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.