WO2007124313A2

WO2007124313A2 - Life insurance with a catastrophic medical health benefit

Info

Publication number: WO2007124313A2
Application number: PCT/US2007/066827
Authority: WO
Inventors: Christopher Capelli
Original assignee: Board Of Regents, The University Of Texassystem
Priority date: 2006-04-20
Filing date: 2007-04-18
Publication date: 2007-11-01
Also published as: WO2007124313A3

Abstract

A life insurance instrument that combines life insurance with a catastrophic medical health benefit is presented. The described life insurance instrument provides a monetary sum to the insured or a beneficiary on the occurrence of death of the insured, and a payment of healthcare expenses to selected healthcare systems for a defined catastrophic illness during a defined time period based on an agreed upon sum for the treatment of defined catastrophic illnesses for the insured in exchange for annual payments during said defined time period. This life insurance instrument 1) benefits an individual by preserving his or her accumulated wealth from the costs of treatment of a catastrophic illness at selected healthcare systems duπng a set time peπod, 2) benefits the healthcare systems by increasing the number of potential future paying patients, and 3) provides financial benefits to the provider of the life insurance when the individual survives the catastrophic illness.

Description

TITLE OF THE INVENTION

LIFE INSURANCE WITH A CATASTROPHIC MEDICAL HEALTH BENEFIT CROSS-REFERENCE TO RELATED APPLICATIONS

This application claims the benefit of U.S. Provisional Application No. 60/745,256, filed April 20, 2006, which is incorporated herein by reference.

FIELD OF THE INVENTION

This invention relates to life insurance and the use of life insurance to pay for a catastrophic illness.

BACKGROUND A concern for individuals is suffering a catastrophic illness such as cancer, heart disease, and liver disease, etc. that required extensive and expensive treatments in major medical healthcare systems. In such instances, the wealth accumulated by an individual throughout their lifetime can be diminished or wiped out by the expense of treating the catastrophic illness. Furthermore, individuals that suffer a catastrophic illness may want to be treated at the "best" healthcare system that can provide sophisticated medical treatments that are classified as experimental or not FDA-approved. However, many health policies do not cover these treatments, and the patient is left to his or her own financial resources that may be limited or illiquid. This is especially the case if the individual desires treatment at a premier healthcare system that is located outside of the individual's country or residence.

FIGURES

FIG. 1 provides a schematic diagram of the method of this invention for the life insurance instrument that combines life insurance with a catastrophic medical health benefit.

FIG. 2 is a block diagram of the components of the life insurance instrument of this invention.

FIG. 3 depicts a block diagram of the process of obtaining the life insurance instrument of this invention. SUMMARY OF THE INVENTION

According to the invention there is provided a life insurance instrument comprising a monetary sum to the insured or a beneficiary on the occurrence of death of the insured; and a payment of healthcare expenses to one or more selected healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein the one or more selected healthcare system(s) will provide services for a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period.

The life insurance instrument may further comprise a monetary sum to the insured or a beneficiary on the occurrence of death of the insured; and a payment of healthcare expenses to one or more selected healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein most of the risk is borne by the provider and/or one or more healthcare system(s) and not the insured.

According to the invention there is provided a method for a healthcare system to increase the number of potential future paying patients comprising providing a life insurance instrument to an insured by determining a monetary sum to be paid to a beneficiary nominated by an insured on the occurrence of death of the insured; and determining a payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein said life insurance instrument is provided directly through an insurance provider or indirectly with the healthcare system working with said insurance provider; and wherein said healthcare system agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period. Another embodiment of the invention is a method for an insurance provider to provide a life insurance instrument product comprising providing a life insurance instrument to an insured by determining a monetary sum to be paid to a beneficiary nominated by the insured on the occurrence of death of the insured; and determining the payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein said life insurance instrument is provided directly through an insurance provider or indirectly with the healthcare system working with said insurance provider; and wherein said healthcare system agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period. Another embodiment of the invention is a method for an insurance provider to provide a life insurance instrument product comprising providing a life insurance instrument to an insured by determining a monetary sum to be paid to a beneficiary nominated by the insured on the occurrence of death of the insured; and determining a payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein the risks associated with providing the monetary sum to the a beneficiary nominated by the insured on the occurrence of death of the insured is defined using standard actuarial approaches; and wherein the risks associated with providing payment of healthcare expenses to said healthcare system for said one or more defined catastrophic illness(es) during said time period time period are defined by an agreement with said healthcare system by establishing a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments to said healthcare system during said defined time period.

