes. Income-rated premiums It is prominent in social health insurance schemes. Here the premium is in accordance to the income levels. People with higher income levels pay a higher premium and vice versa. The total premium collected is expected to suffice the cost of the insurance policy. When compared among the three, it is the most equitable type of premium.
Premiums can either be voluntary or mandatory. Most of the social health insurance schemes are mandatory where it is compulsory to contribute to the fund, which is why the size of such pools are high enabling a mix of all risk rated categories(high risk and low risk). But when it comes to private health insurance, premiums are voluntary.
Benefit package: It is the return for the contribution. Generally the constituents of a benefit package are the events that have least probability but associated with a higher cost, e.g. hospitalization. On the other hand, there exist schemes which Certificate in Health Insurance TCS Business Domain Academy
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provide just the opposite, where it covers events with higher probability and lower associated cost, e.g. outpatient visits. And a combination of both is also possible. Premiums are directly proportional to the benefit package. Also most private health insurance schemes usually exclude some conditions from the cover. For example, many insurers do not cover treatment of HIV-AIDS. Similarly, treatment of chronic conditions or very expensive procedures is excluded.
Payments: There are basically two ways of settling insurance claims. One is the third party payment mechanism, where the organizer pays directly to the provider. This form of reimbursement has the least burden for the patient. On the other hand, many private health insurance schemes have an indemnity mechanism, where the patient pays the bills upfront and is reimbursed by the insurer after submitting the bills and documents. The disadvantage is that the patient has to make arrangements for paying the bill. This can have repercussions, both on access to healthcare and financial protection. The reimbursement to the provider can be either a fee for service or a case-based payment or a capitation payment. The fee for service in an insurance scheme is dangerous as it can lead to irrational therapy and cost escalation. 2.7.3 Functions There are three managerial functions that are performed to enable smooth functioning of the system, which include:-
Administration: The insurer usually has to perform many administrative functions apart from the onerous task of managing the funds. These include: Creating and maintaining insurance awareness among the insured Fixing premiums and benefit packages Processing claims Negotiating with providers Redressing grievances Providing feedback to the insured
Risk management: Health insurance has many risks to manage, e.g. moral hazard, adverse selection, fraud and cost escalation. An effective system will introduce measures to minimize these risks. Certificate in Health Insurance TCS Business Domain Academy
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Monitoring the system: Health insurance framework needs to be closely monitored. There are many indicators that are specific to health insurance, e.g. claims ratio, liquidity ratio, etc. (More details are given in the chapter on Monitoring). 2.8 Values of health insurance
The entire health insurance concept is based on few or all of these below mentioned values:- Solidarity: This is one of the fundamental bases of a health insurance system, especially social health insurance and community health insurance schemes. It operates less in private health insurance schemes. It is defined as the awareness of unity and a willingness to bear its consequences. It means that people accept that the size of the return may not match the resources they have put in the system.
Risk pooling/sharing: Related to solidarity is risk pooling. It implies that there is sharing of risks between the high-risk and the low risk populations. This is traditionally shown as risk sharing between the healthy and the sick, between the rich and the poor, and between the economically active and economically inactive. Risk sharing builds on the concept of solidarity, where people are willing to contribute for the sake of others. It can be graphically depicted as follows:
Figure 3 Pooling of risks
Equity: This is a very important value of health insurance and is one of the reasons for introducing health insurance in countries. Under optimal conditions, health insurance is more equitable than direct out-of-pocket payments and can be as Certificate in Health Insurance TCS Business Domain Academy
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progressive as tax-based financing. There is horizontal equity when for a particular income level; equal contributions by members are used to meet the unequal needs of these members. And vertical equity when across income levels, unequal contributions are used equally to meet the needs of the members.
Participation/empowerment: Health insurance, by its contributory nature, can allow people to express their concerns to the health services. Unlike user fees, where the interaction between the patient and the health services is on an individual basis, in health insurance there can be collective negotiation. This is emphasized in community health insurance, as the distance between the insurer and the health services is usually small. Thus, health insurance can be a tool for empowerment of the patient community in relation to health services. This is especially so since there is a guarantee of service in health insurance.
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Summary The prevention, treatment, management of illness and the preservation of mental and physical well-being through the services offered by the medical and allied health professions is defined as healthcare. Healthcare financing include mobilization of funds for healthcare, allocation of funds and mechanism of paying for healthcare. The basic functions of healthcare financing systems are: Revenue collection Pooling Purchasing Health Insurance can be defined as any form of insurance whose payment is contingent on the insured incurring additional expenses or losing income because of incapacity or loss of good health. Principles of health insurance contracts: Utmost Good Faith Indemnity Insurable Interest Proximate cause Basic Terminologies of Health Insurance Premium Deductible Co-payment Co-insurance Exclusions Coverage limits Out-of-pocket maximums Capitation Pre-Existing Condition Features of Health Insurance are: Reimbursement system Services covered by insurance Role of the insurer
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Framework of Health Insurance are: Stakeholders of health insurance are: Community Providers Organizer Insurer Transactions involved in health insurance are: Premiums which can be risk rated, community rated or income rated Benefit package Payments The three managerial functions of health insurance are: Administration Risk management Monitoring the system Values of health insurance are: Solidarity Risk pooling/sharing Equity Participation/empowerment
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References http://www.whoindia.org/LinkFiles/Health_Insurance_Health_Insurance_Training_Manual. pdf World Health Organization (2002), World Health Report 2002: Reducing risks, promoting healthy life, WHO: Geneva. G. Carrin, C. James and D. Evans, Achieving Universal Health Coverage, WHO Geneva 2005 Institute of Public Health Bengaluru- India, Training Manual on Health Insurance
Notice The information given in this course material is merely for reference. Certain third party terminologies or matter that maybe appearing in the course are used only for contextual identification and explanation, without an intention to infringe.