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Group and Health Core > Core - past questions > Flashcards

Core - past questions Flashcards

1
Q

What do the different parts of Medicare cover?

A

Part A

  • IP hospital and facility
  • skilled nursing facility
  • home health care
  • hospice

Part B

  1. OP hospital including ER
  2. Medical care by qualified health practitioners including diagnostic tests, supplies, and equipment
  3. One-time initial wellness physical within 6 months of enrolling in Part B
  4. Ambulance
  5. Clinical laboratory and radiology
  6. Physical and occupational therapy
  7. Speech pathology
  8. OP rehab
  9. Radiation therapy
  10. Transplants
  11. Dialysis
  12. HHC beyond that covered by Part A
  13. Drugs and biologicals that cannot be self-administered
  14. Certain preventive services such as an annual flu shot and cancer screenings

Part C

  • Medical Advantage
  • supplemental care to parts A and B

Part D
-pharmacy drugs

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2
Q

COB methods

A

standard COB = min (C x %, C-M)
exclusion = (C - M) x %
carveout = (C x %) - M

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3
Q

Reasons for experience rating

A
  1. groups want experience rating because many believe they can get better rates this way
  2. avoid anti-selection by charging more for groups who have poor experience
  3. offer more competitive rates to attract low risk groups
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4
Q

Factors to adjust manual rates

A
  1. age
  2. gender
  3. geographic area
  4. industry and occupation
  5. group size
  6. average earnings per employee
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5
Q

Theoretical considerations for credibility

A

hint: fox says cah-sha-ee!

  1. coverages with low claim frequency are more volatile and will require a larger exposure base to be credible
  2. coverages with widely varying claim sizes will tend to be more volatile
  3. the statistical confidence interval chosen by the insurer
  4. historically, statistical fluctuation was considered to vary inversely with the square root of the number of claims or lives. so it will take 4 times the exposure to vary the credibility
  5. for coverages with stochastically independent claims, longer experience periods can be used to increase exposure and therefore credibility
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6
Q

Practical considerations for credibility

A
  1. competitive pressures to keep rates low
  2. corporate strategy
  3. administrative capacity
    - trade-off between quality and quantity of business
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7
Q

STD base rate =

A

STD base rate = I x D / 12

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8
Q

monthly premium for STD =

A

monthly premium = I x (D x weekly benefit) / 12

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9
Q

services covered by LTC

A

hint: not all hairy horses run marathons ‘cause being cute doesn’t count

  1. nursing home care - care provided in a facility that provides skilled, intermediate, or custodial care, and is either Medicare-approved or state-licensed to provide this care
  2. assisted living facility care
  3. home and community-based care - LTC services provided in the person’s home or in a community-based facility
  4. hospice care - care provided through a facility or program designed to serve the terminally ill
  5. respite care - formal, paid care provided to relive an informal care provider
  6. home modifications and equipment - services that allow an individual to remain at home, rather than have to be institutionalized
  7. Care management services - services provided to develop a plan of care, identify providers, and coordinate care
  8. bed reservation benefit - continues to reimburse the insured for institutional care even if he or she needs to temporarily transfer to an acute care facility due to a medical condition
  9. caregiver training - provides training and education to help informal caregivers obtain state license as a home health care provider
  10. death benefit - typically pays a percentage of all premiums paid minus any benefits paid
  11. cash alternative benefit - some plans give the option of receiving claim payments from home and community-based care as a cash benefit, rather than as a reimbursement benefit
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10
Q

Benefit triggers

A
  1. bathing
  2. continence - the ability to maintain control of bowel and bladder function or ability to perform associated personal hygiene
  3. dressing
  4. eating
  5. toileting - getting to and from toilet, getting on and off toilet
  6. transferring

a cognitive impairment that requires substantial supervision to protect the health and safety of the insured

a. wandering and getting lost
b. combativeness
c. inability to dress appropriately for the weather
d. poor judgement in emergency situations

