Premium Calculation by Health Insurance Companies

Have you been intrigued about how a health insurance company calculates the premium you are required to pay? Here are some of the answers. While getting an insight of any individual company may not be a simple exercise, but they all follow certain broad guidelines and these will be highlighted in this article for the consumers.

Premiums are calculated based on the insurance product (or plan) purchased by the individual. These insurance products may be packaged in various ways to either provide a general coverage or may meet the needs of a particular age group. To decide on the amount that one would need to shell out, the insurance company takes all costs into considerations. Some of these factors are enlisted below.

a) Personal History: It takes into consideration the individual’s health, present health status, past medical history, family history, age of the individual, personal habits (e.g. smoking, alcohol addiction etc.). For purchasing a health insurance cover, the insurance companies may/may not conduct an initial medical examination of an individual before issuance of health cover.

b) Mortality Rate: These are charges incurred by an insurance company to cover the risks incase of any eventuality to an individual. The mortality expenses differ depending on the age and the ‘Sum Assured’ being availed by an individual. Important points to be remembered in co-relation with mortality rate are.

i) Premiums increase, as you grow older.

ii) Premiums increase in co-relation to hereditary or lifestyle ailments such as Diabetes, Hypertension, Obesity etc.

iii) In principle, premiums increase by availing higher Sum Assured by an individual.

c) Administration and marketing expenses: Such expenses are incurred by the organization as part of their operational expenses. These operational expenses are recovered in the form of premium that a policyholder pays while purchasing an insurance product.

Administration and marketing expenses also incorporate the costs incurred on designing the insurance product, market publicity, advertisements, brochures, leaflets, booklets, pamphlets etc to create awareness amongst the public regarding the option of various insurance products and services in the market.

Under this heading, expenses pertaining to payment of monthly salaries to their employees, commission to insurance brokers, insurance agents
, marketing and sales of insurance products and overhead costs are included, that constitute payment of premium by the policyholder. It also incorporates the costs required to meet the operational expenses on daily basis.

d) Savings component: This portion of the premium is invested in various public investments approved by the Government of that country. Investments in private sectors are generally not practiced. This is based on the guidelines issued by the Regulatory Body which is approved by the government of that country.

In India, IRDA (The Insurance Regulatory and Development Authority), at Hyderabad is the regulatory body and it controls the activities and functioning of Life and Non-Life (General) insurance organizations.

e) Medical Underwriting: Underwriting of various insurance products is done to create a balance between an organization and an individual. This is done with a view to analyze risks from various angles and broad-spectrum factors so as to contain fiscal bleeding and containment of losses in the insurance sector. It takes into consideration the number of individuals covered under the health policy and conducts a review pertaining to any claims history pertaining to that individual or that group or an entire organization.

Medical Underwriting is done with a view to establish eligibility, set premiums or deny coverage. For example premiums can significantly increase in case there is an individual with a past medical history of any chronic ailment or with a long-standing prevailing illness or has had a severe Road Traffic Accident etc.

In case, a group or an organization is involved, medical underwriting is done uniformly for that particular group taking into consideration a host of factors.

f) Adjusted or Modified Community Rating: This factor takes into consideration the geographical location, topography, physical factors of the region, economic factors involved in that region, financial stability, political stability, industrial development, trade activities, lifestyles and other varied factors.

For example developed regions have to shell out higher premium in comparison to regions with minimal development, for example a village area.. This means that if you live in metropolitan city like Kolkata, Mumbai, Delhi or Chennai, you have to pay higher premium in comparison to people living in Tier-II and Tier–III cities, as your risks are higher of falling sick or being injured in an accident.

In addition, recently another method of calculating premium has evolved called as Experienced Rating. In this method, usage of historical data is used to decide upon the rates based on the number of claims and the claim amount made during a given period. As a result, the data that is generated is used to calculate and predict the probability and potential for claims in the future. With extensive data that is now available on Internet, the experienced rating method has proved to be a boon for the underwriters and the insurance companies. The method uses a comparison of past or historical data. This data forms the ground-work for analyzing the future premiums.

g) Rating Bands: Under this category, the insurance company fixes a base rate that can be charged for a particular group possessing the same characteristics. The case characteristics include factors such as age, gender, geographical region, family composition, group size, occupation details, industry etc. For example a workforce comprising of healthy employees who are in their youth in the age group of 25-30 years will pay less premium as compared to the workforce who are in the age range of 45-60 years.

