Faculty of Medicine Health Economics and Policies - PowerPoint Presentation

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Faculty of Medicine Health Economics and Policies (31505391) The Market for Health Insurance

By Hatim JaberMD MPH JBCM PhD26+28 -02- 2018

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Course Content 31505391 Week 1 Introduction to Course introduction to Health: health value, health determinants. Week 2 Introduction to: Health care management Health Policy and Healthcare Delivery.Week 3

The scope of Economics and Health Economics .Week 4 Demand and Supply Demand for Medical Care. Supply of public health . Week 5 The Market for Health Insurance.Week 6 Financing health care Economic in Health Policy -Cost and price.Week 7 Health systems performance analysis. Measurement and evaluation in health care.

Week 8 Midterm assessment (Exams.) 21-3-2018

Week 9 Public Goods, Market Failures, and Cost-Benefit Analysis.

Week 10

Economic evaluation . Economics and efficiency cost analysis and cost effectiveness.

Week 11

Economic effects of Bad habits including smoking and alcohol consumption

Week 12

Quality Improvements in healthcare delivery Methods to improve health care delivery.

Week 13

Human resources in Healthcare delivery.

Week

14

Health Markets and Regulation and Economic regulation of health markets.

Week 15

-16

Final assessment (Exams.)

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Week 5Why It Exists, How It Influences Care Delivery.The role of public policy in health insurance market. How does inequality of incomes affect public policy related to health insurance? The characteristics of the insurance market.The role of and implications of employer-based insurance.The trends in insurance markets.

Economics and the market for health insurance? Governmental health insurance programsWhat should public policy do about the price/insurance/affordability/care access conundrum in health care? Health market outcomes: Market failures, Regulations and Institutional changes Expenditures on health and Uninsured.6Slide7

Presentation outline26-2-2018TimeFinancing and insurance: definitions, types and impact.

08:00 to 08:20How does inequality of incomes affect public policy related to health insurance? 08:20 to 08:30

The characteristics of the insurance market.

The role of and implications of employer-based insurance.

08:30

to 08:40

The trends in insurance markets.

08:40

to 08:50

Uninsured ????

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Health policy and financing policyHealth policy and financing policy are inseparable because financing policy determines: who has access to basic health carehow much is available, who controls the funds and how they are used;

- the technical, - allocative and distributive efficiency of resource in use, social protection, - what financial incentives are given to patients and providers and whether health care cost inflation can be controlled9Slide10

Why should doctors be concerned with health care financing?Rising health care costs in all nations leading to:Government cost control measures e.g. regulation of pricesInsurance company scrutiny of actions of doctors

Loss of clinical autonomy for doctors e.g. doctors cannot prescribe expensive drugs or order expensive procedures without getting permission from other parties first 10Slide11

Definition of InsuranceA social device where a group of persons transfers risk to an insuring entity in order to combine loss experience.

This theoretically permits the ability to actuarially predict these “losses” and to calculate the premium payments that will need to be contributed by all members of the risk pool.11Slide12

12What is insuranceMeant to insure us against random uncertainty.Club of 100 members.On average, each year one member gets sick, it costs $20,000. It is random who gets sick.This is a lot of money for one person to pay.

Aim of insurance is to reduce the variability in one’s income by pooling risks with a large number of people.Slide13

13What is insuranceOutlays for health may be variable for one person, they are fairly predictable for the group.Health insurance would not be necessary if everyone had average needs. But we do not it is variable.Slide14

14What is insuranceDesirable characteristics for insurance:The number of insured should be large, and they should be independently exposed to potential risk

Losses covered should be definite in time, place, and amountThe chance of loss should be measurableThe loss should be accidental from view point of person who is insuredSlide15

PremiumsYour monthly cost for insurance coverageCopaymentSet cost per visit that you pay out-of-pocket at the time of service

DeductibleTotal amount you pay out-of-pocket before insurance will pay for servicesCoinsurance% of costs you pay out-of-pocket for services Basic Insurance Terms

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Basic Insurance TermsCoinsurance :A form of medical cost sharing in a health insurance plan that requires an insured person to pay a stated percentage of medical expenses after the

deductible amount.Copayment :A form of medical cost sharing in a health insurance plan that requires an insured person to pay a fixed dollar amount when a medical service is received. The insurer is responsible for the rest of the reimbursement.

