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Transcript of Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow,...
![Page 1: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/1.jpg)
Managing The Cost Per Service Of Medical Expensesin Health Insurance Coverage
By Robert Prochnow, FSA
Assisted by Shruthi Srinivasan, Student Actuary
![Page 2: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/2.jpg)
Slide 2
Premise of Risk control through payment structure
The basic premise of risk transfer in an insurance system is:
• transfer the risk to the party who controls the risk
• but not to exceed the amount of risk they can hold.
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 3: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/3.jpg)
Slide 3
Considerations in what controls on medical payment to apply
• Match the method to the risk
• Make sure you can administer the control method
• Do not set up too many mechanisms to control the same risk
• Different controls can achieve different payment levels
• Make sure the system can be monitored
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 4: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/4.jpg)
Slide 4
Medical Expense Charge Levels Vary by
• The service itself
• The provider
• The place of service
• Whether the patient has insurance coverage
• Whether the insurer has any tariff structure
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 5: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/5.jpg)
Slide 5
Types of Risk
a. Morbidity Risk: Controlled by insurer
b. Incidence Risk: Impacted by insurer, providers,
and insured
• Propensity to use care
• Intensity of care
c. Payment LevelBy Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 6: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/6.jpg)
Slide 6
Who Controls the Payment Level?
• Insurance companies control the level of benefits and allowable fee levels
• Physicians control their charge levels and which hospitals used
• Hospitals control charges and type of room
• Insureds control what care is provided
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 7: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/7.jpg)
Slide 7
Controls of provider expenses - provider payment methods
Some of the common payment level controls are
1. None
2. UCR’s
3. Fee schedules :
• Physician fee schedule
• Hospital fee schedule
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 8: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/8.jpg)
Slide 8
Provider Payment Controls: None
Prevalence: Primary model currently in place in India.
Philosophy: insureds are given a benefit that they can use at any properly credentialed provider.
Strengths:
• Easy to set up
• Customers used to that
• For a time, payment levels may not become unruly
• Unlimited access to providers By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 9: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/9.jpg)
Slide 9
Provider Payment Controls: None (cont)
Weaknesses:
• Over time, providers will charge more and more
• No structure
• Only benefits and selection can control costs
• The cost of insurance will be far greater than the actual risk cost
Impact on provision of care:
• Pays professionals on a piece-work basisBy Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 10: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/10.jpg)
Slide 10
Provider Payment Controls : UCR
What it is: Usual, Customary, and Reasonable limits on the fees paid for a service. Such limits generally agreed and based on typical payment levels.
Prevalence: Not really used in India.
Philosophy: The free market should control charges but there should be limits.
Strengths:
• relatively loose
• understood and accepted
• adjusts to the charge levels in a controlled fashionBy Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 11: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/11.jpg)
Slide 11
Provider Payment Controls : UCR (cont)
Weaknesses:
• This only controls the rogue providers
• Will allow for continued inflation
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 12: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/12.jpg)
Slide 12
Provider Payment Controls : Fee Schedules
What it is: Agreed payment levels between the insurance company and the provider
Prevalence: Moderately used in India at some hospitals for a small subset of services and are regularly circumvented
Philosophy: The provider is a vendor for the insurance company and this is the payment for services that has been agreed
Strengths:
• logical way to do business
• allows for changes over timeBy Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 13: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/13.jpg)
Slide 13
Provider Payment Controls: Fee Schedules (cont)
Weaknesses:
• Contracts must cover a tremendous number of facilities and physicians in all markets the products are sold in.
• The tariffs must cover a long list of medical services.
• Updating schedules is an intensive and ongoing.
• Claims processing must track each contract .
• For services and providers not covered, some other method of payment level must still be applied.
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 14: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/14.jpg)
Slide 14
Control of Provider Payments Through Selection and Benefit Design
This is designed to impact the pricing behavior of
providers by giving the insured a share of the costs.
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 15: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/15.jpg)
Slide 15
Control of Provider Payments Through Selection and Benefit Design
Insureds can keep the costs down through:
• Which provider
• Whether to get treatment, what services to get
• The charge level
• The accuracy of the provider’s bill
• Any fraudulent excess billing
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary
![Page 16: Managing The Cost Per Service Of Medical Expenses in Health Insurance Coverage By Robert Prochnow, FSA Assisted by Shruthi Srinivasan, Student Actuary.](https://reader036.fdocuments.net/reader036/viewer/2022083004/56649dc05503460f94ab48bc/html5/thumbnails/16.jpg)
Slide 16
Control of Provider Payments Through Selection and Benefit Design
Some controls include :
• Selection of insureds
• Fixed benefit coverage
• Copays
• Benefit limits
• Controls on place of treatment
By Robert Prochnow, FSAAssisted by ShruthiSrinivasan, Student Actuary