Introduction
There has been an increase in the demand for security. Nowadays, a sense of security may be considered as the next basic goal after the basic items which include food, shelter and clothing. Majority of the people requires economic and health security. A person with economic security will be able to satisfy the basic needs in the present and future. Economic risk refers to the probability of losing economic security. Historically, economic risk was managed through making informational agreements between the parties concerned. The insurer would compensate the injured party. The pooling concept was later formalized in the insurance industry. Under an insurance contract, each insurance policy holder will pool his or her risk with all other policy holders.
Relationship between risk and insurance
Risk refers to exposure to uncertainty. Alternatively, risk is the possibility of loss or the likelihood of an outcome different from the one expected. On the other hand, insurance is a contract whereby one person undertakes to pay a premium so as to be paid a sum of money upon the occurrence of the event insured against. The insured party takes out a cover and promises to pay a money consideration. The insurer undertakes to pay out compensation if the event insured against occurs. The event is what is normally referred to as the risk. The insurable interest is the interest the insured person has in the subject matter in the event the risk occurs. Normally, the insured pays some premium to the insurer. Alternatively, the insured person can take out a policy on the same risk with different insurers. In such a case, the insurance is referred to as double insurance.
Therefore, an insured person will minimize the risks associated with an outcome through taking an insurance cover. The insured person will be liable for compensation by the insurer in case the risk occurs. The insurer will guarantee returns upon happening of an event. Risk is an essential element of an insurance contract. Other elements include parties, premium and uncertainty. As defined earlier, the parties involved in risk-insurance contract are the insurer and the insured. The relationship between risk and insurance can also be explained by the information that the insurer fills in the proposal form. The circumstances affecting the risk will determine the amount of premium that the insured will pay towards the insurance. The nature of the risk also will determine the type of insurance that the insurer will apply .
However, the potential loss, risk, ought to be significant and crucial enough to warrant insurance cover. The risk must be well defined in terms of the economic value. The risk should also be reasonably independent of the insurance companies. An example of insurance is the disability income insurance. The insurance is paid in case one becomes disabled. The health insurance helps to offset the costs associated with medical care, dental care and hospitalization. In conclusion, the nature of the risk will determine the type of insurance cover.
Ethical concerns health care management/ administrators professionals have to contend with resulting from the supply and demand of insurance
The majority of ethical issues in studies fall into one of four groups: protection from harm, inform consent, right to privacy, and honesty with professional colleagues. A code of ethics is very vital in health care management to ensure that medical professional meet the demand and supply on insurance. It also helps in improving the insurance services to the customers. The code of ethics defines the conduct and practice in the health care field. Certain ethical issues must be complied with by the medical professionals. They have to ensure that they prioritize insurance activities in the order of importance. This may involve giving preference to one type of insurance over another depending on the level of importance. The medical professionals can achieve this by advising their clients on the various types of insurance available and their importance.
The medical professionals must disclose all the information relating to all types of available insurance covers. The patients will be in a position to make reasonable and valid decisions on the type of insurance cover to apply. The information that requires disclosure include the amount of premium expected to be paid by the patients, the maturity period of the insurance cover, the diseases and costs that will be covered by the insurance cover and the benefits associated with the insurance cover. It will be also important for the medical professional to disclose the basis on which the insurance covers will be provided to patients. The medical professionals should ensure that there are no potential negative risks for patients as a result of participating in the insurance policies.
Affordability of the insurance cover by the patients is another ethical concern that medical professionals should take into consideration. The medical professionals should devise a treatment insurance plan for the people who cannot afford a comprehensive insurance cover. This may result from low income among those people. The medical professionals should reduce the problem of enormous bills on those people who cannot afford an insurance cover. They should also ensure that they get routine check-ups and progresses to health problems. The medical professionals should refrain from any issues that would result to conflict of conflict. The medical professional should not provide insurance cover to the patients. This would result to conflict of interest.
