Private Health Insurance Based on theory of spreading risk across policy holders States regulate ◦ Special rules, close connection between coverage and use ◦ Products - registered ◦ Rates set by company ◦ Maryland highly regulated Private Health Insurance An insurance company’s business bet is that in aggregate their payout is less than the total premiums paid. These insurance concepts apply to virtually all private sector insurance, such as auto or homeowner’s insurance.
Tuesday, January 24, 2017 4 Payer Non-Payment and Insolvency Direct contract usually eliminates collection from the patient ◦ Providers no “priority position” in the distribution of assets. ◦ Insurance companies not eligible for federal bankruptcy protection Some states strengthened financial requirements for insurers Payer Non-Payment and Insolvency With limited exceptions, a provider’s direct contract with a payer is only as good as the solvency of the payer. Hospitals can lose substantial revenue when payers become insolvent. Employer-Sponsored Health Insurance Either funded through employer (self-funded) or employer purchases policies on behalf of employees Some self-funded plans use third-party administrator (TPA)
Tuesday, January 24, 2017 5 ERISA Regulates Employer-Sponsored Plans Preemption of state laws Only contract damages (cost of improperly denied treatment) are recoverable as a legal remedy Limits damage for pain and suffering, lost earnings and costs of future care There has been extensive litigation concerning the scope of the ERISA preemption. Many of the decisions are the result of legal actions by plan beneficiaries against managed care organizations for alleged negligence in providing medical care. HIPAA of 1996 HIPAA limits group health plan ability to make coverage decisions based on the health condition of the insured Government-sponsored Health Insurance Medicare TRICARE ◦ Formally CHAMPUS (Civilian Health and Medical Program) FBHBP (Federal Employee Health Benefits Program) Veterans Administration Medicaid (joint federal-state) County and city public health programs
Tuesday, January 24, 2017 6 Government-sponsored Health Insurance Because of the ability of federal and state governments to unilaterally change most government healthcare programs, the right to payment is often determined not by contract but by statutes and regulations. Medicare 1965 Amendment to the Social Security Act Eligibility ◦ 65+, Railroad benefits ◦ End stage renal disease ◦ Disabled at least 2 years Administered federally ◦ National standards ◦ Regional –provider relations and payment Medicare The basic structure remains the same, with Medicare principally designed to cover “items and services” to “diagnose or treat illness or injury”.
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- Spring '08