Health Insurance - To ensure Accessibility and Equity in Healthcare Services.pptx

A brief class-note on importance of health insurance for accessibility and equity of healthcare services.

1. Brigadier General Dr Zulfiquer Ahmed Amin M Phil, MPH, PGD (Health Economics), MBBS, Fellow (AIIMS, Delhi) Health Insurance

2. QUIZ Test Maths

3. ‘Risk’ and ‘Uncertainty’ are two terms basic to any decision making framework in economics. ‘Risk’ involves known probabilities with measurable outcomes , while ‘uncertainty’ involves unknown probabilities and unpredictable outcomes.

4. As per Insurance Information Institute, USA the odds of individual dying in an automobile accident is 1 in 47,852 , and the odds of dying in an automobile accident during one’s lifetime is 1 in 608 (In 2021). Thus, we know the probabilities of these risk events. During COVID-19 neither we knew, who will acquire the infection nor who are likely to die with what consequences, are example of uncertainties. We can insure against risks but not uncertainties . In case of uncertainties, the insurer may underestimate the risks associated with extending coverage. As a result, insurer may have to pay out more than it receives in premiums.

5. Insurance As some of the healthcare services are so expensive that can cause Catastrophic Health Expenditure, that we want some organizations to take the responsibility of financing our medical expenses wholly or partially. Health insurance is an agreement in which an insurance company agrees to pay for some or all of medical expenses . The company pools clients’ risks to make payments more affordable for the insured.

6. Basic Elements in Health Insurance

7. Why is Insurance Important -Distributes Large Risks The risk of significant loss due to an event is borne by a large group of people. Thus, the losses are distributed over a large group, making it bearable for each individual . -Provides Financial Stability Without insurance, it will be extremely costly for businesses to bounce back after a major loss of inventory. -Helps Economic Growth Insurance companies pool a large amount of money. Part of this money can be invested to support investment activities by the government. -Generates Long-Term Wealth Life insurance plans can continue for more than three decades. Within this time they will collect a large amount of wealth, which returns to the investor if they survive. If not, the wealth goes to their family .

8. Terminologies in Insurance Insured: The person or business that get compensated if the loss occurs. Insurer: The company that agrees to pay the compensation. Premium: The money that is paid by the insured to the insurer. Proximate Cause : Proximate cause, or legal cause, is an underlying cause of an accident. For example, if a truck driver swerves and hits a car, the driver is the actual cause of the accident. But if they moved to avoid a bicyclist riding on the road, the bicyclist's unsafe driving might be the proximate cause.

9. Deductible: A deductible is the amount of money that the insured person must pay before their insurance policy starts paying for covered expenses . Example: If someone has a deductibles clause stating an amount of USD 3,000, he will have to pay it upfront . The company will only activate the health insurance policy after he pays USD 3,000.

10. Co-payment A copay is a fixed out-of-pocket amount paid by an insured for covered services. It is a flat fee one has to pay on the spot each time he goes to a doctor.

11. ● Co Insurance : Coinsurance is an insured individual's share of the costs of a covered expense. It is expressed as a percentage. If someone has a "30% coinsurance" policy, it means that, when he has a medical bill, he is responsible for 30% of it. Insurer will pay the remaining 70%.

12. Differences Between Co-Insurance and Co-Payment

13. Out-of-Pocket Maximum The out-of-pocket maximum is the amount someone need to pay for covered medical services each year. The out-of-pocket maximum does not include payment of premium . It typically includes deductible, coinsurance and copays, but this can vary by plan.

14. Cost Sharing in Insurance

15. Principles of Insurance Law of Large Numbers Utmost Good Faith : Insurer and Insured should have good faith towards each other . Insurer must provide complete and accurate information. Insurable interest : An insurable interest exists when an insured person derives financial or other kind of benefits from the continuous existence, without damage of the insured object. Principle of Indemnity : Insured shall be compensated appropriately for the losses, only to the extent that the insurer does not make profit out of it. Principle of Subrogation : It enables the insurer to take over the policyholder's legal right to recover damages .