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11
Q

Effects of HIPAA on LTC plans

A

hint: QTTR (quitter)

  1. defined qualified plans
  2. clarified taxation of premium and benefits - established that a qualified LTC insurance contract shall be treated as an accident and health insurance contract for tax purposes
  3. standardized benefit triggers
  4. allowed tax reserves to be calculated on a one-year preliminary term basis for tax-qualified plans
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12
Q

Major effects of the year 2000 changes in the NAIC LTC Model Act

A

hint: dam bers
1. requires DISCLOSURE of rating practices at the time of application e.g. including a statement that the policy may be subject to future rate increases
2. requires an ACTUARIAL CERTIFICATION at the time of initial rating - must include a statement that the initial rates are sufficient to cover anticipated costs under moderately adverse experience
3. eliminates MINIMUM LOSS RATIO requirements in the initial rate filing
4. places limits on EXPENSE ALLOWANCES in the event of a rare increase - if a rate increase is requested, the lifetime loss ratio must not be less than a weighted average of 58% of the initial premium and 85% of the premium increase
5. Requires REIMBURSEMENT of unnecessary rate increases - this could result if the revised premium schedules are more than double the initial rates
6. for policies in a rate SPIRAL, guarantees policyholders the right to switch to currently-sold insurance without underwriting
7. authorizes the commissioner to BAN companies for 5 years if they persist in filing inadequate initial problems

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13
Q

Assumptions needed for a LTC pricing model

A

hint: clam, prom, gem, is
1. voluntary lapses - lapse rates are much lower than for other types of health insurance. premiums are very sensitive to changes in lapse assumptions
2. mortality - most companies use the 1994 GAM table
3. morbidity
a. marital status
b. gender
c. benefit trigger
d. area
e. case management
4. selection factors
5. expenses - start-up expenses are high relative to other types of business
6. interest - the investment rate on assets is a key assumption because of the large amount of reserves
7. reserve basis - important considerations include the level of margins and how these margins are achieved
8. other assumptions - including the average daily benefit and premium mode
9. profit - typically based on lifetime goals for pre-tax profits, post-tax profits, return on investments, or return on equity

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14
Q

Characteristics of an effective Medicaid Managed Healthcare plan

A

hint: chaos nudic coc

  1. comprehensive NETWORK of providers who are responsive to Medicaid consumers
  2. effective UTILIZATION programs
  3. targeted and effective DISEASE MANAGEMENT programs
  4. INNOVATION with providers as it relates to use of electronic medical records and pay for performance
  5. COMPASSION
  6. targeted and effective CASE MANAGEMENT programs for pregnancies, neonatal services, chronic illnesses, and childhood illnesses such as asthma
  7. excellent and effective CALL CENTER support
  8. effective OUTREACH that is both culturally and linguistically sensitive and addresses health literacy
  9. coordination of any service that may be CARVED OUT, such as behavioral care, pharmacy, and LTC
  10. capability for patient-centered medical HOME and health homes
  11. ability to work with ACCOUNTABLE CARE ORGANIZATIONS
  12. OPERATIONAL EXCELLENCE for providers, such as claims payment accuracy and timeliness
  13. robust quality program to meet and exceed STATE REQUIREMENTS
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15
Q

Components of dental plan design

A

Hint: o clap

  1. plans are designed to emphasize PREVENTIVE care
  2. cost containment provisions exist to limit the ANTI-SELECTION that results from the elective nature of benefits
  3. plans only reimburse for the LEAST EXPENSIVE form of adequate treatment
  4. substantial OOP costs ensure that participants use care appropriately
  5. benefits are divided into different CLASSES, with reimbursement varying by class
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16
Q

Dental tier 1 services

A
  • x-rays
  • cleanings
  • lab tests
  • oral exams
  • flouride
  • diagnostic tests
  • emergency treatment
  • sealants
  • space maintainers
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17
Q

Dental tier 2 services

A
  • fillings
  • anesthesia
  • endodontics
  • periodontics
  • extractions
  • root canals
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18
Q