Another embodiment of the invention is a method for one or more healthcare system(s) to provide healthcare to an insured comprising paying for healthcare expenses of an insured for one or more defined catastrophic illness(es) during a defined time period; wherein the healthcare system(s) agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period; and wherein most of the risks associated with providing payment for healthcare expenses to said healthcare system(s) for said one or more defined catastrophic illness(es) during said time period time period are borne by said healthcare system(s) and defined by an agreement with said healthcare system by establishing a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments to said healthcare system during said defined time period. Another embodiment of the invention is a method for an insured to preserve his wealth from the costs of treatment of one or more defined catastrophic illness(es) at one or more healthcare system(s) during a set time period consisting of paying for a policy on a life insurance instrument comprising obtaining a life insurance instrument that determines a monetary sum to be paid to a beneficiary nominated by the insured on the occurrence of death of the insured; and determining a payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein said healthcare system(s) agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period.

DETAILED DESCRIPTION

"Monetary sum" includes the monetary value which will be payable to the beneficiary upon the insured's death.

"Insured" includes the person on whose life a life insurance policy/instrument is issued.

"Beneficiary" includes the person or entity for whose benefit the life insurance instrument is made and to whom the monetary sum is payable upon the death of the insured.

"Healthcare expenses" includes the costs for treating the Defined Catastrophic Illness during the defined time period.

"Defined time period" includes any fixed time period stipulated in the life insurance instrument.

"Annual payments" includes payments made to maintain the life insurance instrument. "Risk" includes a condition in which there is a possibility of an adverse deviation from the desired outcome that is expected or hoped for.

"Borne" includes taking on as one's own the risks of the insured.

This invention includes a life insurance instrument that combines life insurance with a catastrophic medical health benefit. Specifically, the life insurance instrument provides a monetary sum to a beneficiary nominated by the insured on the occurrence of death of the insured and a payment of healthcare expenses to one or more selected healthcare system(s) (hereinafter "the Healthcare System") for one or more defined catastrophic illness(es) (hereinafter "Defined Catastrophic Illness") during a defined time period. The selected Healthcare System agrees to a monetary sum for the treatment of said Defined Catastrophic Illness for the insured in exchange for annual payments during said defined time period.

Figure 1 provides a schematic diagram of the method for the life insurance instrument that combines life insurance with a catastrophic medical health benefit. An individual (policy holder) 5 obtains life insurance instrument 10 of this invention from a provider (i.e., insurance company) 15. The individual pays annual fees 16 in exchange for payment of a monetary sum (i.e. death benefits) 17 to the beneficiary on the occurrence of an insured event. If the person is diagnosed with a Defined Catastrophic Illness 29 and treated at a Healthcare System (MDACC) 25, the medical fees for such treatment 30 are paid by provider 15. The selected Healthcare System 25 receives a monetary sum 30 for the treatment of said Defined Catastrophic Illness for the insured in exchange for annual payments 35 during said defined time period. The individual's wealth, as represented by the death benefits 17, is not effected if the patient is diagnosed and treated by a Defined Catastrophic Illness. The risk for the costs of the treating the Defined Catastrophic Illness are borne by the provider 15 and the Healthcare System 25 and not the individual 5. Figure 2 is a block diagram of the components of the life insurance instrument of this invention. The life insurance instrument (Ltot) consists of a standard life insurance (Lins) policy 120 plus term insurance for the catastrophic health benefits (Leaf) 140. That is to say

Ltot = Lins + Lcat The risks, and therefore the cost, of the life insurance instrument 100 are derived from these two components. The price and risks of the standard life insurance 120 component can be calculated from dollar size of the policy and actuary data for the specific individual. The actuary data is available from several companies in the insurance industry. The price and risks of the catastrophic health benefits 140 component of the of the life insurance instrument 100 is based on actuary data of the specific individual getting the Defined Catastrophic Illness during the term of the policy and the total costs for treating the individual for said Defined Catastrophic Illness.

Risks Associated with Treatment Costs

In the past, defining the risks for the treating of a Defined Catastrophic Illness has been difficult. The total costs for treating an individual for a Defined Catastrophic Illness is typically open ended. If an individual is diagnosed with lung cancer and goes in for treatment, the costs of that treatment can range from tens of thousands of dollars to over a million dollars depending on the treatments used, complications, etc. That is to say, the treatment expenses are open-ended. For an insurance provider, the risk of providing reimbursement of treatment costs of such a Defined Catastrophic Illness has been intolerable.

For individuals, normal insurance may or may not cover the total costs of treating a Defined Catastrophic Illness. Furthermore, if the individual desires to be treated at a premier Healthcare System, or be treated with experimental therapies, the individuals insurance may not provide any coverage at all. In these cases, the approaches in the prior art to paying for treatment of a Defined Catastrophic Illness has been for the individual to "borrow" from his current life insurance policy to pay for treatment of the Defined Catastrophic Illness. However, if the amount the individual can "borrow" from his life insurance policy is inadequate; the individual is responsible for any outstanding expenses. That is to say, the individual bears the risk that the treatment will more expensive than the amount of money derived from the life insurance policy.

