LIFE & HEALTH INSURANCE

UNIT 8
Health Insurance
 Health insurance is insurance against the risk
of incurring medical expenses among
individuals.
 By estimating the overall risk of health care
and health system expenses, among a
targeted group, an insurer can develop a
routine finance structure, such as a monthly
premium or payroll tax, to ensure that money
is available to pay for the health care benefits
specified in the insurance agreement.
 It includes insurance for losses from accident,
medical expense, disability, or accidental
death and dismemberment
Health care problem
 Rising health care expenditures
 Large number of uninsured in the
population
 Uneven quality of medical care
 Considerable waste and
inefficiency
Rising health care
expenditures
 Increase in consumer demand
 Advances in technology
 Cost insulation because of third-party
payers
 Employment-based health insurance
 State-mandated benefits
 Increased spending on prescription
drugs
 Higher administrative costs
 Rising prices in the health-care sector
Large number of
uninsured in the
population
 Many people do not have health
insurance coverage
 49.9 million people, or 16.3% of the
US population had no health
insurance coverage in 2010
 Many people are uninsured because
the coverage is not affordable
 Many low income people who are
eligible for Medicaid are not aware
they are eligible
 The uninsured often delay or skip
needed medical care because of
high costs
 When the uninsured receive
medical care, they frequently pay
more for that care
 The uninsured often do not have
access to regular screenings and
preventive care
Uneven quality of medical
care
 The quality of care has improved
over time
 The quality of medical care varies
widely depending on geographic
location, type of health insurance
plan, and disease being treated
Considerable waste and
inefficiency
 Experts estimate that the present
system wastes lots of resources each
year on wasteful spending include:
 Duplication of tests
 Medical errors that are largely preventable
 Unnecessary tests
 High administrative costs and excessive
and redundant paperwork
 Readmissions into hospitals because of
inadequate or ineffective initial treatment
 Overuse of expensive medical technology
Individual Health
Insurance Coverage
 Some people are not employed
and may require individual health
insurance coverage
 Retired workers
 College students
 Housewives
 Hospital surgical insurance
 Major medical insurance
 Health savings account
 Long term care insurance
 Disability income insurance
Hospital surgical insurance
 These plans are also called basic
plan
 They cover routine medical expenses
and are not designed to cover
catastrophic losses
 Most policies coverages are as below
 Hospital expenses
 Surgical expenses
 Emmergency treatment

Major medical insurance
 Insureds often desire broader
coverage than that provided by
the basic coverages
 Major medical insurance is
designed to pay high proportion of
covered expenses of a
catastrophic illness or injury
Characteristics of Major
medical insurance
 Broad coverage
 High maximum limits
 Benefit period
 Deductibles
 Coinsurance
 Exclusions
 Broad coverage
 Major medical insurance is designed to
pay a high percentage of covered
medical expenses incurred by an insured
who has a catastrophic illness or injury
 Most individual expense plans provide a
broad range of benefits, including