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Basic Insurance TermsDeductible - A fixed dollar amount during the benefit period - usually a year - that an insured person pays before the insurer starts to make payments for covered medical services

. Plans may have both per individual and family deductibles.Premium - Agreed upon fees paid for coverage of medical benefits for a defined benefit period. Premiums can be paid by employers, unions, employees, or shared by both the insured individual and the plan sponsor.

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What is Health Insurance?Health insurance, like other forms of insurance, is a form of collectivism by means of which people collectively pool their risk, in this case the risk of incurring medical expenses.

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Why should I consider purchasing health insurance?19Slide20

Ten Essential Health Benefit Categories

1. Ambulatory services6. Prescription drugs2. Emergency services7. Rehabilitative and habilitative services and devices

3. Hospitalization8. Laboratory

services4. Maternity and newborn care

9. Preventive and wellness services and chronic disease management

5. Mental health and substance use disorder services, including behavioral health treatment

10. Pediatric services, including oral and vision care

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Insurance:Individual view: Risk Aversion Social view:Risk Pooling way Cross SubsidyInsurance: Pools the risks;

but, don’t vanish or decreased it21Slide22

1. Insured pays a premium

and transfers his financial risk

2. Insurer pays the financial losses

suffered

by the insured

(

indemnity

)

in case

of unforeseen events

A contract!

How does insurance work?

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Bilateral Exchange Model for GoodsConsumers

Providers

Service

Money

Hospitals Clinics Physicians

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GovernmentCharity

Consumers

Providers

Exchange Model for Goods

Service

User fees

Payments

Premiums & Taxes

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Trilateral Exchange Model for GoodsConsumers

Providers

Service

User fees

Hospitals Clinics Physicians

Financing Organization

Treasury

Taxes

Premiums

Payments

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Types of health care provider arrangements26¨ Exclusive providers - Enrollees must go to providers associated with the plan for allnon-emergency care in order for the costs to be covered.

¨ Any providers - Enrollees may go to providers of their choice with no cost incentivesto use a particular subset of providers.¨ Mixture of providers - Enrollees may go to any provider but there is a cost incentiveto use a particular subset of providers.Slide27

The Demand for Health InsuranceWhy do consumers value health insurance?Illness, injury and disability are to a large extent random eventsHospitalizations, serious injury, and rehabilitation and other advanced modern treatments can be very expensiveMost households are averse to risk27Slide28

28Demand for health insuranceResults of uncertainlyIllness and medical expenditures are unpredictableHospitalizations, serious injury, and rehabilitation and other advanced modern treatments can be very expensiveCan save for possible medical expendituresMost households are averse to riskInsurance companies pool risk

Don’t take on risk, spread risk among many consumersWhat is risk aversion? Risk Aversion:The desire to replace an uncertain loss with a steady & certain premium paymentSlide29

29Demand for insuranceFactors affecting demand for health insurance:Probability of illnessLoading

feeMagnitude of loss relative to income (cost of illness)Degree of risk aversionPrice: Higher price reduces likelihood that an individual will insure against a given eventSlide30

30Demand for insuranceProbability of Illness -- evidenceIncreases with ageAffected by availability of public health insurance programs (Medicare)Differs by gender Result of women responsible for child birthAffected by availability of public health insurance program targeting pregnant women

Differs by type of care neededChronic vs. acute vs. preventiveElasticity of demand will differ Slide31

Medical VS HealthMedicalIn order to cover the costs Have to increase premiumsHealthDecrease costsDecrease Invalidity or disease so increase quality of life & productivity31Slide32

Changing Vision toward RISK REDUCTIONFrom

Medical INS

To

Health INS

So Can reduce the risk

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WHAT IS MEDICAL INSURANCESystem

of assurance to make contingencies of health care expenses.To provide protection against financial loss

by unforeseen sickness.

