Assignment 2 -

Question 1

gross premium =

Answer 1

is the pure premium divided by 1 minus the loading percentage.

Pure Premium / (1 - loading percentage)

Question 2

all costs, other than losses and loss adjustment expenses, are included in this

Answer 2

the loading percentage.

Question 3

What are two major factors that determine the size of the loading percentage?

Answer 3

• group and nongroup markets
• loading fee

Question 4

Coverage that may have been provided as part of a particular plan but is now provided separately. often done with Prescription drug and mental health benefits

Answer 4

carve-out coverage.

Question 5

dispersion (which is often measured by standard deviation, variance or range) in losses related to some measure of expected losses and the number of covered lives.

Answer 5

Objective risk

Question 6

purpose of _____ is to establish a number of risk pools or risk classes with each pool having expected losses significantly different from the others, a small dispersion of possible outcomes and a large number of covered lives.

Answer 6

underwriting

Question 7

rating system in which all individuals and/or groups are placed in a single risk pool.

Answer 7

community rating

Question 8

a system in which insurers place insureds in groups according to their loss- producing characteristics.

Answer 8

Manual rating

Question 9

Experience rating has two generic forms:

Answer 9

prospective and retrospective experience rating.

Question 10

involves the use of an employer’s previous data to develop a rate for the future.

Answer 10

Prospective rating

Question 11

examines an employer’s experience to determine a premium for the same employer but, in this case, current experience is used to calculate the current premium.

Answer 11

Retrospective rating

Question 12

refers to the extent to which an insurer can rely upon the loss data of an employer when using experience rating. The loss data of a small employer for only a short period of time is not as reliable as the data from a larger employer over a long period of time.

Answer 12

Credibility

Question 13

used when an employer wants to have a self-insured plan and bear the underwriting risk itself but wants to transfer the burden of administrative services to an insurer or a third-party administrator (TPA).

Answer 13

ASO contrct

Question 14

The percentage of workers in partially or completely self-insured health plans is approximately ____.

Answer 14

60%

Question 15

uses the HMO’s entire pool of utilization experience and applies specific characteristics of a firm to weight these data to better reflect the characteristics of the employer’s workforce

Answer 15

Adjusted community rating

Question 16

Federally qualified HMOs are allowed to use only (2, rating types)

Answer 16

• adjusted community rating or
• community rating by class if they do not use community rating.

Question 17

The ACA requires premiums for the oldest insured to be no more than ___ times that of the youngest insured

Answer 17

three