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Appendix 4.2 Aids to the Consumer in Buying Health Insurance Background 1.

Health Insurance in Israel Health insurance in Israel is composed of several layers, divided on the basis of service providers and insurers (as surveyed in the Report of the Commissioner of the Capital Market for 1998). National health insurance furnishes the basic layer of health insurance, a basket of services delivered by health funds under the State Health Insurance Law. Health funds broaden the basic package of services and offer additional layers of service, such as transplants at high cost and choice of surgeon. Insurance companies expand the basic package of services, offer additional layers, and provide a level of service that the basic package omitsexclusively private health services such as longterm care. The basic layerthe health services included in the basket is delivered by health funds in accordance with the State Health Insurance Law on the basis of medical discretion, at a reasonable level of quality, within a reasonable period of time, and at a reasonable distance from the insureds place of residence. Any citizen who wishes to obtain extra services, such as personal choice of surgeon, greater availability and convenience of service, and full coverage of expenses for treatments in Israel and abroad, has to purchase them separately by buying supplemental insurancea layer on top of the basket that health funds and insurance companies offer at an extra charge. Supplemental health services by health fundsthe funds supplemental programs include a variety of coverages that are limited in extent and in benet levels. Most services of these kinds pertain to elective types of care and are implemented by service providers that have agreements with the funds. The funds must offer the supplemental plan to any member who wants it, irrespective of his/her state of health or economic situation. Private insurance by means of insurance c0mpaniesthis activity is regulated by the Regulation of Insurance Transactions Law, 1981, which stresses the insurers obligation to meet future commitments to insureds, and by the Insurance Contract Law, which regulates relations between insurers and insureds. A characteristic feature of private health insurance is the need for underwriting, in which the insurance company examines risky characteristics of the potential


The binding version of the Memorandum is the Hebrew one.

insured, e.g., by demanding a health statement. As a result of the underwriting process, the policy may become more expensive for a specific insured; it may also include restrictions of coverage. Importantly, when the affidavit is filled out, the applicant must apply appropriate disclosure. Failure to do so may result in severely impaired insurance coverage when it is most needed. Notably, insurance companies private health-insurance plans in Israel usually provide second and/or third layers of coverage, i.e., are supplemental to the national health insurance that all citizens hold and to the health funds own extra services. Additional Characteristics of Insurance Companies Private Health Plans The wide variety of products makes comparison and choice difcult. Medical and professional underwriting is applied when people join the plan. Private policies are long-term insurance arrangements that entail a wise decision by the insured when he/she signs the contract. Policies are usually sold in the form of packages of various types of coverage that are not always fully adjusted to the customers needs. Policies include different kinds of insurance benefits (compensation or indemnification); the differences have implications for the nature of benefits and the possibility of setting one off against the other.
Types of Private Health-Insurance Products

Private health insurance covers various kinds of insurance events, chiey: O private surgery in Israel and/or abroadchoice of surgeon, expenses for surgery, pre-operative consultation, hospitalization expenses, etc.; 0 transplants and special treatments abroad; 0 long-tenn care; 0 major medical; 0 loss of Working capacity. (For explanation of these types of coverage, see Report of the Commissioner of the Capital Market for 1999.)

Additional 7}/pes of Health Insurance 1. Ambulatorymedical services given without hospitalization, such as consultations with a specialist, physiotherapy, radiotherapy, and chemotherapy. 2. Altemative medicine. 3. Miscellaneous testsperiodical check-ups, pregnancy tests, pediatric examinations, imaging, etc. 4. Second opinionconsultation with an additional physician before surgery, including an expert abroad. 5. Medicationexpenses for medications that are not covered by national health insurance. 6. Dental insurancecoverage that pays for dental care (which is totally excluded from national health insurance), usually sold in the form of freely standing policies and marketed on a group basis. This survey deals mainly with health insurance that covers medical expenses, e.g., surgery, transplants, care abroad, and long-terrn care. Consumers may also nd these points useful when they shop for other kinds of insurance, such as major medical and loss of working capacity. 2. Points to Emphasize in Shopping for Insurance The following phases are proposed: a. Dene your needs. b. Examine the types of coverage available. c. Examine the costs. d. Compare the plans and buy the insurance.
Phase A*Dene Your Needs

The rst step in buying private health insurance is to define the needs that the insurance is supposed to meet. Many insurance plans cover general health services such as private surgery or transplants but do not always cover specic needs such as surgery abroad, medications, or alternative medicine. Below are several main points that may help you define your specific insurance needs:


An individual policy is one purchased by the insured for him/herself and/or for his/her family. The process of issuing the policy includes medical undervvriting in which the insured lls out a health statement. {} A group policy is one taken out for a group of insureds, such as members of a labor union, by a policyholder who is not necessarily an insured.

