Design

Question 1

Product design features for health products

Answer 1

• benefit definitions
• NCD or LCD
• benefit limits/caps
• co-payment mechanisms
• benefits offered
• guarantees or options
• tiered benefit
• benefit escalation: fixed, level, index-linked
• term: deferred period, survival period, payment period

Question 2

Different reimbursement arrangements

Answer 2

1. Fee-for-service
2. Negotiated fee-for-serve
3. Per diem
4. Per case
5. Capitation
6. Salary

Question 3

Additional reimbursement

Answer 3

1. Pay for performance
   - financial incentive for achieving goals related to care processes and outcomes
   - offer potential to improve quality of care delivered and encourage collab
   - may be difficult to determine appropriate metrics
   - best for chronic conditions and certain surgeries
2. Pay for co-ordination
   - paying for co-ordination services e.g. making sure hospital appointments attended, making sure medication is suitable, ensuring patient understands importance of rehab
   - benefits: improves patient-physician relationship, increase family involvement in decisions, improve flexibility of where and how care is provided.
   - cons: patients expect services without payment, scope of services is unclear
   - best for primary care and chronic management
3. Pay for participation
   - pays provider to agree to be peer-reviewed on their cost efficiency
   - benefits: create safe environment, to achieve common standard of clinical decisions and consistent expenses
   - cons: excludes those who don’t opt-in to model, request clinical analytics to identify cases worth discussion
   - best for specialities with strong representative society (ASSA of heart surgeons), best return of investment if target specialities with highest influence on cost.

Question 4

Employer’s choice: stand-alone vs. umbrella funds.

Answer 4

• Costs (umbrella funds benefit from economies of scale but may not pass onto members)
• Expertise and time (umbrella fund trustees understand regulation and have time to ensure they’re compliant)
• Personal liability (if mistake is made, trustees can be blamed not company)
• Conflict of interest (umbrella funds don’t care for members)
• Segregation of assets (stand-alone don’t need to do all that)
• Sales practices (often poor in umbrella funds)
• Fiduciary risk (standalones may not use funds for what you’re supposed to)
• Operational risk and individual participant level (easier to detect in standalone)

Question 5

Types of retirement funds

Answer 5

DC funds, DB funds

DA funds
* The benefit amount is defined, and fund sets a contribution rate to reach that.
* If investment doesn’t do as well as planned, then fund can change the contribution rate.
* Works the same as DB funds, minus the sponsor who gives security if things go wrong.
* Younger members are take on more risk because they may have to cover shortfalls if investments don’t perform well.

Hybrid between DC and DB funds.
* Notional DC or cash-balance fund: fund grows on notional (not actual) rate, investment funds are pooled together.
* Combination hybrids: combination of less generous DB plan and a DC plan
* Sequential hybrids: members start off in DC plan and move to DB plan
* Underpins: DC plans where members receive a DB-type pension guarantee

Question 6

Sponsor vs sponsor covenant

Answer 6

The sponsor is the employer providing the pension scheme.
The sponsor covenant is an assessment of how strong the sponsor’s ability and willingness are to meet the pension scheme’s financial needs.