COMPARITIVE STUDY OF HEALTH INSURANCE
PRODUCTS
SHREERAJ DESHPANDE
COUNTRIES HEALTH CARE EXPENDITURE
JAPAN
GERMANY
FRANCE
U.K
IRELAND
NETHERLAND
SINGAPORE
AUSTRALIA
CANADA
USA
INDIA
% OF GDP
7.3
10.4
9.8
6.7
6.7
8.5
3.3
8.5
9.2
14.1
5.6
PUBLIC
5.7
8.1
7.7
5.7
5.1
6.2
1.5
5.8
6.3
6.6
1.2
PRIVATE
1.6
2.3
2.1
1.0
1.6
2.3
1.8
2.7
2.9
7.5
4.4
COUNTRIES HEALTH INSURANCE COVERAGE
PUBLIC%
JAPAN
GERMANY
FRANCE
U.K
IRELAND
NETHERLAND
SINGAPORE
AUSTRALIA
CANADA
USA
INDIA
100
88
99
100
100
70
100
100
100
42
*
MUTULLES%
COMMERCIAL%
#
#
65
5.3
30
54
0
0
0
#
0
#
9
14
11
0
40
0
40
#
69
0.3
*ESIS & CGHS NOT INCLUDED
# INCLUSIVE/NA
HEALTH CARE FINANCING MODELS
Predominantly Tax Funded : Funds Are Raised Through General or Dedicated
Taxes. Funds Are Transferred to Regional Authorities Who Act As Third Party
Payers by Financing Health Service Providers. Prominent Examples Are UK and
Canada.
Predominantly Social Insurance Based: Membership of Social Insurance
Programs(often Called Sickness Funds) Is Compulsory for All or Most Citizens.
Sickness Funds Reimburse Health Service Providers Via Negotiated Contracts.
France and Netherlands.
Predominantly Voluntary Insurance Based: Health Care Finance Is Raised By
Competing Private Insurance Companies Which Then Reimburse Providers For
Services Delivered To Their Members. USA
HEALTH CARE FINANCING

In Countries With Tax Based or Social Insurance Based Systems, People Supplement
Their Entitlement With Private Insurance. Private insurance an Alternative to Public
System.

Private Insurance Effected to Cover Co-payments /deductibles Required Under the Public
System or Cover Services Which Are Fully Not Covered Under Public System.

Private Medical Expense Insurance Underwritten on Short Term Basis Except in Germany
Where Whole Life Cover.

Europe 95% of the Population Covered Under Public Health Insurance Coverage, 21%
mutulles and 11% PHI

