Tag Archives: global underwriting

Medical underwriting and risk adjustment practices: Spain

Health insurance models vary from country to country. As highlighted in our first series of articles on international health markets, governments often dictate the role of private and public health insurance within any country. Milliman has produced a new series of blogs focused on the medical underwriting and risk adjustment practices of eight countries: Australia, Ghana, Ireland, New Zealand, Saudi Arabia, South Africa, Spain, and United Arab Emirates. This is the second article in our series.

The Spanish National Health System (NHS) follows an integrated model in which the financing (through general taxes), purchasing, and provision of health services are mainly public. It offers universal coverage and, in accordance with the Spanish Ministry of Health and Social Policy, 95.8% of the total population was covered in 2011.

Since 2002, the organization of the NHS has been decentralized across the 17 autonomous communities in which the territory is divided. The central government is responsible for ensuring equitable access to health services across the territory and keeps its authority over areas such as regulation of pharmaceutical products.

Patients are required to visit the general practitioner assigned to their specific geographic health areas, who in turn refers patients to corresponding specialists as needed.

In April 2012, a health reform introduced different measures to control the public health expenditure, such as the regulation of the conditions to provide health services to undocumented immigrants and the extension of selective copayments on pharmaceutical products. The copayment is established taking into account the level of income and whether the person is retired or actively working. Copayments are not applied in only a few cases, for example the long-term unemployed and low-income groups.

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Medical underwriting and risk adjustment practices: Australia

Health insurance models vary from country to country. As highlighted in our first series of articles on international health markets, governments often dictate the role of private and public health insurance within any country. Milliman has produced a new series of blogs focused on the medical underwriting and risk adjustment practices of eight countries: Australia, Ghana, Ireland, New Zealand, Saudi Arabia, South Africa, Spain, and United Arab Emirates. This is the first article in our series.

The national public health system in Australia—”Medicare”—provides universal health coverage for all Australian citizens and most permanent residents. It provides free or subsidized access to most medical services and prescription pharmaceuticals. It is largely funded from general taxation, including a statutory insurance levy, which is 1.5% of taxable income (some low-income people are exempt or pay a reduced levy). Individuals and families on higher incomes who do not take out private hospital insurance pay an additional means- tested Medicare levy surcharge of 1%-1.5% of taxable income. The remaining funding comes from private out-of-pocket payments.

The benefits received from Medicare are based on medical and pharmaceutical fee schedules set by the government. Medicare usually pays the full schedule fee for general practitioner (GP) services, 85% of the schedule fee for other outpatient services, and 75% of the schedule fee for inpatient services when treated as a private patient in either a public or private hospital. Services provided to public patients in public hospitals are free of charge. GPs and specialists charge on a fee-for-service basis and can choose to charge more than the fees in the schedule.

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Global underwriting: Hong Kong, China, Singapore, and Malaysia

The role of private health insurance differs significantly from one country to another. A key reason for this relates to the availability and the delivery of public healthcare within each country. In addition, governments often dictate the role of private health insurance within any particular country. This eight-part series focuses on international health markets, comparing and contrasting the key elements of risk selection practice in the public and private health insurance markets in each region.

Health insurance market summary
The provision of hospital inpatient care in all of these countries is mostly provided by public hospitals. Conversely, the provision of outpatient primary and specialist care is dominated by the private providers, which is due to the lower cost per visit and convenience (private clinics are spread across the country compared with the limited locations of hospital-based primary and specialist facilities in the public sector). One exception is China, where outpatient care is also mostly provided by the public sector.

In the case of China, the financing of public care is via a social health insurance (SHI) program, while in Hong Kong, Malaysia, and Singapore it is funded by an allocation of government budgets with limited out-of-pocket payments by the patient at the point of service.

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Global underwriting: United Kingdom

Simon MoodyThe role of private health insurance differs significantly from one country to another. A key reason for this relates to the availability and the delivery of public healthcare within each country. In addition, governments often dictate the role of private health insurance within any particular country. This eight-part series focuses on international health markets, comparing and contrasting the key elements of risk selection practice in the public and private health insurance markets in each region.