We have given only broad guidelines to educate you about how a health insurance company is likely to decide what you will end up paying as premium to insure your health against disease and accidents. Companies that take group insurance are likely to benefit by getting a group discount, depending on the numbers of the staff that they may wish to insure,

Is mandated health insurance Constitutional?

Along with the economic arguments against the health care bills circulating Congress, is a fascinating exposition of the legality of mandated health care. An article by two former Justice Department officials, David Rivkin and Lee Casey, posed this very question in The Washington Post this summer, “… can Congress require every American to buy health insurance? In short, no. The Constitution assigns only limited, enumerated powers to Congress and none, including the power to regulate interstate commerce or to impose taxes, would support a federal mandate requiring anyone who is otherwise without health insurance to buy it.” ¹

Supporters of the mandate argue that Congress’ power issues from the “Commerce Clause”, Article 1 Section 8 of the Constitution: “To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;” It is the second part upon which Congress relies not only to regulate health insurance as “interstate commerce”, but to mandate its consumption. There is an important distinction, though, between regulating a market and obligating citizens to participate in it. In addition, Rivkin and Casey observe the Supreme Court frowns on Congress’ application of the Commerce Clause to regulate non-economic activity: “… in two key cases, United States v. Lopez (1995)² and United States v. Morrison (2000)³, the Supreme Court specifically rejected the proposition that the commerce clause allowed Congress to regulate noneconomic activities merely because, through a chain of causal effects, they might have an economic impact”. Even in these two cases the United States attempted to regulate or proscribe action, not mandate activity, which is much higher threshold.

Since our nation’s founding, application of the Commerce Clause has been deracinated from its original intent. James Madison, in Federalist Paper No. 42, argues that the Commerce Clause was written primarily to allow Congress to regulate foreign commerce, and that the interstate clause precludes the circumvention by individuals and states of foreign treaties or duties: “… it may be added that without this supplemental provision [regulation of interstate commerce], the great and essential power of regulating foreign commerce would have been incomplete and ineffectual.” ⁴ One can only fantasize about this debate: Resolved, the proposed mandate for all Americans to buy health insurance fulfills the Framers’ intention to regulate foreign commerce. For the affirmative, Nancy Pelosi. For the negative, James Madison.

Carson Holloway writes in the Witherspoon Institute’s Public Discourse: Ethics, Law, and the Common Good, “… Rivkin and Casey have performed an important public service by raising this kind of argument. For it is no small measure of the corruption of our public discourse that most political leaders and citizens no longer ask what constitutional provisions, if any, authorize Congress to act when some of its members propose to ‘solve’ some national ‘problem.’ ” ⁵

Holloway thus reminds us that Congress’ power is limited by the Constitution. This is explicit in the 10^th Amendment: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Pelosi’s office tried to preempt 10^th Amendment arguments, but in the most tortured way imaginable: “The 10th amendment does not authorize states to constrict Congress’ power under the commerce clause.” ⁶ This is backwards. States do not constrict Congress’ power; rather the Constitution constricts all powers not authorized specifically to Congress and affords them to the states and to the people. Have we forgotten about people’s individual liberty and free choice in this debate?

And yet we have seen this before. In 1994 during the debate on Clinton’s health plan, the Congressional Budget Office concluded, “A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action. The government has never required people to buy any good or service as a condition of lawful residence in the United States. An individual mandate would have two features that, in combination, would make it unique. First, it would impose a duty on individuals as members of society. Second, it would require people to purchase a specific service that would be heavily regulated by the federal government.” ⁷ This was prior to the Lopez and Morrison decisions, so one would think that the CBO would be more cautious today, but, alas, they are curiously silent on the matter.

