Main Classification of Insurance Providers


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Main Classification of Insurance Providers

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Main Classification of Insurance Providers

  1. 1. MAIN CLASSIFICATION OF INSURANCE PROVIDERS I. PRIVATE INSURERS II. GOVERNMENT INSURERS Some of the private insurers we are going to look are prohibited in Florida and some are not insurers at all, though they would appear to be Provider is any physician, hospital, organization or other person or institution that furnishes health care services and is licensed or otherwise authorized to practice in Florida.
  2. 2. MAIN CLASSIFICATION OF INSURANCE PROVIDERS I. PRIVATE INSURERS 1. Stock insurers 2. Mutual insurers 3. Assessment Mutual insurers 4. Reciprocal insurers 5. Lloyd's of London 6. Risk Retention Groups 7. Reinsurers 8. Fraternal Benefit Societies 9. Service Insurers 10. Home Service insurers 11. Self insurers
  3. 3. MAIN CLASSIFICATION OF INSURANCE PROVIDERS II. GOVERNMENT INSURERS 1. Social Security (OASDI) 2. Social Security Hospital Insurance 3. Supplemental Medical Insurance 4. Medicaid 5. Workers' Compensation 6. U.S. Armed Services and Veterans
  4. 4. I. PRIVATE INSURERS 1.1. STOCK INSURER Stock insurance companies are private organization with the same structure as any corporation, organized and incorporated under state laws for the purpose of making a profit for its owners, the stockholders. A Stock insurer is a publicity – trade insurance company that is owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary for the issuance of guaranteed, fixed premium , nonparticipating policies. Stock Insurance companies are private organization characterized by the following features: • Nonparticipating policies • Owned by stockholders • Provides profit to stockholders • Majority stockholder controls company • Lower rates Stock insurers are incorporated insurers whose capital is divided into shares. Stock insurance companies are owned by the stockholders who are responsible for electing the firm’s board of directors. Dividends are paid to stockholders and are considered taxable income.
  5. 5. I. PRIVATE INSURERS 1.2. MUTUAL INSURER Mutualization occurs when a stock company becomes a mutual company. Mutualization is the conversion of an insurer’s corporate ownership from a stock company to a mutual company by buying backs all the shares of stock and retiring them. Mutual life Insurance companies are corporation and, by laws, must be incorporated in order to write insurance. Mutual insurers are incorporated insurers with no permanent capital stock. Unlike stock insurers, mutual insurers are owned by the policyholders. A mutual company exist to serve the insurance needs of those policyholders. Anyone purchasing insurance from a mutual insurer is both a customer and an owner (mutually) with rights to vote for the board of director members.
  6. 6. I. PRIVATE INSURERS 1.2. MUTUAL INSURER Mutual Insurance are characterized by the following features: • Participating policies • Owned by policyholders • Vote for directors and trustees • Directors and management have controls • Typically higher rates The operating objective of a mutual life insurance company is to provide insurance to its owners (the policyholders) at the lowest possible net cost. Stock insurers are owned by stockholders. Mutual insurers are owned by policyholders. Demutualization is the process of converting a Mutual Insurance company to Stock Insurance company. A mutual insurer may convert to a stock insurer with the approval of the insurance department of its domiciliary state. In the conversion process, a mutual insurer offer policyholders cash or stock. The company may then also make a public stock offering. Both, stock and mutual companies can write life, health and property and casualty insurance.
  7. 7. I. PRIVATE INSURERS 1.3. ASSESSMENT MUTUAL INSURER Even though assessment insurance companies are prohibited in Florida, they are addressed in the Florida Manual. So briefly, we will go over the basic details. There are two methods upon which these insurers charge premiums. A pure assessment mutual company bases premium cost on the loss sharing method. Members do not pay premium in advance and the total loss experience is divided among the members so each pays a portion of the total. The advance premium assessment mutual charges specific premium amounts. If the actual loss is less than the total of the collected premium, members received a refund in the forms of dividend payments. If the actual loss is more than the total premium amount collected, members’ premium rates will be increased to adjust accordingly. Assessment plan insurance companies are not legally permitted to operate in Florida, except in the case of certain multiple employer welfare arrangements.
  8. 8. I. PRIVATE INSURERS 1.4. RECIPROCAL INSURERS Like mutual insurance companies, reciprocal insurers are owned by the company’s policyholders. In a reciprocal insurer structure, each policyholder insures the risk of the other policyholder (reciprocity). If one subscriber incurs a loss, an equal portion of the loss is distributed among each individual subscriber. Reciprocal are managed by attorney – in – fact. An attorney – in – fact es a person who holds a power of attorney and therefore is legally designated to transact business and execute documents on behalf of another person. The attorney – in – fact’s power and responsibilities depend on the specific powers granted in the power of attorney document. An attorney – in – fact is an agent of the principal.
  9. 9. I. PRIVATE INSURERS 1.5. LLOYD’S OF LONDON Lloyd’s of London is actually not considered an insurer. Instead, it is an association of individuals and companies that individually underwrite insurance. Lloyd’s of London gather and disseminates underwriting information, helps its associates settle claim and disputes, and provides coverage that might otherwise be unavailable in certain areas. Lloyd’s of London is different from other insurers since it is a market, not a company. Lloyd’s of London focus on education, training, and enterprise, and is responsible for risk management and profitability targets across the market. Lloyd’s of London lays down guidelines for all syndicates and operates a business planning and monitoring process to safeguard high standards of underwriting and risk management, thereby improving sustainable profitability and enhancing the financial strength of the market. REMEMBER: Even with the similarities, Lloyd’s of London is NOT considered an insurer.
