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 serviceproviders and insurers (as surveyed in the Report of the Commissioner of the Capital Marketfor 1998).

National health insurance furnishes the basic layer of health insurance, a “basket” of servicesdelivered by health funds under the State Health Insurance Law.

Health funds broaden the basic package of services and offer additional layers of service, suchas transplants at high cost and choice of surgeon.

Insurance companies expand the basic package of services, offer additional layers, and providea level of service that the basic package omits—exclusively private health services such as long-term care.

The basic layer—the health services included in the “basket” is delivered by health funds inaccordance with the State Health Insurance Law on the basis of medical discretion, at areasonable level of quality, within a reasonable period of time, and at a reasonable distancefrom the insured’s place of residence.

Any citizen who wishes to obtain extra services, such as personal choice of surgeon, greateravailability and convenience of service, and full coverage of expenses for treatments in Israeland abroad, has to purchase them separately by buying supplemental insurance—a layer on topof the “basket” that health funds and insurance companies offer at an extra charge.

Supplemental health services by health funds—the funds’ supplemental programs include avariety of coverages that are limited in extent and in benefit levels. Most services of these kindspertain to elective types of care and are implemented by service providers that have agreementswith 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 c0mpanies—this activity is regulated by theRegulation of Insurance Transactions Law, 1981, which stresses the insurers’ obligation to meetfuture commitments to insureds, and by the Insurance Contract Law, which regulates relationsbetween insurers and insureds. A characteristic feature of private health insurance is the need forunderwriting, in which the insurance company examines risky characteristics of the potential

12 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, thepolicy may become more expensive for a specific insured; it may also include restrictions ofcoverage. Importantly, when the affidavit is filled out, the applicant must apply appropriatedisclosure. Failure to do so may result in severely impaired insurance coverage when it is mostneeded.

Notably, insurance companies’ private health-insurance plans in Israel usually provide secondand/or third layers of coverage, i.e., are supplemental to the national health insurance that allcitizens 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 difficult.

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 insuredwhen he/she signs the contract.

Policies are usually sold in the form of packages of various types of coverage that are notalways fully adjusted to the customer’s needs.

Policies include different kinds of insurance benefits (compensation or indemnification); thedifferences have implications for the nature of benefits and the possibility of setting one offagainst the other.

Types of Private Health-Insurance Products

Private health insurance covers various kinds of insurance events, chiefly:

O private surgery in Israel and/or abroad—choice of surgeon, expenses for surgery, pre-operativeconsultation, 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 CapitalMarket for 1999.)

Additional 7}/pes of Health Insurance

1. Ambulatory—medical services given without hospitalization, such as consultations with aspecialist, physiotherapy, radiotherapy, and chemotherapy.

2. Altemative medicine.

3. Miscellaneous tests—periodical check-ups, pregnancy tests, pediatric examinations, imaging,etc.

4. Second opinion—consultation with an additional physician before surgery, including an expertabroad.

5. Medication—expenses for medications that are not covered by national health insurance.

6. Dental insurance—coverage that pays for dental care (which is totally excluded from nationalhealth insurance), usually sold in the form of freely standing policies and marketed on agroup 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 find these points useful whenthey 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. Define your needs.b. Examine the types of coverage available.c. Examine the costs.d. Compare the plans and buy the insurance.

Phase A*Define Your Needs

The first step in buying private health insurance is to define the needs that the insurance issupposed to meet. Many insurance plans cover general health services such as private surgery ortransplants but do not always cover specific needs such as surgery abroad, medications, oralternative medicine. Below are several main points that may help you define your specificinsurance needs:

13 An individual policy is one purchased by the insured for him/herself and/or for his/her family. The process ofissuing the policy includes medical undervvriting in which the insured fills out a health statement. {} A grouppolicy is one taken out for a group of insureds, such as members of a labor union, by a policyholder who isnot necessarily an insured.

0 What health insurance do you and your family already have, either through health funds orin 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 define your needs, determine which plan meets them best. You should examine twoor three different plans and compare them with the real needs that you have identified. Makesure that you understand the coverage and that it is spelled out in the policy. It is alsoimportant to determine what events the policy covers and what restrictions apply to thecoverage.

You may find the following points usefill in examining a policy:

Coverage: a list of the main types of coverage in the policy and expansions offered on top ofthe basic policy.

Duration of insurance term: is the insurance term measured in terms of a number of years oruntil the insured reaches a certain age? In most health policies, the insurance term is for lifeand the insurer may cancel the policy only if you fail to pay the premiums.

Qualification period: the amount of time at the beginning of the insurance term, expressed indays or months—ninety days in most cases%uflng which the insured is not covered for variousevents.

Waiting period: the period of time, expressed in days or months—ninety days in most cases-during which the insured must wait, after an insurance event, for eligibility for benefits underthe various types of coverage.

