Presentation Title

Presentation subtitle
 Long – term care insurance
• It pays a daily or monthly benefit for medical or custodial care received in
a hospital or at home
• Basic characteristics
• Type of policies
• Facility only policy: covers care in a nursing home, assisted-living facility,
Alzheimer’s facility or hospital as long as the insured satisfies the benefit
trigger
• Home health care policy: covers care received outside of an institution –
home health care, adult day care and respite care
• Comprehensive policy: similar to facility only policy and optional benefit
of home health care policy
 Long – term care insurance
• Aggregate benefits
– Daily benefits – maximum for a period of 2, 3 or 4 Yrs or over the
insured’s lifetime
– Some plans have maximum amount ceiling for daily benefits and
lifetime benefit
• Elimination period
– It is waiting period during which benefits are not paid
– Ranges from 0 to 365 days
– Common elimination periods are 30, 60, 100 or 180 days
– Longer elimination period can reduce premium
 Long – term care insurance
• Tax qualified policies
– Two triggers and Insured must meet only one of the two trigger
– 1st trigger: insured unable to perform certain no.of activities of daily
living (ADL). Ex: eating, bathing, dressing, transferring from bed to
chair, using the toilet and maintenance of continence. Failure to
perform certain no.of ADL’s without assistance – benefits paid
– 2nd trigger: insured needs substantial supervision to be protected
against threats to health because of severe cognitive impairment Ex:
shor-term or log-term memory impairment or becomes disoriented
wrt persons, place, time or abstract reasoning or errors wrt safety
awareness
• non-tax qualified policies: benefits can be paid if the physician certifies
long-term care needed – even if the insured does not fall under above two
trigger
 Long – term care insurance
• Inflation protection
– It is an optional benefit
– 1st method: four options – once in 5 Yrs – to increase SI 20% with out
evidence of insurability
– 2nd method: 5% automatic increase of daily benefit for next 10 or 20
Yrs
– Premium also increased proportionately
• Guaranteed renewal policy
– Guaranteed renewable and premium can be increased
• Expense coverage
– Long-term care insurance is expensive for older ages
– a person aged 80 Yrs would pay nearly 4 times higher premium than
another aged 65 Yrs for a same policy
 Long – term care insurance
• Taxation of long-term care insurance
– The premiums deducted from salary are tax free
– Annual premiums paid by an individual for individual/group are tax
free (if the premiums paid plus other reimbursement medical
expenses exceed 7.5 % of individual gross income) subject to
maximum ceiling
– Most long-term policies – reimbursement basis – reimburses up to
max SI – benefits paid are income tax free
– Some polices pay daily benefits – regardless actual expenses – max
ceiling for tax free daily benefit
– Insured must have a proof of actual costs paid
 Disability-income insurance
• A serious disability can result in a substantial loss of work earnings. Unless
replacement income from other sources – financially unsecured
• The probability becoming disabled before age 65 is increasing in trend
• Comparison of losses: premature death Vs PTD
• It provides income payments when the insured is unable to work because
of injury or sickness – monthly benefits – related to earnings (60% - 80% of
gross earnings to avoid over insurance)
• Definitions of total disability
– Inability to perform all duties of the insured’s own occupation
– Inability to perform the duties of any occupation for which the
insured’s is reasonably fitted by education, training and experience
– Inability to perform the duties of any gainful occupation
– Loss-of-income test
• Presumptive disability
• Partial disability (failure to perform one or more important
occupational duties)
• Residual disability (pro-rata disability benefit is paid for
reduced income due to accident or sickness)
– Built-in benefit and some time rider cover
– You are not able to do one or more of your important daily
business duties
– (Or) unable to do usual daily business duties in normal
time
– Monthly income is reduced to 25% of your prior monthly
income
– You are under the care and attendance of a physician
– If the loss income exceeds 75% 0r 80% - full monthly
benefit is payable
• Benefit period
– 2,5,10 Yrs or up to age 65 or 70 Yrs
– Most disabilities are short (less than 2 Yrs). If it is longer
lesser chances of recovery
• Elimination period
– 30, 60, 90, 180 or 365 days
– High-quality disability income policies – costs 2 to 3% of
annual earnings
– A male aged 65 can save around 53% of premium if opts
for 90 days elimination rather than 30 days
– Group disability income plan is not convertible in to
individual plan
– Insurer starts with lower premium rates initially and
increases slowly as term insurance
• Waiver of premium
– Inbuilt cover
– If the insured totally disabled for 90 days – future premium
will be waived off as long as he remains disabled
• Rehabilitation provision
– Part or all the disability income benefit paid during
rehabilitation – still totally disabled – benefits continue as
before
• Accidental death, dismemberment, and loss-of-sight benefits
– Some times in-built cover