The increase in demand and supply of insurance policies requires the medical professionals to encourage insurance policies, which reward proper life styles other than those endanger the lifestyle of the patients. Offering proper advice on the patients is considered ethical. The medical professionals should support and encourage patients to purchase the policies which reconnect them with the beneficiaries. It is also important for the medical professionals to develop insurance policies with reasonable insurance deductibles and co-payments. This should include individually purchased policies and the employees’ plans that are offered by the employer.
The medical professionals should offer insurance policies that will benefit the patients regardless of their race, gender and class. They should not offer discriminatory insurance policies and covers. The insurance policies should be beneficial to every person buying the policy. The medical professional should maintain the privacy of all patients. Insurance policies of a patient should not be disclosed to another person. The medical professionals should support their patients’ decisions on the type of insurance they want. They should not make decisions on behalf of clients.
Involvement in the insurance policy decisions should be purely voluntary, and no patient should be forced to engage in an insurance contract without his/her own consent. The role of the medical professional should be to offer advice. The decision on whether to buy the insurance policy should be made by the patient. The primary patients should have ownership, control, and disposal of all insurance materials.
Determination of whether the income of an individual should not be a consideration for health insurance providers
The income of an individual should not be a consideration by the health insurance providers. Studies carried out show that the poor people have limited access to insurance services. This is because of co-payments and deductibles that are a major component of private insurance coverage. The insurance purchase decisions will be influenced to a great extent by the income of a person. Most of the studies carried out indicate that the affordability of the insurance services will depends on the amount of income that a person receives. Majority of people will buy insurance in situations where the employer is paying the insurance premiums.
The individual market for health insurance is small. For instance, in 2005, only 11% of those people without access to employer sponsored insurance policies had purchased insurance in the individual market. Insurers normally charge different premiums depending on the nature of the risk. This implies that a person who is entitled to low income will not be able to buy insurance policies in the individual market. Additionally, the out-of-pocket payments for premiums in the individual market are higher than in the employer coverage market. This makes it hard for poor people to have access to insurance services. Hence, the insurance providers should not take into consideration the amount of income of a person.
According to the United States Census Bureau, 2011, the uninsured rate of children living in poverty was 13.8%. This was higher than the rate for all children, 9.4%. In the same year, the number of uninsured people declined as the household income increased. This is an indication that access to insurance services depend on the level of income of an individual. The Affordable Care Act (ACA) also referred to as the Patient Protection and Affordable Care Act (PPACA) represents one of the most significant United States government expansion and regulatory refurbish of the country’s healthcare system since 1965 when the Medicare and Medicaid bills were passed into law. The comprehensive health reform includes family planning and other related services. The act made the services accessible and affordable for many residents living in United States. Additionally, the act aims at increasing the quality of the health services . This will help to reduce the costs of health care for the Americans and the government. The law also requires the existing insurance companies to provide medical cover for all the applicants within the new set minimum standards. There are resources which are available. The resources are related to the improvement of the health system in the country . The income of an individual should not be a consideration by the health insurance providers.
Alternatively, the insurance providers should negotiate for a discounted fee with the doctors, hospitals and other health care providers. Such negotiations will increase the affordability of the insurance services to low income consumers. The insurance providers should accept the discounted fees as full payments for services rendered. This will help to encourage low income consumers from applying for an insurance cover.
Factors which drive consumer demand for insurance and how management can leverage information obtained from empirical measurements
One of the main factors which affect demand for insurance is the risk attitude of the investors. Individuals who are risk averse will have a higher demand for insurance than risk neutral investors. The demand for insurance will depend on the level of risk, and the nature of the business carried out by the investor. Most investors will purchase insurance covers for their businesses. The management of a company or an organization can use the information from empirical measurement to create competitive advantage over their competitors.
The number of children in a household will also determine the demand for an insurance policy. According to research, the higher the number of children in a family, the higher the likelihood of the household buying insurance covers for the family. The family will demand the insurance cover in order to minimize medical related costs. Additionally, the health insurance will be important in reducing health/illness expenditure. Illness coverage perception about the future and the health care expenditure are important factors in determining the demand for insurance.
