What are the uses of reinsurance?
Insurance for the insurance company
A catastrophic case that involves a lot of coordination of resources, a lot of care planning, and a large allocation of financial resources that may or may not cause the patient to reach his or her maximum lifetime benefit should be a flag to the case manager to find out who may be sharing the risk.
Often, that means the company that provides reinsurance for the health plan. Reinsurance companies offer medical management oversight and often have the resources to help with funding that isn’t available under basic care and the knowledge to help with case coordination.
"Case managers often don’t understand that these resources are available. As case managers, we should be tapping into all the resources for our patients. In some cases, it would be in the best interest of the reinsurer to help out," says Joann C. Milne, RN, BSN, CRRN, PHN, assistant vice president of medical management programs with IOA Re, a reinsurance underwriting company with headquarters in Plymouth Meeting, PA.
Reinsurance, simply put, is insurance for the insurance company. It helps to provide a basis for financial security within an organization by protecting against the dollars involved in caring for patients with catastrophic illnesses or injuries.
Reinsurance is set up very much like personal health insurance. The health plan or party purchasing the reinsurance has a deductible that must be met before coverage under the reinsurance plan kicks in.
"It’s important for case managers to know what the deductible is and what terms are set for coverage," Milne adds.
Reinsurance is designed to cover illnesses and injuries that cannot be predicted because of low frequency. Insurers base premiums on average expected claims coming in — for example, so many live births, so many appendectomies, so many heart attacks, and so forth.
After the cost of the patient’s care reaches the deductible amount, the reinsurer will reimburse the client according to the agreement and begin to assume the financial risk.
"Nobody can predict the financial risk on catastrophic events because it’s hard to know what will happen," Milne adds.
Some larger health plans have a lot of revenue and capital, and a $2 million case or two won’t hurt them as much as it would a smaller health plan, she says.
"But if a plan with 30,000 members gets a set of triplets and care for each costs $1 million, it could affect the financial integrity of that health plan," she adds. Reinsurance plans have a deductible, typically $50,000 to $150,000, depending on how much risk the health plan feels it can manage.
When they encounter a catastrophic case, health plan case managers should ask the director of case management if a reinsurer is involved. If the director isn’t sure, ask him or her to follow up with the medical director, chief executive officer, or chief financial officer, Milne advises.
Larger HMOs are likely to be self-funded for reinsurance, she says. In that case, case managers should notify their supervisor and the chief financial officer of the company if they have a case that has the potential for consuming a lot of resources, Milne says. "The important thing is to know to ask the question."
The job of the case manager is to make sure they are doing everything they can to get all the appropriate treatment possible for their patients. The reinsurer is one avenue they can explore for resources above and beyond what the health plan can do, she adds.
"Part of the case manager’s job is to act as an advocate for their patients, making sure they get appropriate treatment, timely coordination of care, and necessary funding to take care of their health care needs. The reinsurer may be a resource to case managers to help with that advocacy and afford the patient resources above and beyond what the health plan offers," Milne adds.