My exam review Insurance 1. Discuss 3 ways insurance companies try to reduce the amount of health insurance claims they pay. Be sure to include at least 2 specific examples. 1. Inflationary- drive up healthcare costs by having higher administration costs. a. Must have a loss ratio of at least 70%, meaning going to paying legitimate claims before ACA- don’t have to get rebate check b. After ACA the loss ratio must now be 80% if not you get a rebate check: this means higher admin costs =lower loss ratio (the 70% had more admin costs and now with the 80% lower admin costs) c. Example being if admin costs are .30 of $1 there is .70(70%) to go toward payment of claim. d. Cost rising with no intent to keep the prices down, however ACA brought a change to that. 2. Risk rating a. Experience rated premiums are premiums of a group as a whole so costs are not as heavy. b. They don’t want to lose money so they want to make investments that count. c. Medical underwriting/ direct risk rating- premium based off individual risk (smoker and women discussion can do) companies argue it is fair to base premiums off of individual risk. d. There is an argument of social fairness . Insurance want individuals to assume their own risk and base premium off of that, which critics argue is not insurance. Critics say the risk should be spread over large numbers (rule of large numbers) so it replaces actual risk with average risk. If companies do this they make health insurance an efficient administration . ASSUMING OWN RISK IS NOT INSURANCE . e. Instead of spreading the costs they instead document the medical problems or risk people have by not supporting them but instead reduce coverage by not including pre-existing conditions and writing exclusion clauses within the policy, add charges while also making premium higher, or deny coverage all together- medical underinsuring/underwriting. f. Are known to drop groups one by one when the bills of a few very sick members become large. g. Commercial insurers often just don’t insure pre-existing conditions or red line (excluding entire industries) foreign conditions. h. Indirect risk rating- waiting periods, copayments, and payment ceilings are the most common forms along with exclusion of certain procedures, tests, or drugs. Are used to reduce claims paid, discourage sick from abusing system, and help employers keep costs down. Want subscribers to pay the entire balance of bill. (using blood test to see if you are at higher risk so they can charge you more) 3. Claim Harassment
a. Collect money well but slow to process claims b. Complex rules to delay payment to you, c. Delays can be loosing file, misplacing claim, d. Will harass you and the provider and your claim might even be denied, you can appeal but to same company before ACA- all was legal before ACA.
- Fall '19