USA 16% Population Still Without Any Health Insurance Cover.
HEALTH CARE COSTS
Fundamental Causes of Increase in Health Care Costs
A) Rapid Medical Technological Progress
B) Increasing Demands for Better Care and
C) Ageing Populations.
In Some Countries Is Also Partly Attributed to
A) Rising Levels of Remuneration for Medical Personnel and
B) Practice of "Defensive Medicine" Due to the Increasing Level of Medical Malpractice
Litigation.
Difficult to Measure Rate of Medical Inflation but Observers Suggest That Health Care Costs
Are Typically Increasing at Two to Five Times the Rate of General Price Inflation.
INDIAN SITUATION
India Is a High Spender on Health Care Relative to Its Income Though Health Spending
in Absolute Terms Is Still Very Low.
Per Capita Expense on Health in India Is Only 20 $ As Against 4,093$ in USA, 1454$ in
UK, 2,677$ in Germany, 2,349 $ in France and 1,829$ in Canada (World Bank).
Indian Demographic Situation Is Very Unique With More Than 65 % of the Population
Living in Rural Areas and This Population Being Scattered in Nearly 6 Lac Villages.
Literacy Rates Are Low and So Also the Level Of Insurance Awareness.
Non-governmental Health Care Has Outstripped the Role of Governmental Health Care
Amounting to About Three-quarters of All Finances for Health and Most of Which Is by
the Household As Out of Pocket Expenditure.
INDIAN SITUATION
Two Thirds of All Spending on Hospitalisation Is Done by Private Financing.
Most of the House Holds Expenses Are Being Met Out of Savings Due to Absence of
Viable Widespread Health Insurance Mechanism.
The Demand for Healthcare Is Growing Due to Population Increase, Greater Urban
Migration, Increase in Per Capita Incomes and Increased Expectations.
The Private Sector in India Is Slowly and Steadily Increasing Its Dominance in Health
Delivery, With Majority of House Hold Health Expenditures Being Channelled to It.
Capture a Significant Part of Current Household Spending and Assure That the Total Was
Spent on More Cost Effective and Higher Quality Services.
HEALTH INSURANCE
Health Insurance Coverage - Two Categories
 Medical Expenses Insurance
Which Is Reimbursement Coverage / Service Contracts / Managed Care
 Disability Income Insurance
Provides Payment When the Insured Is Unable to Work As a Result of Sickness
or Injury
Health Insurance Is Transacted BY
 Non-Life Insurance Companies
 Life Insurance Companies
 Specialist Health Insurance Companies
MEDICAL EXPENSES INSURANCE
Provides One or More of the Following
 Hospital Expense Benefits: Inpatient As Well As Outpatient Care.
Maternity Benefit Optional and Policies May Contain Inbuilt Subsection Limits or
an Overall Limit.
 Surgical Expenses Benefit: Cost of Operation and Surgical Procedures.
Maximum for Each Procedure Is Fixed or Overall for Multiple Procedures Is
Fixed.
 Physician Non-Surgical Expense Benefits: Provide for in-Hospital/Home
Visits /Visit of Patient to Physicians’ Office. Contain Limits on Amount Payable
Per Visit and Per Day.
MEDICAL EXPENSES INSURANCE
Is Broadly Classified As:
A) Basic Medical Expenses Contract
B) Major Medical Expenses Contract
C) Comprehensive Medical Expenses Contract
BASIC MEDICAL EXPENSE POLICY

Sometimes Called a Hospital Surgical Policy

Provides for Expenses Incurred When a Covered Person Is Ill and in Hospital

Policy Lists the Types of Items for Which It Will Pay

Policy Stipulates the Maximum Amount It Will Pay.
CATASTROPHE/MAJOR MEDICAL EXPENSE POLICY
Provide Broad Coverage With High Limits Protecting Against Large
Unpredictable and Un-budgetable Medical Care Expense.
May Be Purchased in Addition to a Basic Medical Expense Policy or in Lieu.
Maximum Benefits Range From $ 25,000 to Unlimited.
Some May Have Subsection Limits and Some Don’t Have Any.
COMPREHENSIVE MEDICAL EXPENSE POLICY
Covers All Types of Medical Expenses Incurred In or Out of a Hospital
Typically Contain a Relatively Small Deductible and a High Maximum Benefit
Limit
May Have Internal Limits or Overall Annual Limit.
MEDICAL EXPENSE POLICY
Characterized By
(A) Deductibles:
 Frequency With Which Deductibles Are Applied Varies
 May Be Once Per Calendar Year or Once Per Occurrence.
 Generally Expressed In Terms Of Amount.
 Policies have an Individual deductible and a Family deductible. First $200 of
expenses for each individual are not reimbursed but if family has a total of
$400 unreimbursed expenses, individual deductibles do not apply
MEDICAL EXPENSE POLICY
B) Co-Insurance/co-payment :
Insurer Pays a Specified Percentage (80%) of the Eligible (Covered) Expense
in Excess of the Deductible.
(C) Stop-Loss Limit:
After a Fixed Dollar Amount of Medical Expense Is Incurred, Usually Above the
Deductible, by the Insured, the Co-Insurance Clause Does Not Apply and the
Insurer Pays 100% of the Remaining Covered Expenses
PRE-EXISTING CONDITIONS
Plans Totally Exclude Pre-Existing Conditions
Some Cover After a Specific Period of Time
Alternate Limit Coverage on All Pre-Existing Conditions, Until the Policy
Has Been in Effect for a Specific Period.
TERMS OF RENEWAL
Medical Expenses Policies Also Differ on the Terms of Their Renewal
 Renewable at the Option of the the Insurer and Conditionally Renewable
 Guaranteed Renewable
 Non-cancelable and Guaranteed Renewable
COMMON EXCLUSIONS
 War or Any Act of War,While on Active Duty in Military, Navy, or Air Force, Participate in
Riots, Rebellion.
 Care Outside Country
 Loss Covered Under W.C or Employer Liability,Etc.
 Medical Care, Services or Supplies Paid for the National, State or Local Government
or Agency
 Alcoholism, Drug Addiction
 Cosmetic Surgery Except That Necessitated by Injury
 Eye Glasses
 Hearing Aids or the Process of Fitting Them
 Transport, Except Local Ambulance Service to or From Hospital
 Custodial Care.
OTHER COVERS