To meet cost of good medical care.

Relieves anxiety and tension.

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WHY MEDICAL INSURANCE REQUIRED?Medical expenses have increased. Common man has to stretch to uncomfortable financial limits to get proper treatment for himself and his family.

Covers the individual and family against any financial constraints arising from medical emergencies. In case of sudden hospitalization , illness or accident, health insurance takes care of the expenses on medicines, oxygen, ambulance, blood, hospital room, various medical tests and almost all other costs involved34Slide35

What does health insurance cover Basic Coverage 

A health insurance plan should provide cover for hospital rooms, doctor or surgeon fees, medical tests, medicines and related expenses. It provides you with essential protection

plus a range of

optional extensions

that can be selected to suit your specific insurance requirements. 

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Health Insurance Cover Specific Health Plans  It provides covers for critical illnesses or diseases such as heart attack, kidney failure, etc; most insurers offer critical illness plans

. Another set of specific insurance plans target ailments such as diabetes and cancer. These plans offer cash on hospitalization, reimbursement for expenses incurred on surgical treatments, and such like. 36Slide37

Patterns of Insurance CoverageType of Health Care

Variance of Financial Risk

% of People Under 65 Insured

Hospital Care

Highest

80

Surgical & in-hosp medical

High

78

Outpatient doctor

Medium

40-50

Dental

Low

40

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Comprehensive health insurance38Total coverage for health

care-related charges. This coverage is after deductibles and co-insurance are applied to any hospital or physician's office visit costs.Slide39

A Good Health Insurance Plan Should..Provide quality care at a reasonable costOffer basic coverage for doctor and hospital billsCover 120 days’ hospital room and board

Provide at least $1,000,000 lifetime maximum per personPay 80% of out-of-hospital expenses after the deductible is metHave no unreasonable exclusionsLimit out-of-pocket expensesSlide40

HEALTH INSURANCE FUNDAMENTALS Health insurance pays for some or all of a person’s health care costs. The

covered person will pay a premium, which is a monthly amount paid in advance in order to receive health insurance.The covered person may share other costs of care (e.g. a15 % copayment at each office visit).

Preventive care and wellness services are covered by health insurance with

no out-of-pocket cost.

Insurance provides

protection

from

overwhelming

medical

costs arising

from chronic illness or injuries

.

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What different ways can I purchase health insurance?Employer-based Insurance

Private Coverage Through MarketplacePrivate Coverage Outside Marketplace

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Health InsuranceMain TypesFee-for-service (indemnity)Managed care (pre-paid)Private health insuranceProvided by health insurance companies

to consumersCan be purchased directly or can be a benefit of employmentPublic health insuranceProvided by the government (e.g,……….)Private insurance companies may administer these government programs for most of the people enrolled43Slide44

Private insurance private contract offered by an insurer to exchange a set of benefits for a payment of a specified premium.marketed either by

nonprofit or for profit insurance companiesconsumers voluntarily choose to purchase an insurance package that best matches their preference. offered on individual and group basis. Under individual insurance the premium is based on that individuals risk characteristics.

major concern in private insurance is buyer’s adverse selection

Under group insurance, the premium is calculated on a group basis. risk is pooled across age, gender and health status.

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Individual Private InsuranceIndividual policies involve an individual person paying a premium directly to a “health plan” or insurance company, which reimburses providers.Individual policies provide health insurance for approx. 11% of U.S. population.