  10. 10. I. PRIVATE INSURERS 1.6. REINSURERS Reinsurance is an arrangement through which one insurance company transfer a portion of a risk it has assumed to another insurer. A reinsurance arrangement providers an area for sharing loss as a hedge against catastrophic loss to any one company. A reinsurer relationship occurs when one insurer (the ceding company) transfer or relinquishes a portion of a covered risk to another insurer (the reinsurer). 1.7. RISK RETENTION GROUP Risk Retention Group (RRGs) are a form of mutual insurer as well. RRGs provide liability coverage to insure group of individual who are of the same group (or class).
  11. 11. I. PRIVATE INSURERS 1.8. FRATERNAL BENEFIT SOCIETIES Certain criteria must be met in order for an entity to qualify as a fraternal benefits society. To be considered a fraternal, the organization must: Have a lodge system, complete with ritual or ceremonial routines Be nonprofit, governed by elected officials, and Offer insurance only to its members. Fraternal benefits societies are based on religious, national or ethnic lines, any profits derived within the society are considered nontaxable. Most fraternal today issue certificates and annuities with many of the same provisions found in policies issued by commercial insurers.
  12. 12. I. PRIVATE INSURERS 1.9. HOME SERVICE INSURERS Another and more commonly used for this insurer is debit insurer, it is a form of industrial insurance with lesser values. Face amounts are relatively small (typically $1,000.00 to $2.000.00). premium payments are made on a weekly or monthly basis and are collected personally by agent at the policy owner’s home. Industrial life insurance used to account for a significant amount of life insurance policies in force. Typical incomes were lower in the past and people just weren’t as aware of the need for adequate life insurance as they are today. The abundance of group insurance plans has also attributed to the decline of these smaller policies. Overall participation is estimated to have fallen to less than one percent.
  13. 13. I. PRIVATE INSURERS 1.10. SERVICE INSURERS Service insurers technically do not provide insurance to their members. These organization contract for and sell medical and hospital care services. Medical care services are provided in exchange for premium paid. The most familiar plans are HMO and PPO plans.
  14. 14. WHAT IS A HEALTH MAINTENANCE ORGANIZATION (HMO)? A health Maintenance Organization is a Health care delivery system which provides comprehensive health care services for its members. The members are typically enrolled on a group basis by their employer. The employer pays a fixed periodic contribution in advance for the services of participating physicians and cooperating hospitals. The employee may also contribute to the prepayment in some groups. HMO retain a network of service providers (physicians, hospitals, facilities, etc). Subscribers (members/insured) pay a fixed periodic premium in advance of any treatment. HMOs require insured to be assigned a primary care physician (PCP) who oversees the subscriber’s main health care and can provide specialist referrals if necessary. Most health issues also require an authorization through the insurance company before claims are paid. HMOs and Florida laws pertaining to HMO operations within the state are addressed in more depth later. HMOs are known for stressing the provision of preventive health care and early treatment programs.
  15. 15. WHAT IS A PREFERRED PROVIDER ORGANIZATION (PPO)? Following the passage of legislation in 1983, insurance companies were authorized to enter into "alternative rates of payment" agreements with licensed health care providers. Those entering into the agreements are called PPOs. The concept is that if one provider or a group of providers has a large volume of business from a group of insured, it can afford to give them health care at lower guaranteed costs. This savings in health care costs can then be used to prevent health insurance premiums from increasing for that particular group of insured. PPO are considered points of service (POS) companies, the PPO will contract with specific providers who will in turn provide discounts on health care services. Unlike HMOs, PPOs do not require insured to have a PCP. PPOs require deductibles and coinsurance and provide monetary incentives for members to use the physicians who are on their approved provider list. For instance, a typical coinsurance amount for a preferred provider visit is 80/20 (20.0% being the insured’s responsibility). If the member goes out of the network to use a physician who is not in the PPOs network, the coinsurance may raise up to 60/40 (40.0% being the insured’s responsibility).
  16. 16. I. PRIVATE INSURERS 1.11. SELF-INSURERS Self – insurers create their own reserves to provide coverage for future losses. Self – insurance is a risk management method whereby an eligible risk is retained, but a calculated amount of money is set aside to compensate for any potential future losses. Normally, catastrophic risks are not self – insured as they are highly unpredictable and high loss – value. Self insurance is often used by large companies for workers’ compensation purposes and for funding pension plans. Self – insurers will bear the loss up to a maximum amount look to an insurance company to provide insurance above a certain maximum level of loss.
  17. 17. II. GOVERNMENT INSURERS All of the insurers mentioned previously are private insurers. Federal and state government insurance programs are commonly known as social insurance programs. All of the following are government insurance programs, though each has its own criterion for benefits. Social Security, Medicare, and Medicaid programs.
  18. 18. GOVERNMENT INSURANCE CRITERION Social Security (OASDI) Dependent payment are life Insurance Social Security Hospital Insurance (HI)Disability coverage Aged over 65 Supplemental Medical Insurance (SMI) Disable eligible for Social Security (commonly known as MEDICARE) benefits End – stage renal disease MEDICAID Poor, indigent, disable children, renal stage disease Workers’ Compensation Employment accidents Service members US Armed Services and Veterans Group Life Veterans Group Life National Service Life.