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IAI Actuarial Core Principles · Business Management · Issues and challenges in each main practice area

A health insurer's actuary finds that a long-standing hospital partner has been routinely billing higher for insured patients than for self-paying patients. Which strategic response best addresses this challenge in the health insurance value chain?

The best response is to negotiate network tariffs and package rates and strengthen claims audit and fraud analytics. This tackles the cause of inflated claims in the provider relationship, whereas raising premiums or withdrawing cashless service ignores the issue or harms customers.

  1. AIgnore it, as provider pricing is outside an insurer's concern
  2. BRaise premiums for all customers and take no further action
  3. CNegotiate network tariffs and package rates, and strengthen claims audit and fraud analyticsCorrect
  4. DStop offering cashless facilities permanently
  5. Transfer all claims risk to the policyholder through zero cover

Explanation

Differential billing inflates claim costs. Managing provider relationships through negotiated tariffs, package pricing and audit controls tackles the cause. Simply raising premiums passes the cost on without fixing it, and withdrawing cashless or cover defeats the product's purpose.

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