Insurance World

In today’s health insurance marketplace, three primary types of healthcare coverage are available. They are the Indemnity plan, the Preferred Provider Organization (PPO), and the Health Maintenance Organization (HMO). Each approach offers consumers the opportunity to choose between flexibility and control in their healthcare choices vs. the expense of their healthcare coverage. Almost universally, healthcare plans that offer more consumer flexibility and control are also more expensive, while plans allowing the insurance company to control healthcare delivery choices are usually more affordable. Let’s look at each of these plans.

The Indemnity plan approach represents healthcare as it was offered in the days before managed care. In an Indemnity plan, the policyholder is free to go to any doctor, specialist, hospital or laboratory to pursue the medical care they believe they need. These healthcare services are billed to the insurance company at the individual rate set by the healthcare provider. The insurance company pays a fixed proportion of the fees (usually 80%) and the consumer pays the remaining percentage (usually 20%) of the billed medical fees. Each healthcare provider is free to set their fees at a level they choose, and the consumer has little incentive to consider overall medical expenses. While Indemnity plans are still available today, they are not widely utilized since they are too expensive for the average consumer. The monthly premium for an Indemnity plan is generally 50% to 100% higher than premium for a PPO or HMO plan.

On the opposite end of the spectrum, Health Maintenance Organizations or HMOs were introduced by insurance companies as a way to combat the rising costs of healthcare being experienced by employers providing health benefits to their employees. In an HMO, the policyholder selects or is assigned to a Primary Care Provider (PCP) such as a family practitioner, internist or pediatrician. The PCP is responsible for coordinating all healthcare services delivered to the policyholder (except for emergency care). The policyholder can only see a specialist, use a lab service or check into a hospital if they are referred for such services by the PCP. Any services that are not referred by the consumer’s PCP are not reimbursable under the health insurance policy. Within the HMO network, healthcare providers agree with the insurance company on negotiated rates for specific services. Once approved, these healthcare providers become part of the network available to the PCP for referring patients when additional care is required. Based on the insurance company’s strict control of the healthcare providers used and the rates they will charge, an HMO is usually the least expensive alternative for a healthcare plan.

In the middle between the wide-open Indemnity plan and the strictly-controlled HMO, insurance companies also offer a third alternative called a Preferred Provider Organization or PPO. In a PPO plan, a policyholder is free to go to almost any healthcare provider they choose, including doctors, specialists, labs and hospitals, and usually without a medical referral. However, the amount reimbursed by the insurance company for the delivered medical services will vary depending on whether the healthcare provider is within their negotiated network or not. As with an HMO, the insurance company negotiates fees in advance with selected healthcare providers and approves them for inclusion in the plan’s preferred provider network. Healthcare services delivered by these in-network providers are generally reimbursed to the consumer at high rates of 70% or more. On the other hand, when the consumer uses a non-network healthcare provider, the reimbursement will be much lower, ranging from 0% to 50% of the incurred medical expenses. Since the vast majority of PPO policyholders use in-network providers to reduce their out-of-pocket expenses, PPOs are very cost-effective for insurance companies. As a result, PPOs are somewhat more expensive than HMOs, but are still very reasonably priced for the average person.

SCOTTSDALE, Ariz.–(BUSINESS WIRE)–May 23, 2006–The Automotive Dealership Institute (ADI) and The Asian Banker have agreed to a wide-ranging marketing partnership that allows the Singapore-based research and intelligence company to represent ADI’s automotive and banking-related courses and other products in development across Asia, it was announced by ADI CEO/Executive Director Alan Algan and Emmanuel Daniel, The Asian Banker’s president and editor-in-chief.

The first joint project will be a two-day workshop titled, “Building a Successful End-to-End Automobile Financing Business: Profiting from the Value Chain of the Auto Financing Business,” scheduled for Aug. 7-8 at the Sheraton Imperial Hotel in Kuala Lumpur, Malaysia.

The Asian Banker, which is regarded as the most authoritative intelligence provider on emerging best practices and benchmarks to commercial banks to all countries in the Asia Pacific region, has offices in Singapore, Kuala Lumpur, Hong Kong, Shanghai and Beijing, China.

The workshop is designed for vice presidents, directors, senior managers and consultants involved in the automobile and auto financing industries, and will provide a comprehensive practical toolkit for developing a coherent and profitable strategy evolving with the marketplace. ADI executives making the journey from Arizona to Malaysia will be Algan, President/Director of Corporate Affairs Keith Tuber and Professor Jack Ferry.

As part of the agreement, the companies will also exchange links to their popular Web sites.