16. Principle of Loss Minimization : An insured must always do all possible to limit the loss of his covered property in the event of an unforeseen disaster, such as a fire or explosion. Principle of ‘Causa Proxima ’ : The proximate cause, i.e., the cause which is the closest and the main reason for a loss.

17. Why Will People Buy Health Insurance Financial Coverage A health insurance plan acts as strong financial support during medical emergencies . The costs associated with critical illnesses like cancer, heart ailments, etc., can severely affect financial standing. Rising Inflation Inflation is inevitable. Average inflation in the field of healthcare is 7.14 percent . Health insurance is a useful tool to topple the rising medical costs. Tax Exemption Health insurance can provide tax deduction on income . Fall Back Option No matter how much money one saves, fighting a critical illness can be tough. Health insurance take some of the burdens off our shoulders . Insurance helps to come back to financial status as before the catastrophe.

18. Utility and Insurance Insurance mechanism is founded on the principle of risk-aversion . Demand for insurance is a demand for certainty . Risk-averse individuals will always choose to insure valuable assets, since although the probability of a loss may be small, the potential loss of the asset itself would be so large that most people would rather pay small amounts of money as a premium than risk the loss . People buy certainty of security of his property or health. The more risk averse individuals are, the more insurance coverage they will buy.

19. Decision for purchase of insurance Consumer Theory Consumer theory assumes that if consumers are perfectly informed , they maximize their utility as a function of consuming various goods, given relative prices, their income and preferences. Changes in prices and income influence how much of different goods rational consumers will buy. Health insurance is expected to be a normal good with a positive income elasticity of demand , implying that the poor are less likely to insure. A price increase of a substitute for insurance – such as user fees – is expected to raise the insurance demand.

20. Expected Utility (EU) T heory Due to uncertainty about the unknown future health , insurance choice is not made based on utility alone but on consumers’ expectation about factors such as their health status. Insurance demand is a choice between an uncertain loss that occurs with a probability when uninsured and a certain loss like paying a premium. EU theory assumes that people are risk averse. Insurance reduces this uncertainty . This certainty allows the insured to reach a higher utility than those without insurance.

21. Health Insurance in Bangladesh Among the 81 life and non-life insurance companies operating in Bangladesh, two are state-owned corporations – Shadharan Bima Corporation (SBC ) and Jiban Bima Corporation (JBC) – which have a better distribution network than the others . The majority of companies are private domestic and 35 provide life insurance and 46 offer general (non-life) insurance.

22. The population of Bangladesh has almost no financial risk protection for health, with only 0.4% of health insurance coverage . Only four people in 1,000 in Bangladesh have life insurance . Out of which 10% has health insurance. Out-of-pocket healthcare expenditures of households in Bangladesh comprise 64.3% share of the total health expenditure. Each year, around five million people in Bangladesh fall below the poverty line due to high OOP healthcare spending, almost 26.1% of population meet with catastrophic health expenditure. A study in Bangladesh shows that introduction of insurance system in health with 500/- tk premium is enough to generate 5 lac tk annual treatment provisions and another 5 lac tk as death benefit (Cabinet Division, Bangladesh, 2022).

23. Health Insurance in B angladesh Social Health Insurance (Provided by the Govt ) Micro Health Insurance (Provided by NGOs) Private Health Insurance (Provided by Insurance companies) Voluntary Community Insurance Medical Savings Accounts: A medical savings account (MSA) is an account into which tax-deferred amounts from income can be deposited. The money in such accounts is to be used to pay for medical expenses .

24. Future Strategy for Healthcare Financing in Bangladesh (2012-2032)

25. How to Increase Health Insurance Coverage B uild confidence on insurance system Sensitization Enhance competency and capacity of insurance companies Selection of suitable model Acceptable premium and pre-payment system Convenient process-mechanism ( eg Mobile-phone-based insurance) Easy and fast claim-settlement Special provision for the poor Lessons from peer countries Piloting