• Optional disability-income benefits
– Cost-of-living rider (5% of SI increased every
year/periodically and premium too) Max ceiling up
to 100% increase of SI
– Option to purchase additional insurance (based on
increase in income additional insurance can be
purchased with out medical exam)
– Social security rider
– Return of premium
• Tighter disability-income market
 Individual medical expense
contractual provisions
• Renewal provisions
• Optionally renewable
– Insurer has the right to terminate a policy on any
anniversary or premium date
– Instead of this – conditions to be met for renewal
(or) limited coverage to specific illness/injuries can
be done
• Nonrenewable for stated reasons
– Policy owners attains certain age
– No longer employed
• Guaranteed renewable
– Insurer guarantees to renew the policy to some
stated age with right to increase premium
• Non-cancellable
– Insurer guarantees renewal of the policy to some
stated age, and the premiums are guaranteed and
cannot be increased during the period
– It is not renewable only in the following cases:
Non-payment of premium, fraud or
misrepresentation or discontinuation of the type
of coverage provided by the policy
• Pre-existing conditions
– A physical condition for which the insured received
treatment (or) that existed during specified time period
such as 5 Yrs prior to effective date of policy
– The insured should disclose it during proposal
– The waiting period would be 12 months with a 6 month
look back period
• Notice of 10 day right to examine policy
• Claims
– Notice of claim provision: written notice within 20 days
after a covered loss occurs or as soon as is reasonably
possible
– Claim form provision: insurer within 15 should send claim
form after notice is received
• Claims
– Proof of loss provision: written proof should be sent within
90 days after a covered loss occurs or as soon as possible
(Subject to Max. 1 Yr)
• Grace period
– 31 days with coverage
• Reinstatement
– Permits insured to reinstate the lapsed policy
– 10 days waiting period for sickness and accidents are
covered immediately
• Time limit on certain defenses
– If the policy is in force for 2 Yrs the insurer cannot void the
policy or deny a claim on the basis of misstatements in the
application, except fraudulent misstatement
 Group Medical Expense
Insurance
• It covers the cost of hospital care, physicians and surgeons
fees, and related medical expenses
• 90% total mediclaim premium contributed by group
mediclaim
• Sources of availability
• Commercial insurers
– Commercial life &casualty insurer sell both individual
&group mediclaim
– Most individuals &families insured by commercial insurers
• Blue cross and blue shield plans
– Blue cross plans: hospital &related expenses – cashless
mode
– Blue shield: Doctor fee &related expenses
• Managed care organizations
– Medical expense benefits that are provided to cover
employees in a cost effective manner – emphasis on cost
control (care provided by the physician is carefully
monitored)
• Self-insured plans by employers
– The employers pays part or all of the cost of providing
health insurance to the employees
– It usually established with stop-loss insurance and an
administrative services only (ASO) contract
– Stop-loss insurance: commercial insurer will pay claims
that exceed a certain amount up to some maximum
amount
• Self-insured plans by employers
– ASO is a contract between an employer and an commercial
insurer (or third party) in which the insurer provides only
administrative service (Ex: plan design, claim processing,
actuarial support and record keeping)
– Advantages: not subject to state regulations, commissions
need not to be paid, huge money for investment
Types of group medical expense plans
• Traditional group indemnity plans
– Basic medical expense insurance
– Major medical insurance
– Basic medical expense insurance
• It provides only basic benefits – sufficient to cover
routine expenses but not designed to cover a
catastrophic losses
• Group basic medical expense plan includes the
following benefits
– Hospital expense insurance
» Full cost of the semi-private room
» Payment for miscellaneous hospital charges (Ex:
drugs, X-rays, operating room charges etc)
• Surgical expense insurance
– Pays surgeons’ and physicians’ fee for surgical operations
• Scheduled approach: max amount specified for various
surgical operations
• Relative-value schedule: points are assigned to each
operation based on the degree of difficulty. Then
conversion factor used to convert value into specific
amount
• Reasonable &customary charges: generally it does not
exceed 85th or 90th percentile amount for similar
medical procedure performed by other physicians
• Physicians visit
– Coverages: hospital visit and Home visit
– Benefit: fixed benefits and reasonable &customary
charges
• Miscellaneous benefits
– Home health care visits by specialist, extended-care facility
benefits, radiation therapy, diagnostic X-rays, CAT
(Computerized Axial Tomography) scans and MRI
(Magnetic Resonance Imaging) etc
• Major medical insurance
• Designed to pay high proportion of the covered
expenses of a catastrophic lines or injury
• Can be written as a supplement to basic medical
expense plan to form comprehensive plan
• Supplementary major medical insurance