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Direct out of pocket made by patients to private providers at the time a service is rendered

user fees refer to fees the patients have to pay to public hospitals, clinics, and health posts not to private sector providers. proponents of user fees believe that of public health is the fee can increase revenue to improve the quality services

and expand coverage major objection raised against user fees had

been on equity grounds

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Employment-Based Private InsuranceEmployers usually pay all or part of the premium that purchases health insurance for their employees.This is a tax-deductible business expense and the government does not treat the health insurance fringe benefit as taxable income to the employee.Therefore, the government is in essence subsidizing employer-sponsored health insurance. This subsidy was estimated at $260B/year

in 2009.47Slide48

Community based financing Refers to schemes are based on three principles: -community cooperation,

-local self reliance and -pre payment Factors for success of community financingTechnical strength and institutional capacity of the local group

Financial control as part of the broader strategy in local management and control of health care services

Support received from outside organizations and individuals Links with other local organizations

Diversity of funding

Responding to other (non health) development needs of the community

Ability to adapt to a changing environment

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Why Do Nations Consider Social Insurance?Diseases and illnesses are uncertain; serious illnesses can bankrupt families; Health and health care are basic necessities for life, EQUITABLE access to health care is a national goal for most countries

Insurance (pooling risks) enhance people’s well-being and prevent impoverishment49Slide50

Special Features of Social InsuranceMandatory for designated population to avoid adverse and risk selectionsA social contract between government and the enrolleesEligibility for benefits

require that the enrollee has paid the premium (contribution) for a minimum period. Thus SI is not a right of every citizen, and not a welfare programFinancially autonomous and has to maintain its own solvencyBenefits prescribed by lawBenefits not directly related to contributions 50Slide51

Advantages of Social Insurance Pools risks widelyCan improve equityMobilizes financial resources for health care from workers in the formal sectorLow administrative costsCan control health expenditure inflation if the program is designed properly

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Disadvantages of Social Insurance Requires sophisticated knowledge and organization to do it properlyAlters locus of financial power and this power can be misusedCan’t provide universal coverage

unless the government subsidizes the farmers and workers in the informal sector 52Slide53

Impacts of Social InsuranceOrganize and mobilize funds for healthPool risks between the healthy and the sick, cross subsidy by the high-income to the low-incomeCan provide cost effectiveness health careCan control health cost inflationCan improve efficiency and quality of health care

Potential negative economic impacts: Excess burden, labor market, price inflation53Slide54

Government-Financed InsuranceIn the late 1950s, less than 15% of the elderly had health insurance.In 1965, Medicare (for the elderly) and Medicaid (for the poor) was enactedFirst tax-financed govt. insurance

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Contribution of government in shaping health insurance sectorThe government has

interfered whenever the cost of the medical care has become unreasonable. Such government intervention is required to make the process of medical insurance cost-effective and achievable

especially for those who are financial deprived.

 The government introduced

innovative healthcare products

to the medical market .

The

government established

appropriate health infrastructure to support the 

Mediclaim

 conveniences that are offered in the market

.

The government has also taken

various proposals to support the growth of the insurance sector such as 

Tax benefit

offered

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Role of the Private Sector Companies in promoting the Health Insurance Policies

The private players in the health insurance sector have supported their customers by providing them affordable, inexpensive and easily accessible insuranceThe insurance companies have given a lot of importance to convenience of the customer. Buying the e-policy online has become a much convenient alternative with the facility to renew it anytime, anywhere.

The insurance companies have

developed precocious

Mediclaim

 insurance policies that not only provide comprehensive coverage but also induce various other benefits.

Another major step in the health insurance sector is the

floater concept, where they cover the entire family in one policy.

Private companies are constantly

improving their products to meet the needs of the people as much as possible

. Such steps include various plans that cover critical illnesses, outpatient expenses and others

.

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Third Party Administration TPA And Its Role

TPA is a middlemen between Insurer and the Customer . Customer can directly deal with TPA at the time of claim and TPA will help with all the process of claim settlement . A TPA is a

specialized health service provider rendering variety of services

like networking with hospitals, arranging for hospitalization and claim processing and settlement.