“We chose the Automotive Dealership Institute because we could see that they provide world-class automotive management programs that could help any bank in Asia,” said Daniel. “As the automobile ownership business is booming in many parts of Asia, we searched for an appropriate partner to bring world-class skills to this marketplace.”

Looking at the Asian market for the automobile financing business, ICICI’s business soared 56 percent last year, while AmBank, Malaysia’s largest car financier, experienced growth of 16.5 percent. Growth is also booming in other Asian countries such as Indonesia, Pakistan, the Philippines and Thailand. But with high spreads, ranging from 4 percent in China on average, to 10 percent and above in India and Indonesia, the auto lending business attracts banks and other financial institutions like bees to honey.

“We evaluated a number of other schools, in the United States and elsewhere, but none possessed the credibility and the hands-on expertise that ADI demonstrated,” said Daniel. “The key elements of their curriculum are immediately transportable to this region, their faculty’s resumes are comprised of people who are experts in their own right, and their alliances with other industry leaders in the United States and abroad immediately plugs us into a very sophisticated network of resources. We are looking forward to a long, fruitful relationship.”

The Asian Banker is dedicated to providing incisive and up-to-date information and analysis on strategic developments in the financial services industry. The company, founded in 1996, publishes the Asian Banker Journal, the leading commentator on developments in the Asia Pacific region’s financial services industry.

“We are pleased that The Asian Banker has selected us to be its American partner,” said Algan. “We take pride in providing a world-class automotive education, and our association with such powerhouse industry leaders as Northwood University, the Association of Finance and Insurance Professionals (AFIP) and the Institute for Ethical Behavior says much about our commitment to excellence.”

The two-day workshop is expected to attract scores of top level banking leaders from Malaysia, Thailand, Singapore, India, Indonesia, Hong Kong, Taiwan, the Philippines and other Asian countries interested in the American perspective on automotive lending. Local case studies will complement the broader American viewpoint, providing delegates with useful information they can take back to their institutions.

“The potential of the Asian market is enormous,” said Tuber. “Modern technology has made the world a much smaller place, and the opportunity to share our knowledge and experience with the world, and to learn from other business cultures in the process, is most gratifying. We are in the process of working with The Asian Banker to develop additional programs that specifically address their needs, and we are nearing completion on other projects of our own for the American automotive market that we believe will receive overwhelming acceptance in Asia and Europe. While this is an exciting time for us, a period of great growth and satisfaction, we remain committed to our core business — providing the best automotive education available anywhere in the world.”

This year alone, the Automotive Dealership Institute has formed alliances that call for Web site link exchanges, among other projects, with the Arizona Automobile Dealers Association; Dealership for Life; Idealergroup, LLC; the Institute for Ethical Behavior; Northwood University; and the Association of Finance and Insurance Professionals (AFIP).

Ferry, who will participate as workshop leader, served in senior executive positions with Ford Motor Credit and Americredit Corp., and also worked in top management positions, including finance director and special finance director, at three major dealership groups in Arizona and Indiana. A former vice president of the Financial Management Association, Ferry has won numerous awards, including the Financial Management Association’s Outstanding Member of Finance.

“This is an incredible opportunity for ADI,” said Ferry, who earned degrees in Business Administration and Finance from California State University, Fullerton. “We already get a number of students from around the country, including such diverse states as Washington, Illinois and Alabama, as well as from our own back yard, the greater Phoenix area, Nevada and California. The prospect of teaching professionals in Asia and other regions of the world, and potentially having them come to our Southwest headquarters, is truly exhilarating.”

The Asian Banker is regarded as the most authoritative intelligence provider to regulators, banks and related financial services players in the Asia Pacific region. Despite its name, the company monitors developments globally and contextualizes global benchmarks and best practices for the Asian marketplace. Its products and services can be grouped into three main business lines: The Asian Banker Publications, which include the flagship Asian Banker Journal and various e-newsletters; Asian Banker Research, which provides proprietary, generic and subscription-based research services that cover focused operational areas of the financial services industry; and the Asian Banker Forums, which include the Asian Banker Summit, the region’s foremost gathering of decision makers in the financial services industry, as well as focused roundtables for specialists to meet and consider the state of their respective areas. For more information, visit www.theasianbanker.com.

The Automotive Dealership Institute is a Scottsdale, Ariz.-based automotive management school that specializes in educating the next generation of finance and insurance managers and service advisors. ADI is licensed by the State of Arizona Board for Private Postsecondary Education and approved by the Arizona Department of Education. For more information call 877-998-7200 or visit www.autodealerinstitute.com.