Dental Care Expenses Insurance

Hospital Indemnity Policies

Travel Accident Plans

Long Term Care Insurance

Dread Disease Cover

Prescription Drugs/Out Patient Treatment Plans

Managed Care

High Risk Pools, Etc
DENTAL CARE EXPENSE INSURANCE
Coverage Can Be Provided

Under an Integrated Plan in Which the Dental Expenses Are Blended Into the
Covered Expenses of a Major/Comprehensive Plan

Under an Non Integrated Plan

Emphasis on Prevention Care

Lower Maximum Limits

Most Covers Have Business Calendar Year or Policy Year Maximum on All
Dental Services .

Separate Maximum Limits and Co-Insurance Requirement on Certain Kinds of
Services.
HOSPITAL INDEMNITY POLICIES
Hospital Indemnity Contracts Pay Only When Hospitalized
Valued Contract Rather Than a Contract of Indemnification.
Benefit Is Normally Stated in Terms of a Flat Amount Per Day,Week or Month
Maximum number of DAYS for which cover is available is specified
PRESCRIPTION DRUGS INSURANCE
Designed to cover the cost of drugs and medicines prescribed by a
physician
Coverage is written on a group basis
On reimbursement basis for UCR charges - covered drugs and
prescriptions
Deductible to be borne by the insured, may be annual deductible or per
drug deductible
Coverage subject to annual maximum
MEDICAL SAVINGS ACCOUNT
 Allow individuals to make tax-sheltered contributions into a fund to be used
to cover medical expenses.
 Fund is used in connection with a high deductible health insurance plan
 Covers the expenses that fall within the policy deductible
 By giving consumer a stake in the level of expenditure will serve as an
incentive to consumers to control medical care expenses
 Insurance company, Bank can be an MSA trustee
DREAD DISEASE COVERS
 Generally Issued As Riders on Life Policies
 Provide for Pre-Payment of Some Percentage of the Sum assured Under the
Main Life Policy in the Event of Occurrence of Specific Diseases: Myocardial
Infarction, Stroke, Coronary Artery Surgery, Cancer, Renal Failure, etc.
 Amount Is Payable Only Once in Full and Final Settlement Under the Rider
 Benefits May Be Part Of S.I or Inaddition to Basic S.I.
 Maximum Age at Entry Is Stipulated
 Waiting Period of 3 Months and Deferment Period of 30 Days Between Disease
and Death
LONG TERM CARE INSURANCE
Policy Features Cover Services Such As:

