relationship risk insurance. 2. Determine ethical concerns health care management / administrators professionals contend resulting supply demand insurance. 3.
Relationship between risk and insurance
Risk is defined as the potential of a certain activity or action that would lead to any loss occurring Seog, 2010.
The term risk can also express the probability of a particular outcome occurring following a particular exposure. The potential losses that might occur due an unfavorable cause are also referred to as risk. The probability that damage, liability, loss, injury, or another negative occurrence that is mostly caused by internal or external vulnerabilities, and can be avoided by taking some preemptive actions is also referred to as risk. In insurance terminology, risk is defined as the situation where there is some probability of an action that is known occurring, but when it might occur in unknown. For example, a person might fall sick, but when and the severity of their sickness in unknown.
Insurance can be defined as the equitable transfer of risk, from an entity to another entity mostly in exchange for payment Dionne, 2000.
Insurance is a type of risk management that is mainly used to protect against a particular uncertainty. The basic principle of insurance involves the pooling of funds from different entities that have been insured in order to pay for any losses that may be incurred by some.
Risk and insurance share a close relationship with one another. In risk management, insurance is considered to be the best way to mitigate against any losses. Insurance is a coverage agreement given out by the insurer to an entity or person. This agreement indicates that should a risk occur the insurer will bear the costs of the loss. This indicates that there is a relationship between risk and insurance. If there was no potential for a risk occurring then there would not be any need for taking an insurance coverage. However, the insurer has to calculate the probability of a risk occurring before they can provide coverage to any entity. There are two distinct factors that must be there in order for risk to be insured. The factors are potential for loss, and some element of uncertainty. If a risk has some element of certainty it is unlikely that it will be covered by the insurer. For example, when a person wants to get a life insurance cover, the insurer will include measurements which will assist them to distinguish risk from uncertainty. The insurer will calculate the probability of events like death and injury occurring before they can provide the cover.
Ethical concerns to contend with in the supply and demand of insurance
Health care management and administrators are faced with many ethical dilemmas. These dilemmas are mainly caused by the inability of a patient to cover for the costs of treatment needed. The insurance cover a patient has might also not cover all the costs for the treatment. Healthcare administrators are therefore, forced to make difficult decisions that might be ethically wrong, but are necessary in order for the facility to remain profitable and manage to provide care to other patients. Other ethical concerns for health care administrators include withholding life saving treatment because it is not covered, providing subsidized care to patients based on their insurance cover, ensuring the privacy of patients medical records, and complete denial of health care to patients.
There is a demand for health care insurance, and with this demand many people are finding themselves with covers that will not cater for all their medical needs. This causes health care administrators to deny them necessary treatment because the insurer will not pay for the cost of this treatment. With a high demand, the insurance premiums have increased, and many people cannot afford the premiums, which makes them prefer covers that have reduced coverage. Another ethical concern regards the privacy of patient medical records. The health care manager is responsible for ensuring all patient medical records are stored securely, and only accessible by authorized personnel. The law requires the health care providers to allow insurers access to this records. This access is normally upon demand and for the facilitation of reimbursement for costs incurred. This information can also be used to deny some patients medical covers or cause their premiums to be increased. Health care managers have to ensure that they only provide information that regards the treatment in question. This is because they have to protect their patients' privacy and confidentiality.
Based on the patient's insurance cover health care providers are forced to provide subsidized care. This is done because the insurance companies have refused to pay for the needed treatment, and the patient does not have the funds to cover for the treatment. Provision of subsidized care can result in dire to the patient and the health care provider will have failed on their ethical role. Health care administrators are also faced with the ethical concern of whether it is acceptable to deny a patient access to medical care because they do not have a cover, or their cover is not comprehensive. In case they provide treatment to the patient, there is need for the costs to be recovered somehow, and this puts a lot of pressure on them. Turning down treatment to a patient is ethically wrong, and the health care management needs to establish grounds of denying treatment.
Whether income should not be a consideration for health insurance providers
Health insurance providers require an individual to be making monthly or weekly payments for premiums. This been the case, the health insurance providers will need to calculate premiums based on the probability of the risk occurring. This premium will consider a person's age, sex, health, weight, and other factors. The income of an individual determines the level of cover they can be provided with. The income is important because based on a person's earnings they can afford high premiums, which means they can get a better cover. Without considering the income of an individual, health insurance providers will give coverage to individuals who cannot afford the premiums and this would affect their businesses. A person without an income is entitled to some coverage, but this is not possible for the independent health insurance providers. This is because these providers are running businesses and they need to pool resources from different people in order to cover one person when a loss occurs.
The level of income earned by an individual also indicates the type of work the individual does, which is used when calculating the probability of risks. Health insurance providers need to know what kind of work a person does in order to determine the risks the person faces in their work environment, and the probability of them falling sick based on their work. Once a person's work environment has been established, their income is the next factor to be considered. Their income is used to determine the level of coverage they can be provided with. A person cannot be provided with a health cover that they are not able to pay the premiums for even if that is the cover they want.
Health insurance providers also require an individual to pay some deductibles before their insurance coverage can commence. This deductible is calculated based on the individual's family and amounts. The deductible for health insurance is normally imposed on term basis e.g. annually instead of each time a visit is made. This deductible is based on the cover an individual is given and the amount charged is considerate of the person's income.
Factors that drive demand for insurance and how management can leverage on this information
The rising cost of health care services is making health care unaffordable for most individuals. The costs rise because there is a huge demand for health care services, which is not been met by the current health care institutions Paolucci, 2011.
With this rising costs, many individuals are finding it hard to pay from their pockets, and they prefer to use insurance. This has increased the demand for insurance by consumers. New technology has made the costs of treatment to increase. Consumers are aware that they cannot afford to pay for this kind of treatment, and they prefer to have someone else take care if the costs. This desire has led to the increase in insurance demand. Another factor that drives consumer demand for insurance is the probability of falling sick. Consumers have discovered that there is greater probability of them falling sick. Since they cannot predict when they might fall sick and in case they do there will be a possibility they might not have the funds to cater for their medical costs, they prefer to take up insurance covers.
Income is another factor driving the demand for insurance. The low income levels now have an opportunity of accessing some form of health insurance although this cover may not be comprehensive. Individuals at the high level income mostly choose to self insure. Self insuring…