THE PURPOSE OF HEALTH
INSURANCE IS TO MANAGE….
PURCHASING HEALTH
INSURANCE INVOLVES…
PEOPLE EXPERIENCING A
 SMALL, CERTAIN LOSS…
  (KNOWN AS THE PREMIUM)
IN EXCHANGE FOR RELIEF FROM RISK
 OF A LARGE UNPREDICTABLE LOSS.

     (DUE TO ACCIDENT OR MAJOR
               ILLNESS)
PERSON
              INSURER
   BUYS
                SELLS
INSURANCE
            PROTECTION
   FROM
             FROM RISK...
PERSON PAYS
             PREMIUM

  PERSON
                                INSURER
   BUYS
                               ...
THE INSURED ARE PROTECTED
  AT A REASONABLE COST

          AND

 THE INSURER MAKES SOME
         MONEY
B Y  S P R E A D I N G
    T H E R I S K
          &
 BY CONTROLLING THE
          RISK
WITH WHOM?

            • CO-PAYS & CO-INSURANCE
PATIENTS    • DEDUCTABLES


PROVIDERS   • RISK SHARING CONTRACTS


  OTHE...
WITH WHOM?

               • CO-PAYS & CO-INSURANCE
PATIENTS       • DEDUCTABLES
   Co-payment – fixed amount of total cos...
Risk sharing contract – an agreement
                WITH WHOM?
  between an insurer and a provider in
   which the provid...
WITH WHOM?
 Re-Insurance –insurance purchased by
  an insurer from another insurer (i.e.,
reinsurer) for the purpose of tr...
BY CONTROLLING

THE PROBABILITY,
SEVERITY,
AND COSTS OF
PROBABILITY & SEVERITY OF EVENTS
    MAY BE REDUCED WITH…
BETTER
 WELLNESS                       QUALITY
              ADHERENCE TO
PROGRAMS                     IMPROVEMENT
       ...
BETTER
 WELLNESS                        QUALITY
              ADHERENCE TO
PROGRAMS                      IMPROVEMENT
     ...
CONTROLLING COSTS REQUIRES
 INFLUENCING SPENDING ON…
• DRUGS
PRODUCTS      • SUPPLIES
              • TECHNOLOGY


              • PHYSICIAN
 SERVICES     • HOSPITALS
        ...
CONTROLLING HEALTH CARE COSTS CAN
    BE SUMMARIZED WITH THE
     FOLLOWING EQUATION…
Total Health
Care Costs     =ƒ (Price, Volume, Intensity)
Ƒ = function(i.e. is determined by)
Price = amount charged for s...
WHICH MEANS…
Total Health
Care Costs     =ƒ (Price, Volume, Intensity)
Ƒ = function(i.e. is determined THE PRICE PAID,
     TOTALS COST...
FOR EXAMPLE…
CONTROLLING PHARMACEUTICAL
EXPENDITURES REQUIRES CONTROLLING
   THE PRICE OF DRUGS, VOLUME OF
 DRUGS USED, AND INTENSITY O...
THE PURPOSE OF HEALTH
INSURANCE IS TO MANAGE…
PERSON    FOR INSURER
 PAYS A   PROTECTION
SMALL,       FROM
CERTAIN    POTENTIAL
INSURERS CONTROL THEIR
       RISK BY…
S P R E A D I N G
        &
   CONTROLLING

    THE RISK
WITH…
RISK SHARING

             • CO-PAYS & CO-INSURANCE
PATIENTS     • DEDUCTABLES


PROVIDERS    • RISK SHARING CONTRACTS


 ...
AND WITH…
BETTER
 WELLNESS                       QUALITY
              ADHERENCE TO
PROGRAMS                     IMPROVEMENT
       ...
INSURERS CONTROL
COSTS ALSO BY USING…
BETTER
 WELLNESS                       QUALITY
              ADHERENCE TO
PROGRAMS                     IMPROVEMENT
       ...
WHICH HELP CONTROL
(Price, Volume, Intensity)
QUESTIONS?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
Why insure health care?
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Why insure health care?

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Why insure health care?
The answer to this question is fundamental to health care reform, insurance coverage, medical practice, and the cost of health care..

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Why insure health care?