Deductible: an itemization of deductibles for different types of coverage and, possibly, adeductible limit.

Change of policy terms during the insurance term: the time from which the plan may bemodified, as well as the conditions for such modification.

Type of insurance proceeds: “compensation,” a predetermined sum for which the insured neednot present receipts, or “indemnification,” meaning coverage of actual outlays for a medicalprocedure, against receipts. Notably, in the case of indemnification, benefits are given only up toactual expenditure even if the insured owns two similar policies.

Joining the plan: an underwriting procedure that the insurer stipulates, such as filling out ahealth statement and waiving medical confidentiality.

Price

Level of premiums: separate and detailed presentation of the price of the basic policy and itsriders.

Structure of premiums: Is the premium constant or does it change as you grow older? In thelatter case, find out how and by how much the premium will change in each age bracketduring 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 entirepremium scale; therefore, a change affects the cost of the policy in cumulative terms and notonly in response to change in the insured’s age.

Terms of policy cancellation by insured: a breakdown of the premium refund in the event ofcancellation by the insured, and the proportion of the total premium paid that will be creditedto the insured.

Restrictions

Terms of policy cancellation by insurer: a detailed presentation of the conditions under whichthe insurer is entitled to cancel the policy.

Exclusion due to pre-existing medical condition: most policies have a condition that absolvesthe insurance company from liability for a pre-existing medical condition, such as illness orinitial development of an illness that existed before the insurance went into effect or wasdiscovered during the qualification period. The consumer should study the definition of a pre-existing medical condition for which the policy will withhold coverage and pay attention to thedetails of coverage that will be excluded for this reason. Is the “pre-existing medical condition”exclusion time-limited?

Restrictions to insurer’s liability: refer to the clauses in the policy that pertain to restrictionsand 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 someonein your household have a caregiving relationship, included in an agreement with the insurer insuch 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 basiccomponent of commercial health insurance and is offered by most insurance companies thatsell health insurance. This is actually the most sought-after form of coverage; it entitles theinsured 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 surgery—relatively broad coverage.

Coverage for all surgery to insureds who carry supplemental insurance from theirhealth funds—coverage that makes up the difference between total actual expenses and thosecovered by additional health providers.

Coverage for all surgery, with a deductibl%a relatively low premium.

Coverage for a selected list of operations—coverage for major operations.

Rider concerning coverage of surgery abroad

In a policy that covers medical expenses in the course of private surgery, several additionalmatters 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 claimagainst the policy?

Is the funding of coverage conditioned or dependent on entitlements of the insured under theState Health Insurance Law?

Policies that cover transplants and special treatments abroad:

Insurance that covers transplants and special treatments abroad attempts to respond to themost severe insurance event, one that occurs infrequently but carries exorbitant costs that canrun into hundreds of thousands of sheqalim if not more. Must such policies provide benefitsin the form of indemnification and entitle the insured to funding of medical procedures orreimbursement of expenses. Notably, major medical policies offer the option of nonrecurrentcompensation when a transplant is performed.

Notably, too, the insurance event is deemed to have occurred upon the diagnosis of themedical condition due to which the insured needs a transplant and/or special treatment thatcannot be offered in Israel.

In policies that cover expenses for transplants and/or special treatments abroad, the followingpoints in addition to those mentioned above should be examined:

a. Which transplants does the policy cover?

b. Is there a post—operative convalescent benefit?

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 underthe State Health Insurance Law and/or a health fund’s supplemental health services?

0 Long-term care policies

Insurance against the need for long-term care is meant to provide financial support for aperson who cannot carry out Activities of Daily Living (ADL) and needs continual care—aneed most common among the elderly. These are long-term policies, in which the payout ofproceeds ranges from three years to time-unlimited.

One who considers buying long-term care insurance should look into the following additionalpoints:

a. Types of coverage

Does the policy pay benefits for life?

How is the insurance event defined?

How many ADLs does it take to define the insurance event? In most cases, thequalifying situation is the inability to perfonn three or four ADLs.

Are mental frailty and Alzheimer’s included in the definition of the insurance event?

What is the level of the monthly benefit?

Can the monthly benefit be enlarged?

Is the insured excused from paying premiums while receiving monthly benefits?

How long can benefits be paid? Possible periods are three years, five years, andunlimited. 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-termcare insurance event. The activities are standing up and lying down, dressing and undressing, bathing, eating anddrinking, walking, and continence.

Does the level of insurance benefits depend on the insured’s age?

Are the insurance benefits given in the form of indemnification (against actualexpenses) or of compensation?

Does the policy cover nursing care in the insured’s home?

Are the premiums for at-home care different from those upon admission to a nursinginstitution

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 adeclared change in premium that is adjusted to the age of each insured), and underWhat conditions?

