The Practice and Ethics of Risk-Rated Health Insurance (original) (raw)
Related papers
The Geneva Papers on Risk and Insurance - Issues and Practice
Health risk can be defined as the likelihood of a negative health consequence occurring due to a specific event, disease or condition. Its consequences can be strongly detrimental to individuals and society and managing health risks is a central concern for individuals and governments. This special issue of The Geneva Papers on Risk and Insurance on health aims at better understanding the role of insurance mechanisms in financing and managing health risks. It concentrates on four topics: the structure and performance of health insurance markets, the drivers of long-term care (LTC) insurance purchase, the phenomena of moral hazard in health insurance, and the effect of health insurance on the health of individuals. It offers nine contributions from various perspectives to better understand these issues and, in particular, the function and development of health insurance markets. These contributions tackle practical aspects and policy implications and are illustrated in the light of various health systems with application to countries such as Australia, Chile, China, South Korea, Switzerland and the U.S. Health insurance markets are organised in various ways and insurance carriers can take different forms, principally as stock insurers, mutual insurers or health maintenance organisations (HMOs). Health insurers also deal with various types of populations as they can specialise in serving individuals, groups, low-income people, older people, civil servants, etc. Naturally, the structure of their organisation and the type of population they serve strongly influence the governance and activities of health insurers. The first two papers address supply-side issues of health insurance markets by investigating the behaviour and performance of health insurers, either in relation to HMOs or in serving poor individuals.
Now that the Supreme Court has upheld the constitutionality of the Patient Protection and Affordable Care Act ("PPACA"), access to medical care will sharply increase. But the new law will do little to reign in the rapidly increasing cost of medical care in the United States. Regulatory controls on prices or benefits, favored by some on the left, are political non-starters in today's environment. Consumer directed health care ("CDHC") proposals, which seek to provide patients with financial incentives to equate marginal costs and benefits at the point of treatment and is favored by many on the right, is infeasible because of the skewed distribution of health care expenses and patient bounded rationality. New approaches are desperately needed. This article proposes a government-facilitated but market-based approach to improving efficiency in the market for medical care that I call "relative value health insurance." The approach would enable even boundedly-rational patients to contract for the efficient level of health care services ex ante through their health insurance purchase decisions. The key to facilitating efficient contracting by boundedly-rational consumers is the creative use of comparative effectiveness research ("CER"), which the PPACA funds at a significant level for the first time. CER should be used to create public ratings of medical treatments on a scale of 1-10 based on their relative value, taking into account costs and expected benefits. These relative value ratings would enable consumers to contract with insurers for different levels of medical care at different prices, reflecting different cost-quality tradeoffs. After situating the concept of relative value health insurance within the context of a health insurance system that encourages overuse of resources and CDHC proposals that cannot mitigate the problem, the article describes the considerable benefits of relative value health insurance and considers some of the formidable obstacles to making it a reality.
Medical liability and health care reform
Health matrix (Cleveland, Ohio : 1991), 2011
We examine the impact of the Affordable Care Act (ACA) on medical liability and the controversy over whether federal medical reform including a damages cap could make a useful contribution to health care reform. By providing guaranteed access to health care insurance at community rates, the ACA could reduce the problem of under-compensation resulting from damages caps. However, it may also exacerbate the problem of under-claiming in the malpractice system, thereby reducing incentives to invest in loss prevention activities. Shifting losses from liability insurers to health insurers could further undermine the already weak deterrent effect of the medical liability system. Republicans in Congress and physician groups both pushed for the adoption of a federal damages cap as part of health care reform. Physician support for damages caps could be explained by concerns about the insurance cycle and the consequent instability of the market. Our own study presented here suggests that there ...
Fine‐Tuning of Health Insurance Regulation – Unhealthy Consequences for an Individual Insurer
International Journal of The Economics of Business, 2010
This paper sheds light on some unexpected consequences of health insurance regulation that may pose a big challenge to insurers' risk management. Because mandated uniform contributions to health insurance trigger risk‐selection efforts, risk adjustment (RA) schemes become necessary. A good deal of research into the optimal RA formula has been performed. A recent proposal in Switzerland has been to add ‘Hospitalization exceeding three days during the previous year’ as an indicator of high risk. Applying the new formula to an individual Swiss health insurer, its payments into the RA scheme are predicted to increase substantially, reaching up to 13% of premium income. Its mistake had been to implement Managed Care successfully, resulting in low rates of hospitalization. The expected risk management response is to extend hospital stays beyond three days, contrary to stated policy objectives.
Should catastrophic risks be included in a regulated competitive health insurance market?
Social Science & Medicine, 1994
In 1988 the Dutch government launched a proposal for a national health insurance based on regulated competition. The mandatory benefits package should be offered by competing insurers and should cover both non-catastrophic risks (like hospital care, physician services and drugs) and catastrophic risks (like several forms of expensive long-term care). However, there are two arguments to exclude some of the catastrophic risks from the competitive insurance market, at least during the implementation process of the reforms. Firstly, the prospects for a workable system of risk-adjusted payments to the insurers that should take away the incentives for cream skimming are, at least during the next 5 years, more favorable for the non-catastrophic risks than for the catastrophic risks. Secondly, even if a workable system of risk-adjusted payments can be developed, the problem of quality skimping may be relevant for some of the catastrophic risks, but not for non-catastrophic risks. By 'quality skimping' we mean the reduction of the quality of care to a level which is below the minimum level that is acceptable to society.
Moral Hazard and Medical Assessment
Victoria U. Wellington L. Rev., 2003
Across its history ACC policy on rehabilitation has fluctuated, as has the approach to compensating victims with partial but permanent incapacity. These procedures offer an important window onto shifting ACC attitudes to entitlements, social equity, and cost ...
Moral Hazard and Consumer-Driven Health Care: A Fundamentally Flawed Concept
International Journal of Health Services, 2007
For more than 30 years, most health care economists in the United States have accepted a conventional theory of health insurance based on the concept of moral hazard: an assumption is made that insured people overuse health care services because they have insurance. The recent trend toward “consumer-driven health care” (CDHC) is advocated by its supporters based on this same premise, assuming that imprudent choices by patients can be avoided if they are held more financially responsible for their health care choices through larger co-payments and deductibles and other restrictions. This article examines how moral hazard–based CDHC plays out in both private plans and public programs. The author identifies seven ways in which this concept fails the public interest, while also failing to control health care costs. Uninsured and underinsured people, now including many in the middle class, underuse essential health care services, resulting in increased morbidity and more preventable hosp...
Benign moral hazard and the cost-effectiveness analysis of insurance coverage
Journal of Health Economics, 1990
When a medical intervention is found to be cost effective, what level of insurance coverage should apply to it? The optimal level of coverage may be less than or greater than full coverage of medical care costs; a finding of cost effectiveness for a service does not necessarily imply v full coverage or coverage at the same rate as other services. If there is some imperfection in the ability to translate higher insurance benetits into higher insurer revenues, the optimal level of coverage will be greater the higher the degree of moral hazard applying to the service.