Dental tier 3 services

A
  • bridges
  • crowns
  • inlays
  • onlays
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19
Q

Dental tier 4 services

A
  • braces

- retainers

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20
Q

DPAC =

Adjusted acquisition expense =

A

DPAC = adjusted aquisition expense x UPR

Adjusted acquisition expense = acquisition expense ratio - (expense loss ratio + acquisition expense ratio + maintenance expense ratio - 100%)

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21
Q

Different types of earnings

A

operating earnings = revenue - expenses - benefits
EBIT = premium - benefits - expenses + investment income
pre-tax income = EBIT - interest expense
net income = pretax income - taxes

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22
Q

Pros and cons of cash flow statement

A

Pros:

  1. It is easy to understand
  2. It provides more accurate information about some activities than what appears on income statements and balance sheets
  3. It highlights the extent to which operations are generating or consuming cash

Cons:

  1. Can be misleading - appropriating among operating, investing, and financing is ambiguous
  2. negative cash flow doesn’t necessarily indicate poor performance
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23
Q

Modifications to go from STAT to GAAP

A

hint: CALM DDR

  1. removal of some of the CONSERVATISM in reserving assumptions
  2. removal of the AVR and IMR
  3. recognition of LAPSES in reserves
  4. recognition of the MARKET VALUE of most assets
  5. recognition of DEFERRED TAXES
  6. capitalization of DEFERRED ACQUISITION COSTS
  7. recognition of all RECEIVABLES AND ALLOWANCES
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24
Q

Pricing objectives for flexible benefits program

A

hint: Rachel - elderfleur liquor cocktail

  1. realistic prices - option price tags should reflect the value of the coverage
  2. equity - credits should be allocated based on an equal dollar amount or percentage of pay for all employees
  3. no losers - each employee should be able to repurchase prior coverage with no increase in costs
  4. no additional company cost - the new plan should cost the same as the old plan would have in the next plan year
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25
Q

Sources of credits for flexible benefits programs

A

hint: CBA will request donations

  1. Current benefits - employer costs of current benefits that will continue as part of the program
  2. Benefit reductions - a plan may be eliminated and the savings may be used as credits
  3. additional employer money - to provide a new benefit plan or make the program more attractive
  4. wellness credits - employees may have to earn credits through health or wellness initiatives, such as not smoking and completing a health risk assessment
  5. renegotiation of compensation - employees can direct a portion of their bonus into flex credits
  6. employee after-tax payroll deductions
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26
Q

How to control adverse selection

A

hint: Peter Dinklage - goat head, steamed turnips, peppered meat, fine desserts

  1. PARALLEL DESIGN should be maintained - e.g. include vision and ortho at the same coverage in all plans
  2. DELAY FULL PAYMENT - have lower benefits during a waiting period of 6 to 12 months
  3. certain coverages can be GROUPED together - predictable expenses such as dental or vision could be grouped with less predictable expenses such as supplemental medical
  4. Offer a HEALTH SPENDING ACCOUNT instead of insurance - useful for vision and dental
  5. not allow a large SPREAD between options - could be done by requiring a a core coverage level
  6. TEST the program with employees - to bring to light potential design weaknesses
  7. require PROOF OF INSURABILITY for increases in coverage
  8. only allow MID-CYCLE CHANGES if a life-changing event occurs
  9. limit the FREQUENCY OF CHOICE - allow benefit changes only every 2-3 years, instead of annually
  10. Limit the DEGREE OF CHANGE - restrict changes to one level of coverage per year (staircase rule)
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27
Q

How to launch flexible benefit program

A

hint: CLASH

  1. make COMMUNICATION a priority - before, during, and after the launch
  2. LISTEN to employees - this includes the use of focus groups
  3. make sure the ADMINISTRATION SYSTEM is robust
  4. get buy-in from SENIOR MANAGEMENT - make sure they understand and endorse the plan
  5. get the necessary HELP- consult with professionals who have designed flex plans in the past
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28
Q

