class one

1. UNIT INS 517: HEALTH INSURANCE
Course Outline
• Definition of Health Insurance
• The development of the National Health Service (NHS);
• The purpose of healthcare insurance;
• The relationship between the NHS and healthcare insurance.
• The principles which support healthcare insurance propositions;
• The underwriting processes employed by healthcare insurers;
• The rating factors usually associated with healthcare insurance.

2. Course Outline Cont..d
• Scope of healthcare insurance cover;
• Personal healthcare insurance products;
• Group healthcare insurance;
• Benefit structure of group healthcare insurance;
• Taxation of healthcare insurance;
• Health trusts;
• How benefit limits are agreed and set;
• The use of benefits limits within healthcare insurance products;

3. Course Outline Continued
• The alternatives to healthcare insurance and explain other-related insurance
products;
• The basic processes of claims assessment;
• The reasons and methods of controlling claims costs;
• The principles on which the concept of managed care is based;
• Discuss the use of procedure codes;
• Controlling claims costs;
• The sales channels most commonly used by healthcare insurers;
• The future prospects for marketing and distributing healthcare insurance; and
• The current regulatory environment within which healthcare insurers operate.

4. Definition of Health
Insurance
Health Insurance is a type of insurance coverage that covers the cost of
an insured individual’s medical and surgical expenses.

5. The development of the National Health
Service (NHS);
• In the UK, the state (government) provides most of the required healthcare
services through the National Health Service (NHS).
• Before the NHS, friendly societies and other self-help groups provided
insurance against medical risks.
• The National Insurance Act 1911 built on these societies to create a
comprehensive scheme to provide national insurance against various risks.
• In the beginning, NHS was free but now UK nationals pay wholly or partly
for certain services.
• The National Insurance Scheme and state controlled medical services were
gradually extended between the first and second world wars.
• Almost all hospitals were then compulsorily purchased by the state and all
treatments became universally available at no cost.

6. Health Insurance in France
• In 1996, 74% of healthcare spending in France was financed by state
institutions.
• A large percentage of the population has supplementary private
health insurance.
• Some discussions are going on about possible ways to reform the
public health system.
• There are attempts to control the rising costs of medication by asking
doctors to prescribe fewer drugs and drug companies are being asked
to lower their prices.

7. Health Insurance in the USA
• In the USA, health insurance is more expensive compared to other
developed countries.
• Over 14% of the GDP is spent on Healthcare
• Since 1994, there has been a dramatic slowdown in the growth of
costs.
• Disposable income, managed care and excess medical inflation are
the main determinants of premium of the US health Insurance
market.

8. Health Insurance in Rwanda
• The Rwandan health system includes four distinct regimes for its
public servants, the military, salaried employees and the remaining
population.
Public Servants and the military
• Protects beneficiaries against risks from natural diseases, accidents
and pregnancy and childbirth.

9. Health Insurance in Rwanda (cont..d)
• It is managed by La Rwandaise d’assurance Maladie (RAMA). Military
personnel are covered by a plan called “Military Medical Insurance
(MMI).”
Private Sector
• Medical care for salaried employees in the private sector is covered
by their employers.
• Employers may chose RAMA or contract with private insurance
companies.

10. Health Insurance in Rwanda (cont..d)
The rest of the population
• The rest of the population obtains medical care through mutual
associations {Mutuelle de sante};
• A mandatory payment was put in place in 1996 and as a result, the
number of community based health insurance schemes grew quickly,
from 6 in 1998 to 403 in 2007.
• Over 85% of the population is now covered by these programmes.

11. Health Insurance in Rwanda (Cont..d)
Financing Private Healthcare in Rwanda
• For public servants, the contribution rate is 15% of the basic salary
shared equally between the employee and the employer.
• Mutual healthcare programmes are supported by household based
contributions.
• The cost paid by the insured himself/herself is a fixed amount
depending on the member social category.
• For salaried employees, insurance is normally got from an insurance
company.

