Tag Archive: health insurance

Health insurance needs risk management and loss control tools

Risk management and loss control are established practices in the property/casualty insurance industry. An example in homeowners insurance is clearing brush and flammable materials away from structures to reduce the risk of loss due to fire. On the commercial side of the business, it might take the form of recommending an insured business replace old or damaged electrical wiring that could short out and cause a fire. Or reducing safety hazards at the job site that could lead to an injury and workers’ compensation claim.

These practices however haven’t been widely adopted in the health insurance industry. Notwithstanding s a consensus that engaging in health promoting behaviors such as getting sufficient sleep and exercise can mitigate the risk of lifestyle-related chronic metabolic and cardiovascular disease. These risk reduction factors are now measurable, thanks to the availability of wearable tracking devices over the past few years.

The health insurance industry should figure out the best way to use data from these devices to encourage sustained healthy lifestyle habits. If the data show, for example, that an individual is engaging in regular exercise and getting 7-9 hours of sleep most days, an employer-sponsored health plan could offer a premium discount. The discount is justified since an individual who demonstrably practices healthy lifestyle habits on a regular basis will likely be at lower risk to develop a chronic medical condition that could lead to a high dollar loss in the future. It recognizes that people are best situated provide health maintenance for themselves — not their medical providers – a critical distinction as the economics of health care are reaching a breaking point. It also recognizes that as long as the United States utilizes an insurance-based system of paying for much of the nation’s health care, there must be a partnership between health insurers and those they cover to reduce utilization to ensure money is there for those facing high, unexpected medical costs.

Large employer plans can already put this into practice. For the small employer and individual market segments, the addition of an optional rating factor (in addition to the permitted factors such as family size, age, location and tobacco use) under the Patient Protection and Affordable Care Act would be necessary. Given the particular concern health plan issuers have expressed over higher than expected losses in the individual market over the past few years, the impetus is there.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Do You Speak Health Insurance? It’s Not Easy : Shots – Health News : NPR

“We’ve created a monster, and it’s not surprising to me that there’s literacy issues,” says Kathleen Call, a professor in the University of Minnesota School of Public Health. “I’ve studied this stuff, and sometimes I make mistakes.”Call has grown increasingly concerned that the complexity of insurance could compromise public health by keeping people away from the doctor.”People are treating it more like car insurance: You don’t use it until something happens,” she says. “You have an accident, then you use it. Otherwise you’re trying not to use it. And that’s not the way we want health insurance to be used.”

Source: Do You Speak Health Insurance? It’s Not Easy : Shots – Health News : NPR

Call’s comment concerning people not wanting to use their health insurance coverage touches upon a deep philosophical split over what it should be in the Affordable Care Act era. In the age of the health maintenance organization that came about in the 1970s and 1980s, HMOs were a hybrid product consisting pre-paid primary care and protection for high cost care such as major accidents and medical events. Before the HMO, there was major medical coverage that covered only the latter with the patient paying out of pocket for the former.

Today, the United States is shifting back to pre-HMO days. Instead of major medical coverage as it was called in the 1950s and 1960s, we now have high deductible or consumer driven plans. With rising health care costs, the all inclusive HMO plans with little in the way of out of pocket costs are no longer feasible. The problem is people still remember these rich HMO plans of the recent past and see high deductible plans as a poor value by comparison — or even valueless as they were described in a recent New York Times story.

The NPR item featured here makes the case for a simplified high deductible policy resembling the major medical coverage of the past, with a flat deductible of say $2,500 and a 20 percent coinsurance level. And automatically health savings account compatible.

That would be a true insurance product since it would cover large, unexpected medical expenses. Since patients would be responsible for care costs incurred below the deductible, these plans would reduce health plan issuer administrative costs involved in processing reimbursements for lower cost care events and the burden of keeping practitioner directories updated. It also dovetails with the consumer trend of convenience-oriented primary care delivered at retail and employer-sponsored clinics, online and through pre-paid arrangements.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

In 2014, the cost of individual health coverage becomes a matter of fiscal policy

As the name suggests, the primary policy goal of Subtitle D, Part 2 of the Patient Protection and Affordable Care Act (PPACA), Consumer Choices and Insurance Competition Through Health Benefit Exchanges, is to restore America’s health insurance market to functionality.  Functioning markets by definition offer buyers meaningful choice among competing sellers.  The health benefit exchange mechanism would create a functional market by “leveling the playing field” to ensure health plan issuers offer the same benefits and otherwise comply with rules governing coverage contained in the PPACA.  Second, the exchanges offer strong market participation incentive for plan issuers by making available millions of consumers who cannot afford relentlessly rising premiums by taking tax dollars these individuals would otherwise pay to the U.S. Treasury and giving them to plans to subsidize their premiums.

In addition to these market interventions, the PPACA — like the Clinton administration’s unenacted health care reform plan of the 1990s before it — takes the insurance out of health insurance. How?  By outlawing medical underwriting of individuals and instead instituting modified community rating where rates vary only based on age, family size and residence and not medical history.  Underwriting is the heart of insurance: selecting who is offered insurance and at what price.  Without underwriting, health coverage can no longer be accurately described as an insurance product.  Perhaps that’s why the PPACA refers to the new, government mandated state insurance markets as health benefit exchanges and not health insurance exchanges.

Since all health plans would be offering the same coverage as mandated by the PPACA come 2014 and can no longer underwrite to obtain the lowest risk (and lowest cost) individuals to cover, they are left to compete solely on service and price.  How will this play out over the long term since the underlying costs of medical care continue to rise and show no signs of abating?  Let’s explore some scenarios.  Plans may compete by absorbing the increased cost of care in order to keep premiums down.  Plans that can do that successfully will survive. Those that cannot will be forced to pass along increased costs to consumers through higher premiums.  As consumers choose cheaper plans offered by competing plan issuers, less price competitive plans face the death spiral of adverse selection and/or insolvency, leaving only the biggest players to compete in the exchanges.  Fewer players mean less choice, which is contrary to a key goal of the exchanges.  Less choice and less competition in turn gives surviving plan issuers greater incentive to pass along rising costs to consumers.

But unlike in the current market, in the exchange market starting in 2014 and going forward, those increased premiums won’t be necessarily be completely absorbed by consumers or lead to their dropping coverage because it’s no longer affordable.  The federal treasury will also share the burden because the advance tax credit subsidies for exchange-purchased coverage will absorb whatever the plans charge above a consumer’s income level (subject to federal review of the reasonability of rate increases), ranging from no more than two percent of income at the federal poverty level (FPL) to 9.5 percent at 400 percent of FPL.  Since tax dollars will be subsidizing insurance rates, how much those rates go up in this soon to emerge market automatically become not only a market regulation issue, but also a matter of national fiscal policy.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

PwC: State health benefit exchanges will generate $205B in premiums by 2021

For health insurers and health care service plans, state health benefit exchanges represent a major business opportunity that will generate an estimated $205 billion in premiums by 2021, according to a report issued this month by PwC’s Health Research Institute.

“Public exchanges will create an irreversible shift in the insurance market that will ultimately change the way medical care is sold in the U.S.,” the report notes.  It adds the caveat that managing this large new cohort of covered lives poses challenges. “Insurers will continue their battle to keep a balance of healthy and sick members to limit adverse selection. Providers and insurers will face clear challenges in serving a new customer base with a demographic profile and health needs that differ from today’s insured population in meaningful ways.”

In addition, many of the newly covered will churn between Medicaid and commercial coverage sold in the state exchanges as their incomes and life circumstances change.  The full report, Health Insurance Exchanges: Long on options, short on time, can be downloaded here. (Registration required)


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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