Page 50 - MEDICAL AND HEALTH INSURANCE

MEDICAL AND HEALTH INSURANCE

In some cases, the Insured may also share in both, profits and losses

depending on the arrangement.

Risk sharing for individuals is usually on the losses; the policyholder will

bear a certain proportion of the losses, whereby the Insurer bears the

higher portion. In this instance, the advantage will be a lower premium
charged as compared to the full risk to be borne by the insurer.

2.4.4 COST PLUS PLANS

'Cost plus' is an arrangement to provide a facility for payment of medical
expenses, of which the expenses can be:

a) excluded and not covered by the insured benefit program

b) on a self-funding basis

Under a cost plus arrangement, the premium calculated will be the cost of

claims expected to be paid, plus an administrative charge for administering

the scheme and all other related costs.

For premium adjustment the insurer must first determine the future
claims cost and add in the administrative fee for managing the scheme, to

arrive at the premium.

2.4.5 SELF-FUNDING

In a self-funding arrangement the individual or corporate bodies bear the
risk and undertake all costs incurred. The funding is through the individual

saving or is paid out of the company general expense account or reserve.

However, in the event of good claims experience, they will reap the

benefit as it is not affected by the insurer pool or other administrative

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