Health Care Policies: Assignment Week 4

Chapter 7:

Understanding Health

Insurance

Chapter Overview

• Chapter 7 reviews the basic elements of health

insurance

• Chapter 7 focuses on:

– How health insurance operates

• Why people buy insurance

• Basic terminology/features

– Managed care

• Cost and utilization control tools

• Common structures

Insurance Coverage Overview

• The U.S. does not have a single national health

insurance program that covers the entire population

• Approximately 15% of the US. Population is

uninsured

• Of those with insurance, most obtain coverage

through their employer

• Medicaid and Medicare are government health

insurance programs that cover millions of people in

the U.S.

Basic Terminology • Beneficiary

– Consumer, individual who is covered by the plan

• Premium

– An annual fee paid by the beneficiary to the health plan, usually in monthly installments, to secure health insurance coverage

• Deductible

– An amount of money a beneficiary must pay out-of-pocket before the insurance company assists with paying for services.

• Cost-sharing

– Co-payment or co-insurance, an amount the beneficiary pays per service after the deductible is met

Uncertainty and Risk

• People chose to be insured because of

uncertainty and risk

– There is uncertainty whether an expensive and

unforeseen event that impacts their health status

will occur

– There is risk of financial exposure due to the

unexpected event

Uncertainty and Risk

• Insurance companies are concerned about

uncertainty and risk because they are

businesses that need to cover the cost of their

expenditures

• Uncertainty and risk may lead to adverse

selection

– Unhealthy people over-select a particular plan,

making the plan more expensive

Setting Premiums

• Insurance companies set premiums to cover most of

their expenses

• Experience rating

– Based on health status and claims in prior year(s)

– Also referred to as medical underwriting

• Community rating

– Based on factors unrelated to previous use of medical care,

such as geography or age

– All persons in the community rating system pay the same

amount

Legal Issues

• Health Insurance Portability and

Accountability Act of 1996 (HIPAA)

– HIPAA-covered group plans may not exclude or

limit otherwise qualified individuals due to pre-

existing conditions

– HIPAA-covered group plans may not charge

different premiums based on identified health

factors to similarly situated individuals

• State laws on medical underwriting vary

Managed Care

• Managed care integrates the provision and payment of health care services

• Ideally, managed care contains costs while providing necessary and high quality health care services

– Some fear that managed care companies provide fewer services than necessary or lower quality services to save money

Managed Care –

Cost Containment Tools

• Performance-based salary bonuses and withholds

– Provider receives a salary as a managed care organization employee

– Salary is subject to bonuses or withholds

• Discounted fee schedule

– Provider accepts less than fee-for-service rates to participate in managed care network

• Capitated payment

– Provider receives a per member/per month payment for all services rendered within scope of practice

Managed Care –

Utilization Control Tools

• Gatekeeper

– Managed care organization uses a primary care provider to

make sure only necessary and appropriate care is provided

• Utilization review

– Managed care organization reviews and approves or denies

services requested by provider

• Case management

– Managed care organization manages and coordinates

patient care

Managed Care – Common Structures

• Health Maintenance Organization (HMO) – Pays providers a salary or capitation

– Beneficiaries may only use in-network providers

– HMO coordinates and controls receipt of services

• Preferred Provider Organization (PPO) – Pays provider on a discounted fee schedule

– Beneficiary may use in- or out-of-network providers

• Point of Service Plans (POS) – Combines features of HMO and PPO

– Pays providers with capitation or other risk sharing arrangement

– Has a provider network; beneficiaries may use out-of-network provider for designated services

– Has a gatekeeper to control and coordinate care