Some of the services TPA provides are

Maintain database of policyholders

Issue of identity card to all policyholders

Provide ambulance service

Provide information to policyholders about hospitals.

Check various investigations

Provide Cashless service

Process claims

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Life Insurance Provides financial payment to a beneficiary in the event of death.Benefits can vary, depending on the needs of the family and individual.Employers often offer life insurance to their employees in the amount of the employee's annual salary.

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Sources of Health Insurance (2013)Medicare and Medicaid Spending 39% of national health spending23% of federal budget43% of hospital revenues

Employment Based 54%Medicaid 17%

Medicare 16%

Individual Private Insurance 11%

Military 5%

Uninsured

13%

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Types of Health InsuranceMedicareGovernment program providing health care

to people over age of 65 and those who are disabled and have received Social Security benefits for at least 2 years.

Medicaid

Medical assistance programOperated by the

STATE

, not the federal government

Pays for health care of people with low incomes, children who qualify for assistance, and people who are physically disabled or blindSlide61

In Jordan, Nearly 75 % of the Jordanian populations are

insured under one health insurance scheme or another, and

around 6%

has multiple insurance

.

The

RMS

( Royal Military Services)

is the

largest insurer

standing for

28

%

of

the population, followed

by

the

MOH (

Ministry of Health)

with

26.4 % ,

UNRWA

for 10

% ,

Private

for

9.2

%

and

university

hospitals stand

for 1.4

%

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Jordan has two large public pools ,the CIP (Civil Insurance Program

) and RMS funds which cover nearly 54 % of the Jordanian population.

These

pools aim

to

:

increase

resources

and

protect

high

risk groups.

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63Mostly adults, not children – half are childless adults.The number of uninsured children increased from 8 million (10.9 percent) in 2005 to 8.7 million (11.7 percent) in 2006 Poor and near-poor – 60% have incomes above federal poverty levelWorkers and family members –

80% in families with at least 1 workerUnskilled laborers, service workers3 of 5 of the uninsured who work, work in firms with <100 workers Who are the uninsured?Slide64

64Uninsured by incomeSource: ASPE tabulations of the 2005 Current Population Survey Slide65

65Uninsured by age, 2005                                                                                                                                                                                                                                  

Source: ASPE tabulations of the 2005 Current Population Survey Slide66

66Uninsured: Why are they uninsured?Three primary reasons that workers don’t have insurance:

The employer does not offer a health plan.Employer offers health plan, but employee is not eligible for the plan because of part-time status or some other rule.Employee doesn’t buy plan because plan too expensive or does not perceive need for planSlide67

67Uninsured: Why are they uninsured?Uninsured, more likely to:

Change jobs Work part-time Work for small firmsSmall-firms pay much higher premiums because their risk is perceived to be large.Why don’t they buy private health insuranceThere is no risk pooling with private health insurance and it is expensiveAverage annual cost of family policy in the private market (3,330) Average annual cost an employee pays out of pocket towards group insurance (2,700)Slide68

68Uninsured: Impact on health outcomesThose who choose not to buy health insurance do so because they are healthierdoes lack of insurance cause poor health

, or does poor health decrease the probability of being insured. As the number of uninsured grow, policy makers will have an increasingly difficult time ignoring health consequences of the uninsured.Slide69

HEALTH INSURANCE PROVIDERSGroup Health InsuranceMost popular way to buy health insuranceUsually provided by an employerIndividual Health InsuranceMost expensive method of buying health insuranceThe individual pays the entire premiumUsually has a waiting period before the policy is activeUsually requires a physical examination

Health Maintenance OrganizationProvides health care to its members usually at a medically staffed clinic for a set fee per monthEmphasis is on preventative health careSlide70

Tips to choose the right insurance planAdequate Coverage Amount

Cost Benefit GroundAge FactorAge until Renewals AllowedCo-pay and sub Limits

Temporary and permanent exclusionsCovered by employer or not

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Finally,………Need of Medical Insurance Arises

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