0 What health insurance do you and your family already have, either through health funds or in the private market, in individual or group policies? 0 Do you or anyone in your family have special health needs? 0 Are there children in the family? Do they need special care? 0 Does anyone in the family need to see a specialist regularly? 0 How much insurance can you afford in the long tenn?
Phase B*Examining Ij/pes of Coverage Available

After you dene your needs, determine which plan meets them best. You should examine two or three different plans and compare them with the real needs that you have identied. Make sure that you understand the coverage and that it is spelled out in the policy. It is also important to determine what events the policy covers and what restrictions apply to the coverage. You may nd the following points usell in examining a policy: Coverage: a list of the main types of coverage in the policy and expansions offered on top of the basic policy. Duration of insurance term: is the insurance term measured in terms of a number of years or until the insured reaches a certain age? In most health policies, the insurance term is for life and the insurer may cancel the policy only if you fail to pay the premiums. Qualication period: the amount of time at the beginning of the insurance term, expressed in days or monthsninety days in most cases%ung which the insured is not covered for various events. Waiting period: the period of time, expressed in days or monthsninety days in most casesduring which the insured must wait, after an insurance event, for eligibility for benets under the various types of coverage. Deductible: an itemization of deductibles for different types of coverage and, possibly, a deductible limit. Change of policy terms during the insurance term: the time from which the plan may be modied, as well as the conditions for such modication. Type of insurance proceeds: compensation, a predetermined sum for which the insured need not present receipts, or indemnification, meaning coverage of actual outlays for a medical procedure, against receipts. Notably, in the case of indemnication, benets are given only up to actual expenditure even if the insured owns two similar policies.

Joining the plan: an underwriting procedure that the insurer stipulates, such as lling out a health statement and waiving medical condentiality. Price Level of premiums: separate and detailed presentation of the price of the basic policy and its riders. Structure of premiums: Is the premium constant or does it change as you grow older? In the latter case, find out how and by how much the premium will change in each age bracket during the insurance term. Change in premium during the insurance term: The date from which changes may be made, as well as the conditions for such changes. Bear in mind that this change pertains to the entire premium scale; therefore, a change affects the cost of the policy in cumulative terms and not only in response to change in the insureds age. Terms of policy cancellation by insured: a breakdown of the premium refund in the event of cancellation by the insured, and the proportion of the total premium paid that will be credited to the insured. Restrictions Terms of policy cancellation by insurer: a detailed presentation of the conditions under which the insurer is entitled to cancel the policy. Exclusion due to pre-existing medical condition: most policies have a condition that absolves the insurance company from liability for a pre-existing medical condition, such as illness or initial development of an illness that existed before the insurance went into effect or was discovered during the qualication period. The consumer should study the denition of a preexisting medical condition for which the policy will withhold coverage and pay attention to the details of coverage that will be excluded for this reason. Is the pre-existing medical condition exclusion time-limited? Restrictions to insurers liability: refer to the clauses in the policy that pertain to restrictions and exclusions. Does the policy cover medications that are not included in the basic package of health services? Is my doctor, or some other caregiver or other medical institution with which you or someone in your household have a caregiving relationship, included in an agreement with the insurer in such a way as to be covered by the policy?