Detailed presentation of the premium scale up to age 95. The consumer shouldconsider whether the monthly premium at old age (such as 80+) is consistent with thefinancial 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 insuredages?

Does the policy have a nonforfeiture benefit, i.e., an entitlement to partial benefits evenif the insurance is terminated?

What rights does the insured have in the event of an increase in premiums? Accordingto some policies, if the premium scale is raised the insured may pay the old price forreduced benefits and/or become eligible for a nonforfeiture benefit.

Phase C—Examine the Costs

Once you have defined your needs, examine the costs of the coverage that you want. Mostindividual policies in health insurance are long-term plans, and their premiums are also spreadover a lengthy period—often an entire lifetime. It is recommended to examine the cost of thepolicy in consideration of your family’s sources of income. Below are several basic points toconsider in examining the total cost of health insurance:

Deductible—the level of the deductible is an indicator of your ability to affect the price of theplan, on the one hand, and the total cost of the insurance and the medical services, on theother hand. The deductible may be reflected several distinct ways: the total sum up to whichthe insurer does not participate in the cost of medical care, a percentage of the cost of care (asin the case of surgery), and a lump sum that is deducted from the price of the service orproduct (as in the case of medicines).

Discounts — it is sometimes possible to get a discount on a policy or a policy that offerssimilar coverage at a lower price. For example, there is a policy for Jerusalem residents thatrefers patients to Jerusalem hospitals only. Consult an agent or an insurer to find out aboutsuch benefits.

Another point to examine is the limitation of the insurer’s liability or the maximum amount ofcoverage. Many policies limit the insurer’s liability for various medical treatments, either infinancial terms or in terms of a given number of treatments. The consumer has to determine inwhich form of coverage the proposed limit will suffice for comprehensive medical care in mostcases, and in what cases the limit will place substantive limits on the availability of the medicaltreatment that is sought.

In many cases, various expansions and riders are offered in addition to the basic policy. Herethe consumer should ask whether these expansions meet his/her insurance needs and shouldexamine their effect on the cost-benefit relationship of the plan. In any case, the consumershould find out which components of the policy are voluntary and which belong to the “basicpackage.”

Phase D—C0mpare 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 severalsources. You may contact an insurance agent who sells products of one company or severalcompanies and ask him/her to review the plan, give advice, answer questions, and help out inthe event of a claim. Another source of information is the insurance company. A thirdpossibility is by contacting friends and acquaintances who have private health insurance; theymay give you an impression of the terms of the plan, prices, restrictions, and quality of servicethat they have received from their insurance agent or company.

The wide variety of policies available and the many differences among them make it necessaryto 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, sincepolicies in this field may vary widely from one company to the next. It is best to comparetypes of coverage, exclusions and restrictions, waiting and qualification periods, correspondencein matters of service, extra benefits, and price, to make sure that the total package is tailored toyour needs and to your financial resources.

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

A few final 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 inHebrew only).

Before you buy a policy, you are entitled to view it and to examine its details. Do not rush tobuy 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 filing a claim—theforms you will need to fill out and/or submit, the address, and cases in which the insurer’sprior approval is needed.

In addition to the basic policy, you may usually expand the coverage by paying an extrapremium. It is recommended that you ask how necessary these expansions are, in a mannersimilar to your examination of the basic plan.

Appendix 4.3

Shopping for Health Insurance: Comparison of Plans

Plan A Plan B Basic packagelsupplementalhealth service

Name of insurance planName of company and addressfor inquiriesName of agent and addressfor inquiriesIs coverage conditioned or dependenton entitlements of the insured underthe State Health Insurance Law and/ora health fund’s supplementalhealth services?Are all types of surgery covered or onlythose on a list?What operations/ illnesses does theplan include?Can surgery be performed abroad?Which transplants does the plan include?Does the policy include ambulatoryservices?Does the policy cover are medicationsthat are not on the basic list?Does your doctor have an agreementwith the plan?What procedure is used to contact aspecialist?Are your specific medical needs covered?What medical conditions are not covered?How is a pre-existing medical conditionexcluded?What premium is charged for the basicplan?What premium is charged for Rider A?What premium is charged for Rider B?Rates of deductible, by types of coverageLimits of insurer’s liability

Appendix 4.4

Shopping for Long-Term (Nursing) Care Insurance:

Comparison of Plans

Plan A Plan B

How many Activities of Daily Living areused to define the insurance event?Are mental frailty and Alzheimer’s includedin the definition of an insurance event?Level of monthly benefitFor how long are benefits paid?Correspondence between insurancebenefits and insured’s ageIs the benefit given in the form ofindem-nification or of compensation?Is at-home nursing care covered?Does the policy have a nonforfeiture benefit?Detailed presentation of premium scalein all age brackets