• Comprehensive major medical insurance
– Supplementary major medical insurance
• Designed to supplement the benefits provided
by basic plan (exhausted or uncovered)
• Co-insurance provision of 80% or stop loss limit
• Corridor deductible
– Comprehensive major medical insurance
• Combination of basic benefits &major medical
insurance
• Deductible and co-insurance provision not
applicable to certain lines of expenses
• Calendar year deductible
• Family deductible provision (deductibles to
family members waived off)
 Managed care plans
• Managed care plans: medical expense plans that provide
covered services to the members in a cost-effective manner
• Different types:
– Health maintenance organizations (HMOs)
– Preferred provider organizations (PPOs)
– Point-of-service plans (POS)
– Exclusive Provider Organizations (EPOs)
• Health maintenance organizations (HMOs)
– It is an organised system of health care that provides
comprehensive services to its members for a fixed, pre-
paid fee
– Basic characteristics
– Organized health care plans
• owns or leases medical facilities, tie-up with hospitals
and doctors, hires ancillary personnel etc
– Broad, comprehensive health services
• Most services generally covered in full. Alcoholism
&drug addiction - max ceiling
• Restrictions on the choice of physician:
– network of hospital in selected areas –treatment in non
network hospital also covered (in case of emergency and
max ceiling is there)
• Payment of a fixed, prepaid fee:
– Usually monthly – coinsurance on alcoholism &drug
addiction – deductibles on inpatient bills
• Heavy emphasis on controlling cost
– Capitation fee – physician or a hospital receives a fixed
annual payment regardless of the frequency or type of
services provided
– Salary to physician to control the cost – contract with
specialist and other service providers for negotiated fee
– Gatekeeper physician – primary physician to decide
whether a specialist is required
• Types of HMOs
– Staff model
• Physicians are employees of the HMO and are paid
salary and incentive sometimes
– Group model
• Physicians are employees of another group – annual
capitation fee
– Network model
• Contract with two or more independent group – fixed
monthly fee
– Individual practice association plan
• Open panel of physician – fee for service basis –
capitation fee for each member or reduced fee
• Risk sharing agreement – bonus for good experience
&reduced payment for bad experience
• Preferred provider organizations (PPO)
• It is a plan that contracts with health care providers to provide
medical services to the members at reduced fees.
• Difference between PPOs and HMOs
– Do not provide medical care on a prepaid basis, but are
paid on a fee-for-service basis
– Not required to use a preferred provider but have freedom
of choice
• If they choose preferred service provider deductible
&co-payments are reduced
• Lower fee for routine services & preventive medicines
health care services
• If the actual charge exceeds the negotiated fee then the
provider absorbs the excess amount
– Do not use a gatekeeper physician (getting permission
from a primary physician to see a specialist)
• Point-of-service plans
– If patients see providers who are in the network, they pay
little or nothing out of pocket .In case of non-network
providers – higher deductibles &co-payments (similar to
HMO).
– Advantage:
• Freedom of choosing service providers
– Disadvantage
• Substantially higher cost for non-network service
provider
• Exclusive Provider Organizations
– It is a plan that does not cover medical care received from
non-network providers
– Preferred providers – negotiated fee for service basis
• Advantages of managed care plans
– Lower utilization rates than traditional group indemnity plans
– In case of network hospitals – lower out of pocket expenses
– Heavy emphasis on cost control
• Reasons for rising health care costs
– As the labour age increases, premium increases
– Reduced competition due to M&A etc
– Innovative latest health care techniques
– Health care providers have more leverage in negotiating
• Disadvantages of managed health care plan
– Quality of care is being reduced because of the heavy
emphasis on cost control
– Access to specialist may be delayed/denied because of
gatekeeper physician
– Skip preventive care to maximize profits
– Approval required from insurers before certain diagnostic
tests or procedures
– Argument for prolonged hospitalization for too sick
patients
– Prescription drugs may be limited only to approved list of
drugs
• Disadvantages of managed health care plan
– “Gag rule” on discussing alternative treatments not
approved by HMOs
– Incentive bonus based on the profitability of the plan
• High quality care can be compromised in order to earn
bonus
– Unawareness among many workers regarding various
restrictions &limitation
Current developments in managed care
plans
Declining HMO enrollments
• Steady growth: 1980s and early 1990s
• Decline from 33% to 27% in 2003
• Reasons
– Employee dissatisfaction due to higher premium
– Higher deductibles &co-payment charges
– Network changes in physician and health care plans
• Enrollment in Traditional indemnity plan (TIP) have also
declined
Changes in plan design
• To control cost, employees to pay higher deductibles, co-