Private Surgery Policy Insurance for medical expenses on account of private surgery in Israel and abroad is a basic component of commercial health insurance and is offered by most insurance companies that sell health insurance. This is actually the most sought-after form of coverage; it entitles the insured to choose his or her surgeon and jump the queue for the surgery he/she needs. Surgery policies fall into several categories: Coverage for all forms of surgeryrelatively broad coverage. Coverage for all surgery to insureds who carry supplemental insurance from their health fundscoverage that makes up the difference between total actual expenses and those covered by additional health providers. Coverage for all surgery, with a deductibl%a relatively low premium. Coverage for a selected list of operationscoverage for major operations. Rider concerning coverage of surgery abroad In a policy that covers medical expenses in the course of private surgery, several additional matters are worth examining: Does the policy cover all operations or a small list? Can the surgery be performed abroad, and under what conditions? Can the surgery be performed by a service provider that has no agreement with the insurer? Is compensation given for surgery by a public service provider when there is no claim against the policy? Is the funding of coverage conditioned or dependent on entitlements of the insured under the State Health Insurance Law? Policies that cover transplants and special treatments abroad: Insurance that covers transplants and special treatments abroad attempts to respond to the most severe insurance event, one that occurs infrequently but carries exorbitant costs that can run into hundreds of thousands of sheqalim if not more. Must such policies provide benefits in the form of indemnication and entitle the insured to funding of medical procedures or reimbursement of expenses. Notably, major medical policies offer the option of nonrecurrent compensation when a transplant is performed. Notably, too, the insurance event is deemed to have occurred upon the diagnosis of the medical condition due to which the insured needs a transplant and/or special treatment that cannot be offered in Israel.

In policies that cover expenses for transplants and/or special treatments abroad, the following points in addition to those mentioned above should be examined: a. Which transplants does the policy cover? b. Is there a postoperative convalescent benet? c. Is payment given for medical activity that is needed to obtain an organ for transplant? d. Is the funding of coverage conditioned or dependent on entitlements of the insured under the State Health Insurance Law and/or a health funds supplemental health services? 0 Long-term care policies Insurance against the need for long-term care is meant to provide financial support for a person who cannot carry out Activities of Daily Living (ADL) and needs continual carea need most common among the elderly. These are long-term policies, in which the payout of proceeds ranges from three years to time-unlimited. One who considers buying long-term care insurance should look into the following additional points: a. Types of coverage Does the policy pay benets for life? How is the insurance event dened? How many ADLs does it take to define the insurance event? In most cases, the qualifying situation is the inability to perfonn three or four ADLs. Are mental frailty and Alzheimers included in the denition of the insurance event? What is the level of the monthly benet? Can the monthly benet be enlarged? Is the insured excused from paying premiums while receiving monthly benets? How long can benefits be paid? Possible periods are three years, five years, and unlimited. The duration has an effect on the level of premium.

14 ADLs are six basic daily activities, among which the inability to perform several usually constitutes a long-term care insurance event. The activities are standing up and lying down, dressing and undressing, bathing, eating and drinking, walking, and continence.

Does the level of insurance benets depend on the insureds age? Are the insurance benefits given in the form of indemnification (against actual expenses) or of compensation? Does the policy cover nursing care in the insureds home? Are the premiums for at-home care different from those upon admission to a nursing institution Are receipts required in the case of at-home care? b. Prices Is the insurer allowed to change the premium for insureds at large (in contrast to a declared change in premium that is adjusted to the age of each insured), and under What conditions? Detailed presentation of the premium scale up to age 95. The consumer should consider whether the monthly premium at old age (such as 80+) is consistent with the nancial capabilities that he or she will have at that age. Is it possible to buy a policy in which the premium does not change as the insured ages? Does the policy have a nonforfeiture benet, i.e., an entitlement to partial benets even if the insurance is terminated? What rights does the insured have in the event of an increase in premiums? According to some policies, if the premium scale is raised the insured may pay the old price for reduced benets and/or become eligible for a nonforfeiture benet. Phase CExamine the Costs Once you have defined your needs, examine the costs of the coverage that you want. Most individual policies in health insurance are long-term plans, and their premiums are also spread over a lengthy periodoften an entire lifetime. It is recommended to examine the cost of the policy in consideration of your familys sources of income. Below are several basic points to consider in examining the total cost of health insurance: Deductiblethe level of the deductible is an indicator of your ability to affect the price of the plan, on the one hand, and the total cost of the insurance and the medical services, on the other hand. The deductible may be reected several distinct ways: the total sum up to which the insurer does not participate in the cost of medical care, a percentage of the cost of care (as in the case of surgery), and a lump sum that is deducted from the price of the service or product (as in the case of medicines).