The legal arguments portend philosophical differences that are striking and ominous if the people allow Congress to stretch the Constitution to the breaking point. We have a tradition of giving incentives to encourage positive behavior and of instituting regulation to prevent harmful behavior. The mandated approach to health care turns this tradition upside-down: it institutes regulation to force positive behavior while creating incentives to encourage negative ones; to wit, if businesses see the mandate, taxes and penalties in these bills as added costs, they will have economic incentive to invest in overseas markets over the United States. The mandate is an accretion that may have the unintended effect of leaving more workers without health care or on the “public option”.

How, then, to solve the problem and make health insurance more accessible and affordable? The answer lies in the correct application of the Commerce Clause. In 2002, legal scholar and former Appeals Court Judge Robert Bork and former Chief Counsel for the Food and Drug Administration Daniel Troy analyzed the devolving of the Commerce Clause through Supreme Court cases over the years and concluded, “ … the purpose of the Commerce Clause was to remove barriers to interstate commerce, and that the original understanding of the Clause permits federal regulation of the purchase and sale of goods in commerce to address barriers created by discriminatory or inconsistent state laws.” ⁸

Removing barriers is certainly a better idea than obliging purchase from state-sanctioned oligopolies (private insurers) or a federal monopoly (public option). The proper application of the Commerce Clause is to open the barriers erected by the states that prevent an interstate market in insurance. Encouraging everyone to buy health insurance is a salutary objective. Making it easier and less costly through free markets and personal choice is in keeping with American tradition and Constitutional limits on power.

Ghanaians satisfied with health insurance scheme – Survey

Ghanaians are generally satisfied with the performance of the National Health Insurance Scheme (NHIS), a survey report released by the National Development Planning Commission (NDPC) said on Thursday in Accra.

The 95-page report indicated that 59 per cent of all households who were insured under the scheme had said they were satisfied with another 31. 7 per cent saying they were “very satisfied” with the scheme’s performance.

The report, launched by Dr Ebenezer Appiah-Denkyira, Director, Human Resource, Ministry of Health on behalf of the sector Minister indicated an increasing level of registration under the scheme with a total subscription increasing from a low of 1,797,140 in 2005 to 12,518,560 in 2008 though significant variations in registration existed across geographical and socio-economic groups.

The survey however indicated that although more than half of Ghanaians were enrolled in the scheme, a large portion of the population remained uninsured with 41 per cent of households not registering any member at all.

Analysis of the NHIS subscription by socio-economic groups revealed that about seven out of 10 people in the lowest socio-economic group had not registered with the scheme.

The NDPC in ensuring the implementation of the Growth and Poverty Reduction Strategy (GPRS II 2006-2009), conducted the 2008 Citizens’ Assessment of the National Health Insurance Scheme on the theme: “Towards a Sustainable Health Financing Arrangement that Protects the Poor”.

The survey conducted between September and November 2008 in collaboration with the Ghana Statistical Service, Ghana Health Services, Ministry of Health and the National Insurance Authority was to find out whether the NHIS was providing an affordable health care financing arrangement that protected the poor as envisaged under the GPRS II.

The findings revealed substantial positive effect of the scheme on several aspect of health care delivery in Ghana, indicating that the proportion of those who consulted skilled health care providers for general health conditions had risen from 45 per cent to about 62 per cent between 2005 and 2008, during the implementation of the scheme.

The result also noted an increase of 72 per cent of babies delivered with the assistance of skilled personnel.

“This suggests that the scheme has significantly improved access to health care by pregnant women or women in labour, with positive implication for maternal mortality and complications associated with child birth.

The report noted that the greatest expectation of Ghanaians about the scheme was to reduce the burden of health care cost on households, with the survey suggesting that households registered with the scheme benefited in terms of out-of-pocket expenditure reductions at health care facilities than those who were not registered.

Poorer households who were not insured suffer even more and would find it more difficult to access health care.

It therefore recommended further improvement in the exemption policy, which was necessary to adequately serve the health needs of the poor, adding that women who benefited from the policy of free medical care for pregnant women should be encouraged to subscribe to the scheme even after delivery.