12. Purpose of Healthcare Insurance
• Healthcare insurance provides financial protection for individuals,
families and businesses.
• Healthcare insurance assists individuals, families and businesses in
budgeting for the cost of healthcare.
• Healthcare insurance minimizes worry i.e it creates peace of mind and
this creates social stability.

13. The purpose of healthcare insurance
(Cont..d)
• It helps in creation of employment. People are employed as medical
insurance underwriters, Doctors and nurses;
• It can act as a substitute for government social security programs;
• The funds generated through collection of premiums can be invested
in the public and private sectors.
• It enhances employee and employer relations.
• It enhances choice of consultants, hospitals and pharmacies for the
insured members.

14. The relationship between the NHS and
healthcare insurance.
NHS offers patients treatment that is largely free whereas private
health insurance provides surgery and medical treatment for those
who pay indirectly through insurance.

15. The main differences that separate NHS and private
healthcare insurance are as follows:
• Treatment delays;
• Choice of facilities;
• Choice of specialists;
• Treatments using technology that may not be available through the
NHS;
• Intensive care back-up technology which may not be available at
certain private hospitals.

16. The main differences that separate NHS and
Private Health Insurance
• Differences often arise due to the type of treatment that is required. The
treatment may be available in an NHS hospital, private hospital covered by
medical insurance or must be paid for privately. These include the
following:
• Emergencies: These will be sudden or unexpected illnesses or injuries
resulting from accidents and handled by the accident and emergency
departments/casualty wards. This facility is usually available under NHS.
• Complementary/Alternative Medicine: This includes therapies outside
traditional medicine for example acupuncture and osteopathy.
• Cosmetic Surgery – This is non-essential surgery that may change a
person’s appearance, for example breast implants and facial lifts. These will
usually be paid for privately.

17. Perceived Benefits of Private Healthcare
Insurance
• Less time is spent for operations on non-urgent conditions, such as
hernia repairs, hip replacements and nail surgery;
• Choice of consultants who will perform the operation;
• Choice of admission dates;
• Choice of hospitals; and
• Private room with comfortable facilities.

18. The principles which support healthcare
insurance propositions;
• The basic principle of healthcare insurance is that many members will pay
premiums for the benefit of those members who will actually need private
medical attention.
• In other words, it is assumed that out of the large number of people who
pay premiums, only a few will fall sick.
• Each member pays an age related premium and is entitled to treatment
under healthcare insurance in event of ill-health.
• The relatively high incidence of claims and their associated costs have
made a considerable impact on healthcare insurance premiums.
• People with a history of ill-health are more likely to require future
treatment than people in good health.

19. The principles which support healthcare insurance
propositions (Cont..d)
• It would be unfair for them to receive healthcare insurance on the
same terms as those with good health.
• The basic method commonly employed in the industry is to exclude
pre-existing conditions.
• Healthcare insurers impose exclusions for pre-existing conditions and
not opt for increasing the premiums as commonly done in life
assurance.
• This is because the mortality risk (risk of dying) happens only once
whereas the morbidity risk (risk of falling sick) tends to be repetitive.

20. Underwriting Principles
• Underwriting is deciding whether to accept or reject the risk or
postpone the risk, and the appropriate premium to be charged for the
risk. The main objective is to be as fair as possible i.e the principle of
equity.
• Those who pose a higher risk to the insurance pool generally pay
more than those who pose a lower risk.
• An underwriter has to decide whether the risk accepted has to be
charged normal/standard premium or increased premium.
• The commercial objective of underwriting is to keep premiums
affordable while being cost- effective.

21. The underwriting processes employed by
healthcare insurers
Methods of Underwriting
Healthcare insurance policies normally have exclusions.
The following exclusions normally apply to all types of healthcare insurance policies:
• Pre-existing conditions;
• Chronic conditions such as cancer;
• Self-inflicted injuries;
• Human Immunodeficiency Virus and Acquired Immunodeficiency Syndrome;
• Normal Pregnancy and Childbirth;
• Optical Cover;
• Cosmetic Surgery;
• Mental and addictive illnesses;
• Medical check-ups.