How are insurance plans (including government payers) impacted by the decisions that patients and their doctors make? Consider supply and demand concepts when formulating a response.
The amount and type of medical consumption anticipated by patients and doctors plays an important role in influencing the type of insurance cover they select.Doctors usually recommend to their patients the need to have insurance cover for certain medical needs that they are likely to address in the near future. Dusansky and Koc (2006) emphasize that the health insurance choice is determined by the specific expected utilization while the utilization is determined by the chosen health insurance. This interdependence means that insurance providers have to closely monitor the changing trends in the anticipated health needs of patients and create insurance plans that match the demand created by the changing needs.
Cost sharing is the other aspect of insurance that plays an integral role in formulation of insurance policies. According to Dusansky and Koc (2006), anticipated health and medical needs such as dental procedures, outpatient mental medical services, and obstetrical services determine the extent of cost sharing. In the event that a patient anticipates many medical needs, they will have a larger net price than those who anticipate few medical needs. The health insurers have become more aware of the changing dynamic of the customer health demands in order to create a more palatable cost sharing scheme which does not hugely disadvantage the customers. In the event that the insurance companies fail to respond to the changing demand environment and remodel their supplies (insurance policies), they face the risk of losing customers.
Efficiency losses, risk-sharing losses, and the losses that occur when insurers distort their policies in order to improve the variety for insurers are some of the losses that the insurance companies try to avoid. This means that when observing changes and the need to accommodate the patient and doctor preferences, insurance companies have to use reinsurance prospective risk adjustment or whenever possible (Cutler and Zeckhauser, 1998).
Cutler, D.M., Zeckhauser, R.J. (1998). Adverse Selection in Health Insurance. Harvard University and National Bureau of Economic Research. 1-32. Retrieved from http://www.nber.org/chapters/c9822.pdf
Dusansky, R., & Koc, C. (2006). Health Care, Insurance, and the Contract Choice Effect. Economic Inquiry, 44(1), 121-137.
Order your paper at EssayAgents.com - Let our academic writing experts help you write a custom paper on a topic of your choice now within the shortest time possible. We are the most affordable writing service online- Click on the order now button for an instant quote. We guarantee 100% authenticity of all papers written by us. Boost your grades with our expert writing services.