Problems with the prior art approaches include that the insured individual is still bearing the risk associated with the costs of treatment for the Defined Catastrophic Illness. As a result, the individual may be less inclined to be treated at the best facility or be treated at all. Since most individuals consider the proceeds from the life insurance part of their wealth they pass onto their beneficiaries, the prior art approaches to paying for a Defined Catastrophic Illness is less than ideal for preserving wealth.

In this invention, the provider and the Healthcare System bear the risk and not the individual. If an individual is diagnosed with a Defined Catastrophic Illness, the costs to treat the Defined Catastrophic Illness at a premier Healthcare System will be paid in full by the provider. As a result, the individual will not be dissuaded from seeking treatment at a premier Healthcare System because of concerns over costs or preserving wealth.

In this invention, the provider overcomes the risk associated with the open-ended treatment costs for a Defined Catastrophic Illness by having an agreement with the Healthcare System to provide treatment for a predetermined amount of dollars during a defined time period. For example, in one embodiment, the provider has an arrangement wherein the healthcare system agrees to treat an individual for cancer during a 15 year term for a guarantee payment of $500,000. If the patient is diagnosed with lung cancer during this term, the participating Healthcare System will cover all expenses for treating said patient. The Healthcare System receives a defined amount of money (e.g. up to $500,000) for the treatment from the individual. If the treatments are more expensive, then the Healthcare System covers the difference. In this embodiment of the invention, the Healthcare System receives only the benefit of a new potential paying patient in the future. That is to say, the Healthcare System receives no additional consideration for participating in the program.

In another embodiment of this invention, the provider has an arrangement wherein the Healthcare System receives the agreed upon total payment but said payment is divided into two parts. The first part is a guaranteed annual payment during the time period. The second part is a defined reimbursement amount for the total treatment of a Defined Catastrophic Illness. For example, the Healthcare System agrees to treat an individual for cancer during a 15 year term. Annually, the Healthcare System receives $10,000 from the provider for the individual in the program. In one scenario, after 10 years the individual is diagnosed with lung cancer. The participating Healthcare System treats the patient and covers all expenses for treating said patient (e.g. $500,000). The Healthcare System receives a defined amount of money (e.g. $400,000) from the provider for the treatment of the specific patient. In this scenario, the Healthcare System breaks even. However, if the individual never gets cancer, or gets cancer but elects to go to another facility, then the Healthcare System receives a total of $150,000 over the 15 year time period. The annual payments and the total treatment payment for the Defined

Catastrophic Illness are agreed upon by the provider and Healthcare System. The annual payments versus the total treatment payment can be agreed upon using a number of different financial methods. One approach is to use a modified real option approach where the Healthcare System is selling a "put" and the provider is buying a "call" on an option for the treatment of an individual. In this scenario, the costs of the put are spread over the term of Defined Catastrophic Illness coverage.

Process

This invention includes a life insurance instrument providing a monetary sum to the insured or a beneficiary on the occurrence of death of the insured and a payment of healthcare expenses to one or more selected Healthcare System for Defined Catastrophic Illness during a defined time period. The selected Healthcare System agrees to a monetary sum for the treatment of said Defined Catastrophic Illness for the insured in exchange for annual payments during said defined time period.

Figure 3 depicts a block diagram of an overview of the process of obtaining the life insurance instrument of this invention. An individual 210 is interest in life insurance and is concerned about losing his accumulated wealth due to payment for treatment of a Defined Catastrophic Illness. This individual learns about the life insurance instrument through his insurance agent. Likewise, the individual can be made aware of this life insurance instrument from his physician who directs him to a life insurance agent.

After the individual has expressed interest in obtaining the life insurance instrument, the provider 220 arranges for the patient to be examined by a physician to determine the individual's qualifications for this program. In one scenario, the physician is known to the Healthcare System and has a contractual relationship with the Healthcare System to perform the examination of the individual.

A full history and physical 230 is performed as well as tests that would provide insight into the risks of the individual having the Defined Catastrophic Illness during a defined time period. If the individual does not qualify for medical reasons, then the process is stopped. If the person does meet the qualifications for the life insurance instrument, then the provider performs an actuarial review 260 to assess the life insurance risks for the individual. In parallel, the provider will request from the healthcare system bid on the total costs for the treatment of a Defined Catastrophic Illness for the specific individual 250. The Healthcare System will review the actuarial tables as well as its historic costs for the treatment of all catastrophic illnesses under consideration for this individual during the time period.

