Introduction to Health Insurance

1. Introduction to Health Insurance Health of the Public

2. Objectives Understand who is covered and who isn�t Be able to describe differences among different insurance types Understand how different insurance types influence ability to control costs Appreciate emerging trends in health care organization

3. What was health insurance like in 1900?

4. What were the forces that lead to commercial insurance? Doctors: Initially very opposed to insurance Hospitals: Needed business during the great depression Baylor University 1929: Contract with teachers union. $.50/month for 21days hospitalization Later led to �Blue Cross� AMA agrees that insurance is ok but only if controlled by the medical societies Blue Shield Blue Cross & Blue Shield merged to give competitive advantage

5. Why is insurance linked to employment? Wage freezes expand fringe benefits Experience rating Set rates on historical costs by a risk pool

6. It�s 1964. Who is left out of the insurance market? 1965 Medicare A Medicare B Medicaid

7. What is the effect of insurance on health care costs?

8. Out of Pocket Expenditures as Percent of Total Health Expenditures

9. Health care costs as percent of Gross Domestic Product

10. Who�s covered? -- Who isn�t?

11. Who is uninsured?* 40-45 million Americans 17% of the population 33% of Hispanics (account for 1/4 of the uninsured) 23% of African-Americans 11 million children 80% are in families with at least one person employed 1/2 earn < 200% of the poverty level

12. Can you afford it? 200% of the poverty level: $28,000 Cost of a family insurance policy $529/month

13. What difference does health insurance make?

14. Who bears the cost of the uninsured? Cost shifting no longer feasible Government support DSH payments Community health centers VA medical centers Charity reduced with increase in managed care Emergency rooms

15. Barriers to covering the uninsured Public opinion Lack of political support Cost ?$300 billion/year for universal coverage Lack of trust of government programs

16. Current tax policy Currently benefits the rich employer contributions already tax exempt some employees have tax exempt medical expense accounts most poor receive no tax breaks for insurance or medical expenses

17. Possible solutions Expansion of CHIP move above 200% of the poverty level expand to parents Tax incentives Tax deductions for health insurance Refundable tax credits Tax credits to small business Would it undermine existing employer based system? Employer mandates

18. What is managed care?

20. What is managed care? Influence on health care delivery from someone other than the caregiver and the patient

21. What are the different types of insurance available today?

22. What are the typical insurance options? Indemnity PPOs POS Network/IPA model HMOs Group/Staff model HMOs

23. Indemnity and Service Benefit Plans Similar to fire or homeowners insurance: Insurance company pays for the �loss� or costs Fee-for-Service Examples: Traditional Medicare; Traditional BC/BS

24. Indemnity and Service Benefit Plans Cost control mechanisms deductibles copayments exclusions pre-authorization, utilization review cherry-picking prospective payment - DRGs Resource-Based Relative-Value Scale

26. Preferred Provider Organizations Basically a discounted FFS restricted to a select group of providers - may see other providers, but at increased costs Almost all commercial carriers carry a PPO option Cost control mechanisms usual and customary discounted contracting

27. Point of Service Cross between PPO and HMO Patient decides whether to use indemnity or HMO component at the �point of service� Cost-control Once patients have HMO provider, they usually stick with them deductibles and copayments

28. Network and IPA models IPAs: group of physicians who form for purpose of contracting with an HMO Network model: HMO contracts directly with different groups of physicians Cost control: utilization review capitation/risk/gatekeeper FFS with withholds

29. Capitation Who primary care Specialists Limits Withholds & percentage at risk percentage of practice

30. Staff & Group Models Staff: doctors employed by HMO (Harvard Community Health Plan) Group: Close alliance between an HMO and single practice (how the practice reimburses is their own business) Cost control Behavior modification

31. Control of Providers

32. Integrated Health Care Delivery Systems Physician-hospital organizations assure referrals productivity Virtual integration

33. Buying doctors Control Incentives for efficiency Productivity

34. Summary Types of insurance Cost control mechanisms Physician control and productivity Integration of health care systems

39. Self-assessment - answers 1. - A 2. - C 3. - B 4. - ?