Discounts it is sometimes possible to get a discount on a policy or a policy that offers similar coverage at a lower price. For example, there is a policy for Jerusalem residents that refers patients to Jerusalem hospitals only. Consult an agent or an insurer to nd out about such benets. Another point to examine is the limitation of the insurers liability or the maximum amount of coverage. Many policies limit the insurers liability for various medical treatments, either in nancial terms or in terms of a given number of treatments. The consumer has to determine in which form of coverage the proposed limit will sufce for comprehensive medical care in most cases, and in what cases the limit will place substantive limits on the availability of the medical treatment that is sought. In many cases, various expansions and riders are offered in addition to the basic policy. Here the consumer should ask whether these expansions meet his/her insurance needs and should examine their effect on the cost-benet relationship of the plan. In any case, the consumer should nd out which components of the policy are voluntary and which belong to the basic package. Phase DC0mpare the Plans and Buy the Insurance To use the information and compare the plans, consult the table in Appendix 4.3. Buying insurance Before you buy an insurance policy, it is best to gather relevant information from several sources. You may contact an insurance agent who sells products of one company or several companies and ask him/her to review the plan, give advice, answer questions, and help out in the event of a claim. Another source of information is the insurance company. A third possibility is by contacting friends and acquaintances who have private health insurance; they may give you an impression of the terms of the plan, prices, restrictions, and quality of service that they have received from their insurance agent or company. The wide variety of policies available and the many differences among them make it necessary to examine and compare the plans in which you are interested. Do not compare rates only. Correct shopping should be based on additional indicators, especially in health insurance, since policies in this eld may vary widely from one company to the next. It is best to compare types of coverage, exclusions and restrictions, waiting and qualication periods, correspondence in matters of service, extra benets, and price, to make sure that the total package is tailored to your needs and to your nancial resources.

15 Every insurance agent requires a license from the Commissioner of Insurance.

A few nal tips Use a licensed agent only. You may examine agents licenses by visiting the Web site of the Commissioner of Insurance, http://www.mof.gov.il/hon/bituach.htm, clicking to Insurance Agents and Agencies (available in Hebrew only). Before you buy a policy, you are entitled to view it and to examine its details. Do not rush to buy a policy that you do not understand from all angles. It is better to ask for information, view the policy, and receive explanations to any extent required. Before making the purchase, make sure that you understand the process of ling a claimthe forms you will need to fill out and/or submit, the address, and cases in which the insurers prior approval is needed. In addition to the basic policy, you may usually expand the coverage by paying an extra premium. It is recommended that you ask how necessary these expansions are, in a manner similar to your examination of the basic plan.

Appendix 4.3 Shopping for Health Insurance: Comparison of Plans Plan A Plan B Basic packagel supplemental health service Name of insurance plan Name of company and address for inquiries Name of agent and address for inquiries Is coverage conditioned or dependent on entitlements of the insured under the State Health Insurance Law and/or a health funds supplemental health services? Are all types of surgery covered or only those on a list? What operations/ illnesses does the plan include? Can surgery be performed abroad? Which transplants does the plan include? Does the policy include ambulatory services? Does the policy cover are medications that are not on the basic list? Does your doctor have an agreement with the plan? What procedure is used to contact a specialist? Are your specic medical needs covered? What medical conditions are not covered? How is a pre-existing medical condition excluded? What premium is charged for the basic plan? What premium is charged for Rider A? What premium is charged for Rider B? Rates of deductible, by types of coverage Limits of insurers liability

Appendix 4.4 Shopping for Long-Term (Nursing) Care Insurance: Comparison of Plans

Plan A

Plan B

How many Activities of Daily Living are used to dene the insurance event? Are mental frailty and Alzheimers included in the denition of an insurance event? Level of monthly benet For how long are benets paid? Correspondence between insurance benets and insureds age Is the benet given in the form of indem-nication or of compensation? Is at-home nursing care covered? Does the policy have a nonforfeiture benet? Detailed presentation of premium scale in all age brackets