The provider and Healthcare System then negotiate the potential two components for payment - annual payments and total payment for treatment 270. In one scenario, a Healthcare System may elect to have all its payments in the form of a guarantee annual payment (i.e., pure capitation). In another scenario, a Healthcare System may elect to have little if any annual payments with the reimbursement for the treatment of the Defined Catastrophic Illness having a larger payment from the provider. The amounts of the annual payments versus the total treatment payment can be agreed upon by the provider and the Healthcare System using a number of different financial methods. One approach is to use a modified real option approach where the Healthcare System is selling a "put" and the provider is buying a "call" on an option for the treatment of an individual. In this scenario, the costs of the put are spread over the term of Defined Catastrophic Illness coverage.

After the costs of the Defined Catastrophic Illness treatment has been agreed upon, the provider can calculate the cost of the life insurance instrument policy for the individual 280. The annual costs for the policy will be made up various components including: costs of the life insurance, costs of the Defined Catastrophic Illness coverage, commissions, fees, and other.

One the costs of policy have been calculated, the provider can then offer the life insurance instrument to the individual 300.

In another embodiment, the life insurance instrument may take the form of a return-of-premium term insurance. With such an instrument, all or a portion of the premiums is returned without interest if there is no occurrence of a Defined Catastrophic Illness during the defined time period.

Notwithstanding that the numerical ranges and parameters setting forth the broad scope of the invention are approximations, the numerical values set forth in the specific examples are reported as precisely as possible. Any numerical value, however, inherently contain certain errors necessarily resulting from the standard deviation found in their respective testing measurements. Therefore, the present invention is well adapted to attain the ends and advantages mentioned as well as those that are inherent therein. While numerous changes may be made by those skilled in the art, such changes are encompassed within the spirit of this invention as illustrated, in part, by the appended claims.

Claims

CLAIMSI claim

1. A life insurance instrument comprising a monetary sum to the insured or a beneficiary on the occurrence of death of the insured; and a payment of healthcare expenses to one or more selected healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein the one or more selected healthcare system(s) will provide healthcare services for a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period.

2. A life insurance instrument comprising a monetary sum to the insured or a beneficiary on the occurrence of death of the insured; and a payment of healthcare expenses to one or more selected healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein most of the risk is borne by the provider and/or one or more healthcare system(s) and not the insured.

3. A method for a healthcare system to increase the number of potential future paying patients comprising providing a life insurance instrument to an insured by determining a monetary sum to be paid to a beneficiary nominated by an insured on the occurrence of death of the insured; and determining a payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein said life insurance instrument is provided directly through an insurance provider or indirectly with the healthcare system working with said insurance provider; and wherein said healthcare system agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period.

4. A method for an insurance provider to provide a life insurance instrument product comprising providing a life insurance instrument to an insured by determining a monetary sum to be paid to a beneficiary nominated by the insured on the occurrence of death of the insured; and determining the payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein said life insurance instrument is provided directly through an insurance provider or indirectly with the healthcare system working with said insurance provider; and wherein said healthcare system agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period.

5. A method for an insurance provider to provide a life insurance instrument product comprising providing a life insurance instrument to an insured by determining a monetary sum to be paid to a beneficiary nominated by the insured on the occurrence of death of the insured; and determining a payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein the risks associated with providing the monetary sum to the a beneficiary nominated by the insured on the occurrence of death of the insured is defined using standard actuarial approaches; and wherein the risks associated with providing payment of healthcare expenses to said healthcare system for said one or more defined catastrophic illness(es) during said time period time period are defined by an agreement with said healthcare system by establishing a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments to said healthcare system during said defined time period.

6. A method for one or more healthcare system(s) to provide healthcare to an insured comprising paying for healthcare expenses of an insured for one or more defined catastrophic illness(es) during a defined time period; wherein the healthcare system(s) agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period; and wherein most of the risks associated with providing payment for healthcare expenses to said healthcare system(s) for said one or more defined catastrophic illness(es) during said time period time period are borne by said healthcare system(s) and defined by an agreement with said healthcare system by establishing a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments to said healthcare system during said defined time period.

7. A method for an insured to preserve his wealth from the costs of treatment of one or more defined catastrophic illness(es) at one or more healthcare system(s) during a set time period consisting of paying for a policy on a life insurance instrument comprising obtaining a life insurance instrument that determines a monetary sum to be paid to a beneficiary nominated by the insured on the occurrence of death of the insured; and determining a payment of healthcare expenses to one or more healthcare system(s) for one or more defined catastrophic illness(es) during a defined time period; wherein said healthcare system(s) agrees to a monetary sum for the treatment of said one or more defined catastrophic illness(es) for the insured in exchange for annual payments during said defined time period.