Health Insurance

Health Insurance

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring relevant facts and figures relating to health insurance. The market for insurance has evolved into many different forms. The traditional form of insurance is fee-forservice, where health care providers are reimbursed for each service performed. Because of the fast growth in expenses in the health care sector, insurers have experimented with other forms of insurance. Managed care organizations (MCOs) are one market response to this growth in expenses (Finkelstein, 2007).

These organizations may take many forms, including health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans. Cost savings are achieved through a variety of mechanisms. One mechanism is the use of monopsony (buyer) power to lower fees paid to the providers (hospitals, doctors, pharmacies, etc.) (Lesser, 2003). Because the insurer represents multiple potential patients, they may have market power to achieve price discounts. Another is capitated (prepayment) reimbursement mechanisms, which give incentives to providers to reduce the amount of care given. Other mechanisms are to emphasize preventive care and make use of information technologies to reduce the more expensive hospital care (Currie, 1996).

Discussion & Analysis

Insurance is a mechanism for assigning risk to a third party. It is also a mechanism for pooling risk over large groups, which in the case of health insurance involves transferring benefits from healthy to ill individuals within a pool. Health insurance may be either private insurance, purchased by individuals or groups, or social insurance, provided by governments out of tax revenues (Finkelstein, 2007).

Following is a list of factors that are needed to be considered in choosing an insurance company and policies for a health care organization (Currie, 1996):

The coverage of the services

The cost of services provided

Convenience and Accessibility i.e. location of hospitals and doctors whether ...