Health Insurance is a method of risk transfer by which an insurer assumes responsibility for costs that arise due to covered illness, disease and accidents. This ensures that the client, by regularly paying a small premium, is financially cushioned in the case of unforeseen events. Â
Efforts at controlling the spiralling cost of health insurance has typically led to the system of managed care, which in the process can also offer many beneficial and necessary services such as outpatient care, preventive care, dental services and so on.
Managed care has three broad objectives: firstly, to ensure access to medical care in the most appropriate and cost effective manner; secondly, to provide co-ordination and continuity of medically necessary health services to the patient and thirdly, to assist the covered person in achieving full health.Â
Managed care involves the active management of the services and providers in healthcare. Utilisation of the management and review of the same is the most significant element of managed care. It provides oversight, supervision and feedback of providers in regard to their treatment of patients and the aggregate expenditures incurred on behalf of the enrolled persons.
This has come from the recognition that traditional fee for service indemnity plans do not provide mechanisms or necessary incentives for containing costs. Managed care can embody a wide variety of techniques, which include various kinds of financial incentives for providers, promotion of good health, early identification of disease, patient education, self-care and all aspects of utilisation management. The focus on managed care has seen a shift from the curative to the preventive with focus on primary care. These techniques are also now adopted by conventional insurance plans, especially the requirement of obtaining second opinions before undergoing elective surgery.
A good health plan consists of ready availability of healthcare as provided by hospitals and other providers, the affordability of which can come through pooling as in insurance or other financing schemes.
Thus, a good healthcare plan will consist of the benefits of availability, affordability and assistance. The concept of the Third Party Administrator (TPA) has been introduced in India by the IRDA through the TPA Regulations in 2001. The need for TPA in health insurance arises from the unique characteristics of health insurance itself.
Health covers deal with morbidity conditions and is characterised by frequency of claims. The insured event involves a continuous treatment process till discharge or cure and is hence not a discrete event. The need for effective cost control is essential and requires the management of provider networks. More importantly, the health insurance service directly involves people who are ill and in need of proactive assistance and not objects as is generally insured in other covers.
Disease, accident and disability have expensive downsides in human existence and managing these risks is essential not only for the financial security of individuals and families, but also for the community as well as the country. Health and disability insurance is therefore an integral part of social engineering.
Courtesy: Guide for Para 13.2 exam/ Direct Recruit Exam published by Sashi Publications