Dr Regina O. Adutwum, Director-General, NDPC said the survey focusing on the NHIS after four years of implementation provided the opportunity for citizens to share their views on the various aspects of the scheme, with the view of obtaining feedback to improve its implementation.

“As government undertakes a review of the NHIS our hope is that this report and the subsequent discussions on the subjects will contribute to strengthening its implementation and the achievement of its objectives”, she added.

Dr Appiah-Denkyira urged the private sector to come on board to help expand the health infrastructure by establishing more health centres to help in providing quality health care for the people.

Dr Kwabena Opoku-Adusei, Vice-President, Ghana Medical Association stressed the need for the sustainable improvement of the NHIS since “it is one of the best health systems that has ever happened in Ghana”.

Mr K. Kamalideen Resident Manager, United Nations Development Programme who sponsored the survey said such research would help identify lapses in the scheme and so stakeholders, particularly, government should accept its recommendations and work towards improving on the service.

Forcing Us to Buy Health Insurance Is Not the Same as Mandatory Car Insurance

I thought this analogy had been thoroughly destroyed, but it’s baa-aack. The One is claiming it’s no biggie that the new “health care” bills require every American to buy insurance because most states require everyone to buy car insurance. He goes back to that analogy as he downplays the fact that if you don’t buy health insurance you will eventually be sent to prison.

The President said that he didn’t think the question over the appropriateness of possible jail time is the “biggest question” the House and Senate are facing right now.

I’m thinking it’s a pretty big question for people who don’t want to buy health insurance and don’t want to pay a fine. The only way a “mandate” works is that, eventually, jail time is the punishment. Otherwise, people can ignore the mandate.

Back to the car insurance analogy:

“What I think is appropriate is that in the same way that everybody has to get auto insurance and if you don’t, you’re subject to some penalty, that in this situation, if you have the ability to buy insurance, it’s affordable and you choose not to do so, forcing you and me and everybody else to subsidize you, you know, there’s a thousand dollar hidden tax that families all across America are — are burdened by because of the fact that people don’t have health insurance, you know, there’s nothing wrong with a penalty.”

Here are the problems with that:

1. Everybody doesn’t have to buy car insurance. You can choose not to drive and then you don’t need to buy the insurance.
2. The only way to avoid mandatory health insurance will be to stop breathing. Our federal government has never required us to buy something just to exist in America.
3. Driving is a privilege, Living and breathing is a right.
4. You can choose liability coverage only for your car. Government will mandate what’s covered in your health insurance.

If this passes, it’s time for a class action lawsuit challenging the constitutionality of such a mandate.

By the way, if Obama is going to relate health care insurance to car insurance then it’s time to allow health insurance to be sold across state lines, remove expensive mandates, give the same tax breaks to individuals that businesses get and decouple insurance from your place of employment. Actually, those are the ways the two types of insurance should be the same.

Short Term Medical Insurance, Considering Your Health Insurance Purchase

Short term health insurance is a good way to have a low cost alternative to your standard health insurance plan. If you’re someone that is both fairly young and in good physical condition then you should consider getting some short term health insurance in opposition to a more extensive health insurance plan.

You’ll find that with many of the short term health insurance plans the monthly premium that you’re going to have to pay to the insurance company is going to be quite low. You’ll find that most typically these plans are going to be around $30-$60 dollars rather than the hundreds you’re going to be paying with a more standard plan. This is even going to be cheaper than if you go with a company plan as your monthly premium is going to be right around the same amount as your monthly premium with the short term medical insurance plan.

The one thing that you’re going to need to keep in mind is that there are going to be a lot of things that won’t be the same as if you were to have a full health insurance plan so you need to make sure that you’re completely aware of the differences and make the best and wisest decision for you.

We talk about some of those things below.

Benefit Eligibility

The major difference with the short term health insurance plan is that you’re not going to be eligible for the many benefits that you’d receive if you had a standard health insurance plan. Rather than having than having non-emergency doctor’s visits; such as, yearly checkups, elective surgical procedures fully or partially covered you’ll have to pay for all of this out of pocket with the short term medical insurance.