Health insurance market summary
The publicly funded English National Health Service (NHS) is a tax-funded system that provides (largely) free healthcare at the point of use to all UK citizens. It is funded out of general taxation, rather than by a social insurance scheme or earmarked tax.

The NHS budget is currently devolved to regional bodies, called primary care trusts (PCTs), which must then fund care for their geographically defined populations, ranging from 90,000 people to over 1 million. PCTs sometimes provide primary care service by employing clinicians directly, but more likely are involved in ‘commissioning’ and paying for the care deemed necessary to meet the needs of its population. As there are few defined benefits under the NHS, a PCT must perform a juggling act and identify needs and clinical priorities to ensure that they have enough budget throughout the year to pay for care.

PCTs receive their budget allocation based on a risk-adjusted methodology, which takes into account the demographic structure of each population, as well as loadings for ‘deprivation,’ which is deemed to be a broad indication of clinical need. However, there is little sophisticated use of past clinical data to risk adjust the budgets according to a future perceived demand based on past health status. In addition, a PCT that underspends its allocation is likely to have the surplus redistributed to another PCT that has overspent. In this way, a very informal and uncodified ex-post experience adjustment is made to the budget allocation, but this adjustment could be as much to do with poor management as true risk differences.

Under proposed reforms, PCTs will be formally abolished and instead the funds will be held directly by clinicians (mainly GPs), grouped together in clinical commissioning groups (CCGs). Estimates vary on the size of these groups, but they are likely to cover populations similar in size or slightly larger than PCTs. It is unclear how budgets will be allocated to CCGs, or budgets allocated to practices within CCGs, but it is likely there will be a more sophisticated type of risk-adjustment methodology required than is currently used. In addition, there is an expectation that CCGs may be held fully accountable for their allocated budget with a series of penalties for overspending through poor performance, and financial incentives for underspending (combined with quality outcomes). But this is not clear as the new reforms are still evolving.

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Global underwriting: Brazil

Daniela MendoncaThe role of private health insurance differs significantly from one country to another. A key reason for this relates to the availability and the delivery of public healthcare within each country. In addition, governments often dictate the role of private health insurance within any particular country. This eight-part series focuses on international health markets, comparing and contrasting the key elements of risk selection practice in the public and private health insurance markets in each region.

Health insurance market summary
The current public health system in Brazil, called Sistema Único de Saúde (SUS)—or ‘Single Health System’—was created in 1988 in order to rectify the inequality that exists in health assistance among the population of 190 million. Today, in theory, ‘public health assistance is mandatory and equal for any Brazilian citizen and provides universal coverage.’

The intention of the SUS, which is analogous to a social security system, is to provide every citizen with doctor’s appointments, exams, hospital admissions (clinical and surgical), and treatment in public health units provided by the county, state, or federal government, or in private health units (for profit and nonprofit institutions) contracted by the public administration.

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Global underwriting: Germany

The role of private health insurance differs significantly from one country to another. A key reason for this relates to the availability and the delivery of public healthcare within each country. In addition, governments often dictate the role of private health insurance within any particular country. This eight-part series focuses on international health markets, comparing and contrasting the key elements of risk selection practice in the public and private health insurance markets in each region.

Health insurance market summary
Social health insurance (SHI) in Germany is a premium-funded system that covers about 86% of the German population (70.5 million). The basic insurance principle is that the allocation of costs is based upon the gross income of insured people, as opposed to health status. About 66.1 million people are obligated to be insured by the SHI, while 4.4 million are voluntarily insured. Premiums are based on gross income from employment (or retirement pension). Employees (or retired people) and employers split the premiums about fifty-fifty. Children (until 25 years old) and spouses without their own income are insured with no extra premium.

Premiums are paid to a nationwide German ‘Gesundheitsfonds’ Health Fund (GHF). In addition to premiums, the GHF receives grants (subsidies) from the federal states. The GHF pays contributions to the statutory SHI insurers based on a risk equalisation system that considers numbers of insured lives, age, gender, 80 serious illnesses including 3,800 diagnoses, and disability of insured lives including daily allowance, costs of implemented managed care plans, and administration expenses.

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