Inpatient hospital benefits

Outpatient benefits

Physician benefits

Preventive services

 High limits
 Major medical policies are written
with high lifetime limits
 High limits are necessary to meet the
crushing financial burden of a major
catastrophic illness or injury
 Benefit period
 The purpose of benefit period is to
provide a definite time period within
which eligible medical expenses for
specific illness or injury must be
incurred in order to reimbursed under
the policy
 Deductible
 Major medical policies contain a
deductible provision
 The purpose of the deductible is to
eliminate small claims and the high
administrative cost of processing them
 By eliminating small claims the insurer
can provide high policy limits and still
keep the premiums reasonable
 Types of deductible
 Calendar year deductible
 Family deductible
 Common accident provision
 Coinsurance
 Major medical policies contain a coinsurance
provision
 It requires the insured to pay a certain
percentage of eligible medical expenses in
excess of deductible
 Also called a percentage participation clause
 Purpose is to reduce premiums and prevent
overutilization of plan benefits
 Also the insured is less likely to demand
unnecessary medical servises if he or she
pays part of the cost
 Exclusions
 All major medical policies contain
exclusions such as
 War or military conflict
 Elective cosmetic surgery
 Dental care, except as a result of an
accident
 Eye checkup
 Pregnency and child birth
 Expenses covered by workers compensation
Health savings account
 A health savings account (HSA) is a
tax exempt account established
exclusively for the purpose of
paying qualified medical expenses
 The beneficiary must be covered
under a high deductible health plan
to cover catastrophic medical bills
 Contributions can be made by
individuals, their employers, and
family members
Long term care insurance
 Long-term care insurance pays a daily
or monthly benefit for medical or
custodial care received in a nursing
facility, in a hospital, or at home
 People who reach age 65 will likely
have a 40% chance of entering a
nursing home, and about 10% of them
will stay there five years or more
Disability income
insurance
 The financial impact of total
disability on present savings,
assets, and ability to earn an
income can be devastating
 Disability income insurance
provides income payments when
the insured is unable to work
because of sickness or injury
 The most common definitions of
total disability are
 Inability to perform the material and
substantial duties of your regular
occupation
 Inability to perform the material and
substantial duties of your occupation,
and are not engaged in any other
occupation
 Inability to perform the duties of any
occupation for which you are
reasonably fitted by education,
training, and experience
 Inability to perform the duties of any
gainful occupation
 Loss-of-income test, i.e., your income
is reduced as a result of sickness or
accident
 Partial disability means that you can
perform some but not all of the duties
of your occupation
 Some policies offer partial disability
benefits
 Usually, partial disability benefits must
follow total disability
 The partial disability benefits are paid
at a reduced rate for a shorter period
Third party administrator
 A third-party administrator (TPA) is
an organization that processes for
insurance
 This can be viewed as
"outsourcing“
 Third-party administrators are
prominent players in the Health
care industry
 They are normally contracted by a
health insurer or self-insuring
companies to administer services
 Claims administration
 Premium collection
 Enrollment
 Other administrative activities.
Shopping for Health
Insurance
 Insurer for the catastrophic loss
 Consider group health insurance first
 Purchase a policy that has a preffered
provider network
 Don’t ignore disability income insurance
 Avoid limited policies
 Watch out for restrictive policy
provisions and exclusions
 Use deductibles and eliminations
periods to reduce premiums
Insurer for the
catastrophic loss
 Choose a life insurance that provides
protection against a catastrophic
loss that can destroy financially
 The cost of a serious illness or injury
can prove ruinous
 Unless you have the adequate
health insurance to meet the above
cost you will bw financially insecure
Consider group health
insurance first
 First consider whether group
health insurance is available or not
 You may be eligible to participate
in a group health insurance plan
sponsored by your employer or
any other group
 Group health insurance is
preferable to individual coverage
Purchase a policy that has
a preffered provider
network
 Shop for a policy that has a prefered
provider network
 Insurers frequently establish networks of
health care providers who agree to provide
medical services to the insureds at
discounted fees
 Prefered provider include

Physicians

Dentists

Hospitals

Pharmaceutical firms

Don’t ignore disability
income insurance
 Substantial amount of income is
lost each year because of sickness
and injury
 Should consider purchasing an
individual guarenteed renewable
or non cancellable disability
income policy
Avoid limited policies
 Limited policy covers only certain
diseases or accidents, pays limited
benefits or places serious
restrictions on the right to receive
the benefits
Watch out for restrictive
policy provisions and
exclusions
 Aware of any restrictions on
coverage
 Two common restrictions are
 Preexisting condition clause

Policy with preexisting clause longer than
one year should not be purchased
 Exclusion
Use deductibles and
eliminations periods to reduce
premiums
 High quality individual health
insurance coverages are expensive
 You can reduce premiums by
purchasing a policy with a
substantial deductible
Conclusion
 You should contact more than one
insurer before purchasing a policy
 Although price is important, it
should not be the only consideration
 A low premium policy may contain
restrictive provision, pay limited
benefits, or reflect a restrictive
claims policy
Health care problem in
Nepal
 Nepal's Interim Constitution of 2007
addresses health as a fundamental
right
 Every citizen has the right to basic
health services free of cost.
 But the reality is a far cry.
 Only 61.8% of the Nepalese
households have access to health
facilities within 30 min.
 Unequal distribution of health care
services
 Poor infrastructures
 Inadequate supply of essential
drugs
 Poorly regulated private providers
 Inadequate budget allocation for
health
 Nepal has only 0.67 doctors and
nurses per 1,000 population, which
is significantly less than the World
Health Organization's
recommendation of 2.3 doctors
and nurses per 1,000 population