The costs for your prescription drugs and if you’re a woman your ob-gyn visits won’t be covered either. Additionally, the maternity related costs as well as delivery aren’t covered by a short term health insurance plan; although you can potentially be covered from other sources.

If you are someone that has complications or have genetic predispositions for illnesses; etc… you’re going to want to consider a full health insurance plan rather than a short term plan. Also should you be a woman that is planning on having children a full health insurance plan is well worth the premium when it comes to the costs of having to have a child. If you’re a male that has his spouse on the medical policy you should consider the full health insurance policy if you’re going to have kids like in the previous example.

Medical Emergencies

With medical emergencies, should you have one your short term health insurance policy will compensate you to a capped amount which is usually no less than 100k though. This would payout after you’ve reached your deductible you signed up for with the policy and then the short term plan would pay out after that up to your policy limits.

The deductible on most short term health insurance plans is going to range anywhere around $1k-$10k and when it comes to the deductible the higher the deductible the lower the premium and vice versa.

Insurance Cap

You’ll be looking at a 6 month to 1 year cap on most of the short term health insurance plans; however, once the cap has expired you’re then free to sign up with another short term health insurance provider.

Considerations

Getting a short term health insurance policy is not going to be the right decision for everyone. Like mentioned above if you have medical problems and you need to see a doctor regularly and need to make purchase of expensive prescription drugs you need to start looking to a standard health care provider so you’ll be able to get assistance in helping in the cost of these bills.

If you don’t have a health insurance option through a job and cost is a high factor you’re going to find a very reasonably priced option with the short term medical insurance policy. It might not cover everything but it is definitely better than nothing should you have a major medical emergency; at that point it could be invaluable.

Many Veterans Are Without A Health Insurance Plan

Two stories have been dominating the news prior to Veteran's Day this year: the tragic Fort Hood attacks, and the continued battle over healthcare reform. These important issues are more interrelated than it appears at first glance. Thirteen people, many of them soldiers, died at Ft. Hood; many others were injured. While Americans are mourning the victims, we must also take care of the members of our military that are still living. Unfortunately, quite a few soldiers who were honorably discharged are now suffering due to their ability to buy a health insurance plan.

Doesn't the Veteran's Administration provide health insurance and medical to veterans? That is largely the case. However, many veterans uninjured in combat are--surprisingly--considered ineligible for VA insurance. The post-military income levels deemed too high to receive benefits are surprisingly low; a veteran with no dependents can only take advantage of the government's health insurance plan if he or she earns under $29,400 per year, while one with four dependents can earn around $41,300 before losing eligibility for VA benefits. Such incomes aren't quite poverty level, but are the domain of working-class Americans (including civillians) unable to afford private insurance if their employer doesn't offer it. Troops returning from Iraq and Afganistan are also struggling with unemployment, and are a disproproportionate percentage of the nation's homeless. Many are working low-paying jobs that push them just above Medicaid and VA elibility. This makes it even harder for them to become insured.

Uninsured veterans also face unique challenges when buying health insurance plans. Although they may not have been physically injured in combat, serving in a war zone can affect their mental health. One-in-five of the veterans of our current wars has been diagnosed with Post-Traumatic Stress Syndrome. Some health insurers could consider PTSD a pre-existing condition and refuse to cover a returning veteran. Treatment sufferers PTSD can be expensive, making it out of reach for uninsured vets. If sufferers are not properly cared for, they have the potential to act out in ways that hurt themselves or others. Quality health care would prevent a large portion of that.

Studies have shown that, controlling for other factors, being uninsured leads to a 40% increased risk of death. According to the Harvard Medical School, nearly one-and-a-half million veterans went without health insurance during 2008. Out of those uninsured veterans, who were too young to be eligible for Medicare, 2,266 are said to have died as a result of medical conditions that could have been prevented. The Walter Reed scandal nonwithstanding, Veteran's Administration hospitals have received high praise for the quality of their care...if veterans are able to access it.

Regardless of one's feelings on healthcare reform for the civillian population, don't the soldiers that risk their lives to protect us deserve better? As we remember the veterans who have fallen in battle, we should also resolve to take care of the ones who made it home.