  1. 1. THE PURPOSE OF HEALTH INSURANCE IS TO MANAGE….
  2. 2. PURCHASING HEALTH INSURANCE INVOLVES…
  3. 3. PEOPLE EXPERIENCING A SMALL, CERTAIN LOSS… (KNOWN AS THE PREMIUM)
  4. 4. IN EXCHANGE FOR RELIEF FROM RISK OF A LARGE UNPREDICTABLE LOSS. (DUE TO ACCIDENT OR MAJOR ILLNESS)
  5. 5. PERSON INSURER BUYS SELLS INSURANCE PROTECTION FROM FROM RISK RISK
  6. 6. PERSON PAYS PREMIUM PERSON INSURER BUYS SELLS INSURANCE PROTECTION FROM FROM RISK RISK INSURER WRITES A POLICY
  7. 7. THE INSURED ARE PROTECTED AT A REASONABLE COST AND THE INSURER MAKES SOME MONEY
  8. 8. B Y S P R E A D I N G T H E R I S K & BY CONTROLLING THE RISK
  9. 9. WITH WHOM? • CO-PAYS & CO-INSURANCE PATIENTS • DEDUCTABLES PROVIDERS • RISK SHARING CONTRACTS OTHER • REINSURANCE INSURERS
  10. 10. WITH WHOM? • CO-PAYS & CO-INSURANCE PATIENTS • DEDUCTABLES Co-payment – fixed amount of total cost that must be paid by the insured each PROVIDERS • RISK SHARING CONTRACTS time a medical service is used Co-insurance – a fixed percentage of the total cost that must be paid for each OTHER insured medical service • REINSURANCE Deductable – a fixed amount that must INSURERS be paid by the insured before insurance takes effect
  11. 11. Risk sharing contract – an agreement WITH WHOM? between an insurer and a provider in which the provider assumes risk for treatment in some way. Typically, the provider will receive a fixed payment per • CO-PAYS & CO-INSURANCE PATIENTS patient and assume any costs for • DEDUCTABLES treatment above that fixed payment. PROVIDERS • RISK SHARING CONTRACTS OTHER • REINSURANCE INSURERS
  12. 12. WITH WHOM? Re-Insurance –insurance purchased by an insurer from another insurer (i.e., reinsurer) for the purpose of transferring risk from the insurer to the reinsurer. The reinsurer agrees to pay CO-PAYS & CO-INSURANCE • the insurer PATIENTS when insurer’s losses exceed a specified • DEDUCTABLES amount. PROVIDERS • RISK SHARING CONTRACTS OTHER • REINSURANCE INSURERS
  13. 13. BY CONTROLLING THE PROBABILITY, SEVERITY, AND COSTS OF
  14. 14. PROBABILITY & SEVERITY OF EVENTS MAY BE REDUCED WITH…
  15. 15. BETTER WELLNESS QUALITY ADHERENCE TO PROGRAMS IMPROVEMENT THERAPY MEDICATION DISEASE & APPLICATION UTILIZATION CASE OF REVIEW MANAGEMENT TECHNOLOGY EVIDENCE PATIENT PAY FOR BASED ENGAGEMENT PERFORMANCE MEDICINE
  16. 16. BETTER WELLNESS QUALITY ADHERENCE TO PROGRAMS IMPROVEMENT THERAPY MEDICATION MANAGED CARE & THESE DISEASE METHODSAPPLICATION UTILIZATION IMPROVE CASE INCREASE OF SEEK TO ACCESS, REVIEW OF CARE, AND/OR LOWER COST QUALITY MANAGEMENT TECHNOLOGY EVIDENCE PATIENT PAY FOR BASED ENGAGEMENT PERFORMANCE MEDICINE
  17. 17. CONTROLLING COSTS REQUIRES INFLUENCING SPENDING ON…
  18. 18. • DRUGS PRODUCTS • SUPPLIES • TECHNOLOGY • PHYSICIAN SERVICES • HOSPITALS • LONG TERM CARE • OF EXISTING PRODUCTS & SERVICES UTILIZATION • OF NEW PRODUCTS & SERVICES
  19. 19. CONTROLLING HEALTH CARE COSTS CAN BE SUMMARIZED WITH THE FOLLOWING EQUATION…
  20. 20. Total Health Care Costs =ƒ (Price, Volume, Intensity) Ƒ = function(i.e. is determined by) Price = amount charged for services and/or products Volume = number of units of service and/or products Intensity = amount of energy or effort used
  21. 21. WHICH MEANS…
  22. 22. Total Health Care Costs =ƒ (Price, Volume, Intensity) Ƒ = function(i.e. is determined THE PRICE PAID, TOTALS COSTS ARE CAUSED BY by) THE VOLUME USED, AND THE INTENSITY OF Price = amount charged for services and/or products HEALTH CARE PROVIDED. CONTROLLING ONLY ONE (E.G., PRICE) WILL BE POINTLESS WITHOUT CONTROLLING THE OTHERS. Volume = number of units of service and/or products Intensity = amount of energy or effort used
  23. 23. FOR EXAMPLE…
  24. 24. CONTROLLING PHARMACEUTICAL EXPENDITURES REQUIRES CONTROLLING THE PRICE OF DRUGS, VOLUME OF DRUGS USED, AND INTENSITY OF CARE (E.G., USING A CHEAPER GENERIC DRUG INSTEAD OF A NEW BRAND NAME THERAPEUTIC EQUIVALENT).
  25. 25. THE PURPOSE OF HEALTH INSURANCE IS TO MANAGE…
  26. 26. PERSON FOR INSURER PAYS A PROTECTION SMALL, FROM CERTAIN POTENTIAL
  27. 27. INSURERS CONTROL THEIR RISK BY…
  28. 28. S P R E A D I N G & CONTROLLING THE RISK
  29. 29. WITH…
  30. 30. RISK SHARING • CO-PAYS & CO-INSURANCE PATIENTS • DEDUCTABLES PROVIDERS • RISK SHARING CONTRACTS OTHER • REINSURANCE INSURERS
  31. 31. AND WITH…
  32. 32. BETTER WELLNESS QUALITY ADHERENCE TO PROGRAMS IMPROVEMENT THERAPY MEDICATION DISEASE & APPLICATION UTILIZATION CASE OF REVIEW MANAGEMENT TECHNOLOGY EVIDENCE PATIENT PAY FOR BASED ENGAGEMENT PERFORMANCE MEDICINE
  33. 33. INSURERS CONTROL COSTS ALSO BY USING…
  34. 34. BETTER WELLNESS QUALITY ADHERENCE TO PROGRAMS IMPROVEMENT THERAPY MEDICATION DISEASE & APPLICATION UTILIZATION CASE OF REVIEW MANAGEMENT TECHNOLOGY EVIDENCE PATIENT PAY FOR BASED ENGAGEMENT PERFORMANCE MEDICINE
  35. 35. WHICH HELP CONTROL
  36. 36. (Price, Volume, Intensity)
  37. 37. QUESTIONS?

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