Insurance Practices - Essay Example

On one hand and often uppermost in the mind of the healthcare organizations, they may estimate the upper limit of the compensation they may need to claim and then compare the premium which they must pay. On the other hand, important factors also include the nature of the insurer, the way the insurer manages claims, the obligations and benefits specified in the policy and possibilities of additional insurance coverage (Thornton). Of interest to the healthcare organization is not only the capacity of the insurer to pay out claims finally awarded, but also to fund the costs of ongoing litigation in the meantime.

Healthcare organizations must understand that ' Serious problems can arise in each of these areas that can make a health care liability claim even worse than imagined' (Thornton). Aggravating factors that work to increase claims are the cost of continued healthcare to treat or remedy the problem under discussion and the potential loss of earnings for the plaintiff. (Bell). In some cases the rocketing level of claims awarded have driven healthcare insurance companies out of certain states because they cannot afford to do business in those circumstances.

Only revised state legislation capping the level of claims made has allowed them to return and resume business with the healthcare organizations in the area. (Thornton). The first category, workers' compens. The first category, workers' compensation insurance, protects the healthcare organization from legal action following accidents or illness suffered by its employees in the workplace and funds the medical attention and compensation for lost income for employees affected by such events; workers' compensation insurance applies no matter whose fault the accident or illness was, as long as it was workplace related (Insurance Information Institute).

The second category, liability insurance, applies to a third party other than the insured and its employees, meaning a person or persons who have not contracted with the insurer (Farlex).Policies for liability insurance are defined in accordance with a maximum level of payment to be made by the insurer per stated period (typically 1 year). If the healthcare organization wishes to have insurance coverage above this level, this is typically available from the insurer. The insurer then often pays for legal costs associated with such claims in excess of the original amount, although this is by no means an absolute rule (Bell)Liability insurance can then be further sub-categorized into claims made and occurrence policies.

Claims made policies taken out by a healthcare organization protect the organization against claims or events reported during the term of the policy (Tennant). At the discretion of the insurance company, such a policy will typically cover events prior to the claims made policy term, if a similar claims made policy was in operation immediately before the term of the current claims made policy. These claims are settled according the law as it was defined at the moment of the event triggering the claim, rather than at the moment when the claim itself is made.Occurrence