insurance &copayment charges and out-of –pocket expenses
• Three-tier copayment charges for prescription drugs:
– Lower co-payment charges: Generic drugs
– Higher co-payment charges: branded & in approved list
– Very High co-payment charges: branded &unapproved
• Consumer-directed health care plans:
– Designed to make employees seek out low cost providers
– Employer funded account
• Routine medical expenses
• Serious illness/injury covered under a high deductible
major medical plan
• New cost management strategies
– Collective purchase arrangements
• Larger employers band together & negotiate for lower
rates
– Tiered networks
• Higher out-of-pocket expenses in case of non-net work
hospitals
– Disease management program
• Websites provide information about self-care, health
risk assessment, health care decision tools and
management of certain diseases (diabetes, heart-
disease and asthma)
 Health savings account
• It is a tax savings account or custodial account established
exclusively for the purpose of paying qualified medical
expenses of the account beneficiary who is covered under a
high-deductible health insurance plan
• Patients bill of rights (proposals)
– Allows the patients harmed by the denial of care the right
to sue the managed care plan
– Payment of emergency expenses in the non-network
hospital
– Allows women to see obstetricians &gynecologists without
prior approval
– Requires to pay routine health care costs
• Patients bill of rights (proposals)
– Prohibits plans interfering doctor’s care (if medical services
are necessary)
– Payment for overnight hospital stay for mastectomy
– Allows the patients who are pregnant the right to keep
their doctors for 90 days (even if the doctor leaves
network)
– Appeal against denials through internal process & then
later to outside experts
Group medical expense contract provisions
• Pre-existing conditions
– Health Insurance Portability and Accountability Act (HIPAA)
– Pre-existing condition: it is defined as a medical condition
diagosed or treated during the previous 6 months
– Insurers &employers must give credit for previous
coverage of less than 12 months with respect to any
preexisting condition
• Coordination of benefits
– Coverage as an employee is usually primary to coverage as
a dependent
– Coverage of dependent children: the plan of the parent
whose birthday occurs first is primary
• Continuation of Group Health Insurance
– if a qualifying event occurs that results in a loss of
coverage, employees and covered dependents can elect to
remain in the employer’s health insurance plan for a
limited period
– a qualifying event includes termination of employment for
any reason (Except misconduct), divorce, legal separation,
death of the employee and attainment of a maximum age
by the dependent children
 Personal Accident Insurance
• Introduction
– It is supplement to life insurance provides protection
against death& disability
• Coverage
– Death
– Loss by physical separation of
• Both hands
• Complete& irrecoverable loss of sight in both eyes
• Loss of one limb &complete and irrecoverable loss of
sight in one eye
• (capital SI is given for above cases)
– Temporary total disablement (TTD)
• 33% of SI (Max.Rs. 500 per week)
• Features of the policy
– Maximum liability is the capital SI
– In case death amount is payable to nominee
– Weekly compensation is payable only after discharge
– PA policies with other insurers must be within the
knowledge of the insurer
– Age limit: 16 – 25 Yrs
• Rating
– It is based on occupation
– Premium varies widely with different insurers
• Extension of policy
– Accidents arising out of motor vehicles can be covered
• Exceptions
– War, riot, strike, intentional self injury
– Injury sustained whilst the insured under influence of
intoxication
– Injury occasioned by venereal diseases or pregnancy
– Hunting, racing or any hobbies involving high degree of risk
• Classification of occupations
– Class I – accountants, bankers, lawyer, teacher, consulting
engineer, administrative personnel etc
– Class II – architects, engineers (Field), planters, salesmen
etc
– Class III – engineer (High risk profile), engineering
contractors
– Class IV – any occupation involving unusual hazards
• PA & specified diseases insurance
– Disablement arising out of specified disease can be covered
under this policy
• Extension
– By paying additional premium certain diseases like malaria,
influenza etc can be covered
– 0.1% of capital SI is charged
• Underwriting consideration
– Age
– Health& physical built
– Occupation
– Other pursuits
– Medical history and family history
• Medical benefits& hospitalization scheme
– Cashless hospitalization preferred rather than
reimbursement
 Child welfare insurance
• It is applicable to expectant mothers – 18 to 40 years with
pregnancy up to 3 moths
• Reimbursement of medical expenses in case of child born
with congenital anomalies (certified as permanent total
disablement)
• In case of permanent partial disablement: % of SI as per the
certification by the physician
• Medical expenses are reimbursed & balance of SI is deposited
in a bank account or in UTI (in case of PTD/PPD)
• In case of curable congenital anomalies: 50% of tabulated
benefits
• In case of death of insured the amount will be paid to
guardian
• Premium rate: 2% of SI and so on up to Rs.75,000 SI