The amount of income received by an individual is an important determinant of the demand for insurance. The higher the amount of income received by an individual, the higher the probability of purchasing insurance. A household or an individual will spend a high amount of money on insurance after attaining a certain level of income. The individual will be able to pay for healthcare costs due to an increase in income. The nature of the business will determine the type of insurance to purchase.
The level of awareness and knowledge about the insurance will also create demand for insurance. Majority of the people do not understand the importance of insurance. They do not have the necessary knowledge regarding how the insurance works. They do not have access to the insurers. Lack of knowledge and awareness may be caused by low education levels and illiteracy levels among the people. On the other hand, people who understand how the insurance works and its importance will apply for insurance covers. Therefore, it is important to create high knowledge and awareness among consumers regarding insurances. This can be achieved through advertising by insurance companies.
An approach that would effectively mitigate the issues associated with measuring the health care demand
The demand for health care insurance may be measured by the price and income elasticity of demand. There are several issues, which are associated with measuring the healthcare demand. There are problems associated with the correct information on the types of insurance available. Additionally, there are complicated methods of data collection. Measuring the health care demand is also very expensive. These are some of the issues which are associated with the measurement of health care demand.
The introduction of an Electronic Health Record (EHR) may help to solve some of the issues associated with measuring the health care demand. One of the main problems identified was complexity involved in data collection. Advancing the adoption of information systems and standards in the health care sector will help to improve data collection methods. It is possible to store a large amount of data in an electronic form. Additionally, it is easy to carry out analysis of data stored in electronic form. Broadening of the relationship between the Public-Private Sector in the public health system will help to improve the measurement of health care demand. Public-Private Sector Collaboration will also help in developing and implementing strategies for reporting public health data. The collaboration also helps to improve electronic health infrastructure.
Relevance of the Lemon Principle: Health Insurance to the current health care system(s) in the United States
The Lemons Principle was founded by George A. Akerlof. The principle states “bad cars chase good ones out of the market”. The principle can be applied in many situations including the case of health care system in United States. Currently, the health care system in United States is largely owned and operated by the private sector businesses. Report by the World Health Organization (WHO) indicates that U.S spends more on the health care per capita ($8608) and health care. United States has the highest percentage of infant mortality rate prevalence, adolescent pregnancies, injuries, homicides and sexually transmitted infections. United States is ranked last in the provision of quality health care among similar countries, according to the Common Wealth Fund. The United States medical costs are the highest.
The presence of health insurance will help in improving the quality of the health care system in United States. The introduction of the Affordable Care Act (ACA) also referred to as the Patient Protection and Affordable Care Act (PPACA) or simply the Obamacare on 23rd March 2010 made the health care services accessible and affordable for many residents living in United States. The law also requires the existing insurance companies to provide medical cover for all the applicants within the new set minimum standards. The ACA includes various provisions, which would take effect over numerous years beginning in January 2010. The provisions relate to guaranteed issues, individual mandate, health insurance exchanges, federal poverty level, deductibles and co-insurance and minimum standards for health insurance policies . The ACA act will help to improve the health sector in the United States.
One of the major provisions of the Affordable Care Act refers to the small business tax credits. According to the provision, all the small businesses with less than 25employees, and who earn an average income of $50000 are eligible for tax credits of up to 35% of their premium costs for a period of two years. In 2014, the tax credit will be increased to 50% of their total premium costs. However, the small businesses must be offering health care benefits and contributing at least 50% of their premium. The condition stated above must be fulfilled for the small business to qualify for the tax credit. The small businesses will be entitled to subsidies in case they purchase an insurance policy through an exchange . Another provision involves Pre-existing Condition Insurance Plan (PCIP). All the individuals who have remained uninsured for a period of at least six months will have access to a temporary, Pre-existing Condition Insurance Plan in their respective state. The premiums for the individual will be based on the health status of the standard population. The annual out of pocket costs will be $5950 for an individual, and $11900 for families . This will help in improving the health care system in United States.
References
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