Skilled and Intermediate Nursing Facility Care

Custodial Nursing Facility Care

Home Health Care

Adult Day Care
Policies Are Characterised By

Day Limits, Benefit Period and Elimination Periods

Inflation Protection & Waiver of Premium

Coverage Trigger
LTC - COVERAGE TRIGGER
 Critical Policy Provision That Determines Who Is Eligible to Receive Benefits
 Person Qualifies for LTC Coverage If He or She Is Unable to Perform a Specified
Number(2 or3) of a List of Activities Of Daily Living(ADLS) Contained in the
Policy
 ADLS Typically Include: Bathing, Dressing, Eating, Using the Toilet, Walking,
Maintaining Continuity, Taking Medicine, Transferring From Bed to Chair.
 Subject to Individual Underwriting, Age, Medical Condition, History
 Policies Are Often Guaranteed Renewable.
MANAGED CARE
EVOLUTION OF HEALTH INSURANCE
 INDEMNITY (HOSPITALISATION ONLY)
 INDEMNITY(ALL EXPENSES)
 MANAGED CARE
EVOLUTION OF MANAGED CARE
Increasing Healthcare Costs Compelled Employers to Insist
That Insurance Companies Evolve Their Role From Risk
Distributors to Risk Managers.
- Moral Hazard
- Large Investments in Health
Infrastructure
- Malpractice Issues
MANAGED CARE
Managed Care Encompasses a Variety of Innovations in Both the
Delivery and Financing of Health Care That Are Intended to
Eliminate Unnecessary and Inappropriate Health Care and
Reduce Costs.
MANAGED HEALTH CARE
Utilisation Review and Control of Decisions About Health Services
Provided
Limiting or Influencing Patients Choice of Providers
Negotiating Different Payment Terms or Levels With Certain Providers
(i.e Discounts, Capitation)
UTILISATION CONTROLS INVOLVE

Second Surgical Opinions

Prior Authorisation for Hospital Admissions

Use of Primary Care Physicians - Gatekeepers - Subsequent
Referrals

Concurrent Review of Hospital Use i.e ., Ongoing Monitoring
While the Patient Is in Hospital

Discharge Planning

Profiling of Physician Practices
UTILISATION CONTROL MAY LEAD TO
Refusal to Pay for a Particular Service
Establishment of Guidelines for Anticipated Utilisation(Eg.
Authorisation for a Specific Number of Hospital Days for a Particular
Diagnosis)
Efforts to Educate Physicians Whose Practice Patterns Vary
Substantially From Accepted Norms.
MANAGED CARE PLANS
 HEALTH MAINTENANCE ORGANISATIONS
(HMOs)
 PREFERRED PROVIDER ORGANISATIONS
(PPOs)
 POINT-OF-SERVICE (POS) PLANS
AND MANY MORE
HMOs
Provide Wide Range of Comprehensive Health Care Services to a Group of
Subscribers in Return for a Fixed Periodic Payment.
Not Only Provides for Financing of Health Care Also Delivers Care.
Merging of Provider and Financing Mechanisms.
May Be Sponsored by a Group of Physicians, a Hospital, Employer, Labour
Union, Insurance Company, Not for Profit Organisations.
HMO - PROCESS


Member Enrolls in HMO to Receive Health Care in Exchange for Premium
Member Is Encouraged to Remain Healthy by Being Offered Free Preventive
Care Treatments

In the Event of an Illness / Injury, Member Goes to the Primary Care
Physician(PCP).

PCP Provides Care or Referral to a Specialised Network Provider.

Insured Pays Co-payments to PCP and the Specialised Network Provider
HMO PROCESS
Specialised Network Provider Submits Bill to the HMO.
HMO Pays Fixed Formula - Based Capitation Amount Per Member to PCP Independent of
Actual Usage by Member.
HMO Pays Pre-Determined and Discounted Rates to Specialised Network Provider
Depending on Actual Usage.
For Pharmaceuticals and Appliances,These Items Must Be Obtained From a Select Group
of Suppliers With Whom the HMO Has Negotiated Predetermined and Discounted Rates.
Co-payments Also Apply to Pharmaceuticals and Appliances.
REGULATIONS FOR HMOs

Requirement of License

HMOs Must Provide Certain Prescribed Minimum Benefits

Prohibited From Limiting Care Based on Pre-existing Diseases

Must Show There Is an Adequate Number of Providers to Meet Health Care
Needs of Its Members.

