K

HIMT 2308 (ch3)

Chapter 3: Defining Health Insurance

Introduction

  • Overview of health insurance and its various aspects.

  • Key topics: healthcare finance, alternative health insurance forms, growth of health insurance, policies, health economics, risk management, and health services research.

Defining Healthcare Finance

  • Public vs. Private Insurance:

    • Public insurance: government-provided plans (e.g., Medicare, Medicaid).

    • Private insurance: plans purchased from private companies or employer-provided.

  • Importance of understanding funding flow through government budgets.

Measuring Healthcare Finance

  • The role of out-of-pocket payments in influencing the demand for health insurance.

  • Health insurance as an "indirectly demanded" good, helping mitigate financial burdens associated with healthcare costs.

  • The concept of health as the ultimate goal rather than healthcare itself.

The Easiest Way to Define Health Insurance

  • Health insurance plans allow individuals to cover health-related expenses.

  • Many U.S. citizens acquire insurance via their employer or family members' employers.

The Subjectivity of Healthcare Finance

  • Health capital as a valuable asset representing individuals' health.

  • Payments from insurers correspond to individuals' health states, raising questions about the value of a human life and recovery to full health.

Market Valuation and Health Insurance

  • Health cannot be traded as other products, complicating valuation for insurance.

  • Challenges of pricing insurance due to the subjective value of health capital.

Asymmetric Information in Insurance Markets

  • Asymmetric information poses dilemmas in both health insurance and broader insurance markets.

  • Individuals and insurers may possess differing information regarding risk assessments.

Information Advantage of Providers

  • Insurers and healthcare providers hold expertise not easily accessible to consumers.

  • Knowledge gaps give providers an informational edge in the healthcare market.

Alternative Forms of Health Insurance

  • Consideration of personal financial strategies (savings and loans) to cover future healthcare costs.

  • Preventative activities serve as both alternatives and complements to insurance.

Public Health Activities

  • Public health initiatives present cost-effective alternatives to private insurance.

  • Programs demonstrating economies of scale can enhance health outcomes at lower costs.

The Growth of Health Insurance

  • Historical roots of health insurance traced to accident and disability policies.

  • Cooperative societies and employer-provided group health insurance played significant roles.

Cooperative Societies and Health Insurance

  • Cooperative associations developed rules to manage asymmetries in information.

  • Health cooperatives are owned by the individuals they insure, resembling mutual aid.

Employer-Provided Health Insurance

  • Group health insurance (e.g., industrial sickness funds) was a precursor to modern health insurance.

  • Baylor Hospital introduced prepaid hospital coverage, laying groundwork for future models.

The Role of Blue Cross and Blue Shield

  • Blue Cross offered unique assurances for hospital services, separating them from traditional commercial insurers.

  • Introduction of Medicare and Medicaid in 1965 fundamentally shaped the U.S. health insurance landscape.

Differences Between Medicare and Medicaid

  • Key differences in eligibility criteria and funding structures.

  • Medicare: age-based eligibility; Medicaid: income and health-based eligibility (federal/state partnership).

Health Insurance Pricing Strategies

  • Experience rating vs. community rating: understanding different pricing models in insurance.

  • Community rating aims for uniform pricing regardless of individual health differences.

Health Insurance Policy

  • Intersection of health and insurance policy, focusing on regulations that impact health outcomes.

  • The Affordable Care Act (ACA) exemplifies the application of health insurance policy.

Health Economics

  • Distinction between demand and supply in health insurance markets.

  • Numerous consumers include individuals, employers, and governments seeking health insurance coverage.

Role of Health Insurers

  • Insurance companies are central producers in the market, catering to diverse health risk profiles.

  • Health insurance acts as both a financial mechanism and a risk management tool.

Market Failures in Health Economics

  • Discussion on market failures and public policy interventions to mitigate them.

  • Importance of addressing failure within the healthcare system and insurance market.

Asymmetric Information Problems

  • Insured-insurer relationship complexities due to non-disclosure of health conditions.

  • This issue can prevent adequate insurance coverage and expose weaknesses in market design.

Risk Management and Insurance (RMI)

  • Insurance serves to manage various risks, including health, driving, homeownership, and professional services.

  • Goal: provide financial protection and recovery mechanisms for losses.

Underwriting in Health Insurance

  • Underwriting practices are vital for risk management and solvency in insurance contracts.

  • Key to the financial health of insurance companies.

Important Actuarial Principles

  • Mutuality and solidarity principles underpin insurance contracts.

  • These principles guide risk sharing and highlight distinctions between private and social insurance approaches.

Health Services Research (HSR)

  • HSR focuses on healthcare outcomes and effectiveness, integrating social, financing, and personal behavior factors.

  • Studies how various factors influence health access, quality, and cost.

Effectiveness of Alternatives to Insurance

  • HSR examines other mechanisms like precautionary savings and preventative strategies, potentially serving as complements to health insurance.

  • Recognition that social determinants can significantly impact health outcomes.