Ethical concerns in healthcare insurance supply and demand management

¶ … 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.

Approach that would mitigate issues in measuring health care demand

Measuring the demand of health care is faced with many difficulties. This is because there is no recognized method that can be used to determine when people would fall sick, or what they might be ailing from Finn & University, 2007.

Therefore, determining the demands for health care becomes difficult and all that health care facilities can do is prepare for anything. There are many variables that one has to consider when measuring health care demand. The variables are normally external to the health sector. There is also the difficulty in predicting any correlations in ssupply and demand of health care services. Another challenge with measuring demand is that the use of historical data may be unavailable, or the data is not sufficient for comparison purposes. Another issue in measuring health care demand is that not all concerns raised by people will be heard. The concerns raised by well off people will be listened to, but not the low income levels.

The best approach for mitigating these issues is using a projection methodology that will measure demand based on the fulfillment of certain targets. Using this approach one will be able to gain various analytical and programmatic advantages, which would not have been possible with other methodologies. This approach will allow for the extrapolation of historical data, combined with actual current demands for health care. Comparing the differences will allow one to determine the rise of health care demand, and predict when it is likely to occur. The current lifestyles that people are living make them prone to sicknesses. Using this approach one can plot the current lifestyle with the past lifestyle and determine how to measure demand in the future. This approach will reduce the external variables that affect health care demand, which would allow for proper measurements for demand.

Relevance of the lemons principle

The lemons principle occurs when there is information asymmetry between the involved parties of a transaction Mankiw, 2009.

The lack of having the same degree of information that is necessary in making an informed judgment, leads to the lemons problem. This problem is mostly apparent in areas like insurance. The lemons principle was popularized by Akerlof in 1970. Akerlof provided an example of used car market. In this case the buyer does not know for sure the value of the used car, and would only be willing to pay the average price, which is obtained by analyzing the price of a new car and a used car. This average price would make the used car seller to benefit since the price would be higher than if the buyer knew the real value of the car.

In the current health care in the United States, the government is providing subsidized health insurance, which is forcing the health care insurance providers to lower their premiums. The citizens are benefitting mostly as they have an option to pay the average price for health care services. Since people do not know the actual costs for health care they rely on the average based on the costs provided by the government. The average price might be higher than the actual cost, but the government has ensured that all the citizens have equal access to health care. The health care insurance providers are at a disadvantage as the citizens are only willing to pay the average price to get covered. The lemons principle is relevant in that it shows the lack or necessary information is causing the citizens to rely on averages. These averages may not favor the health care insurance providers as they are forced to reduce their premiums for them to survive.