Emergency Treatment - Covered Even If Outside the Network.
 HMO Must Provide Members With Advance Notice Before a Doctor or Dentist Is
Dropped From Network
 Change in PCP, Minimum of Four in a Year.
 HMOS Cannot Ask Members to Settle Disagreements by Arbitration Rather Than
Legal Action
PREFFERED PROVIDER ORGANISATION (PPO)
Panel of Providers Who Negotiate With Employers, Insurance Companies or
Other Organisations to Provide Service at Reduced Fees to Members of
Specific Groups.
Typically Employers Allow Their Employee to Use Other Providers but Will Cost
More.
Differ From HMOs in That Employees Are Not Restricted to Them but Can
Choose to Use or Not Use a PPO Provider Each Time Care Is Needed.
Fee for Service at Reduced Cost
COST-EFFECTIVENESS ?
Debate Over Efficacy and Acceptability of Managed Care.
Less hospitalisations and on admissions less time in hospitals thus reduction in
cost.
Quality of health care suffers?
Debate - Administrative Cost May Outweigh Potential Savings
Cost Savings or Cost Shifting ????
DISABILITY INCOME INSURANCE(PHI)
Designed to Replace a Portion of the Income a Worker Loses When He
or She Becomes Unable to Work As the Result of Accident or Sickness
Different Definitions of Disability Are Followed by the Insurers, Own
Occupation, Any Occupation,etc.
Marketed as group schemes or on individual basis
DISABILITY INCOME INSURANCE(PHI)
(A) Short - Term Disability Insurance

Provides Coverage for Disability Upto Two Years

Usually Underwritten With Benefit Periods of 13,26,52 or 104 Weeks
(B) Long - Term Disability Insurance
 Protects Individual Often Until Age 65 for Illness and for Life in Case of Accident
 Generally Provide Benefits for 5years, 10years, Until Age 65, or Even for the
Lifetime of the Insured
DISABILITY INCOME INSURANCE(PHI)
Types of Benefits
Stipulate That the Periodic Benefit Is a Proportion of an Insured Income Before
Disablement (Group)
Policy May State the Benefit on a Specified Dollar Amount Per Week or Month of Disability.
(Individual)
Difference in Pricing, Underwriting and Breadth of Coverage for Short-term/ Long- Term
Policies
Most Disabilities Are Short-term Thus the Insurer’s Risk Decreases As the Contract
Lengthens
Longer the Contract the Lower Is the Cost of Additional Protection: A 26 Week Plan Will
Not Cost Twice of a 13 Week Plan
DISABILITY INCOME INSURANCE(PHI)
 Unlike Life and Group Medical Expense Insurance in the Disability Income Field,
Group Policies Are Often More Restrictive in Their Coverage Than Individual
Policies
 LTD Contracts Are More Liberal Than Short Term Plans
 Most Blue-collar Workers Are Offered Short-term Covers or Long Term to a
Maximum of 5 Years
 White-collar Offered LTD Covers up to 65years
DISABILITY INCOME INSURANCE
Cover Total / Partial Disability
Provide for Waiver of Premium in Case of Disability
Extension of Rehabilitation Benefits
Optional Benefits Such As Cost of Living Provisions, Guaranteed Insurability
Which Allows Insured to Periodically Increase the Benefits Payable As His/Her
Income Increases Over Time.
DISABILITY INCOME INSURANCE
Waiting or Elimination Period
 Is a Time Deductible i e., Between the Disability Injury or Sickness and the
Start of the Disability Income Benefit.
 Short - term disability coverage have shorter waiting periods than LTD
 Waiting period may differ for accident and sickness
DISABILITY INCOME INSURANCE
 Most common in short-term disability is 1-8-26 formula
 Provides benefits from 1st day incase of an accident, 8th day in case of
sickness and 26 indicates the number of weeks for which the benefits are
payable
 In long-term coverage 90 days elimination periods are most common
 Most Disability income covers typically limit the amount of coverage to about
60-80% of the worker’s wages to prevent moral hazard
INDIAN SITUATION
General Insurers Dominate the Health Insurance Segment .
In-hospitalisation Benefits / Hospital Fixed Benefits and Critical Illness
Are The Major Products.
Unregulated And Unmonitored Health Care Sector.
Rate Of Medical Inflation Is Very High
In Sufficient Data And Non Standardised Costs Make It Very Difficult
For Pricing And New Product Development.
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