Key components of CDHPs

A

hint: cc chai

  1. a high-deductible health plan
  2. an individual health account to pay for expenses not covered by the HDHP
  3. information and tools to provide health education and help find the highest-quality providers at the lowest cost
  4. a communications program to encourage consumerism and healthy behaviors
  5. a health coach or consultant to help individuals use available information and provide guidance on use of health care providers
  6. for serious chronic conditions, a proactive medical professional to coordinate care for the patient
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29
Q

Administration expense considerations

A

hint: eagles attract far more active communities

  1. how expenses are allocated to the product. methods include:
    a. activity based allocation - distributes expenses according to some measure of use
    b. functional expense allocation - determines how expenses are split by line of business for new and renewal business
    c. multiple allocation methods - a combination of the other two methods
  2. how administrative expenses should be allocated to groups - should differentiate between first year and renewal expenses
  3. What the competition includes as expenses in its pricing - adjustments may be needed to match what others are doing in the marketplace
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30
Q

Trend analysis techniques

A

hint: ashley - riddichio and edemame

  1. actuarial models - projects utilizationa nd price data by type of service, but the result is mostly based on historical experience
  2. linear regression model of historical average trend, but does adjust for random fluctuation
  3. ARIMA models - do not work for cyclical changes that affect trends, so they are only good for short periods
  4. External indicator models - typically statistical in nature and rely on causal modeling techniques. Requires the use of a leading indicators or a coincident indicator that has specified future values such as Health Cost Index.
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31
Q

Challenges with trend analysis

A

hint: patrick - shrimp on mostacotti pasta with lemon

  1. changes in claim PROCESSING and payment patterns
  2. SEASONALITY - can smooth out by using 12 month moving averages
  3. ONE-TIME EVENTS such as high flu season - can significantly change claims during one period, followed by a return to normal levels in later models
  4. MARGINS- in some situations, adding an explicit margin for uncertainty can be appropriate or even required
  5. changes in PRIOR PERIOD ESTIMATES - the base period claim costs to which the trend is applied may not be complete when claims are projected, so the reserve estimate will impact projected claims
  6. LEGISLATIVE CHANGES - rating laws, mandated benefits, and other changes can cause one-time and ongoing changes in trends
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32
Q

Typical basic group life plan designs

A

Hint: finish my salty peanuts

  1. flat dollar plans - such as $10,000 for all employees
  2. multiple of earnings plans (most common design) - such as 1 or 2 times earnings
  3. salary bracket plans - salary ranges are established and benefits vary by range
  4. position plans - benefits vary based on the employee’s position in the company
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33
Q

Group term life disability provisions

A

Hint: wet

  1. waiver of premium - coverage continues without premium payment when an employee becomes totally disabled
  2. total and permanent disability - a monthly benefit is paid when an insured becomes totally and permanently disabled. on death, the original death benefit is reduced by any disability payments made.
  3. extended death benefit - pays the death benefit if the insured’s coverage terminates upon total disability prior to age 60 and the insured remains disabled and dies within one year
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34
Q

Tax implications of AD&D

A
  1. no imputed income
  2. premium paid by employer is tax deductible
  3. benefits excluded from beneficiary’s gross income as well
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35
Q

ROE =

A

ROE = asset turnover x profit margin x leverage ratio

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36
Q

Sustainable growth rate =

A
  1. the sustainable growth rate represents the limit on a company’s growth if there is no external source of capital
  2. g = R x ROEbop
    R = earnings retention rate = 1 - dividends / earnings
    ROEbop = earnings/ equity at beginning of period

3 Since ROEbop = PAT, then G = PRAT
P = profit margin
A = asset turnover ratio
T = financial leverage = assets to equity ratio
Therefore, increase to g, one of P, R, A, or T must increase

  1. Since ROA = profit margin x asset turnover ratio, g = RT x ROA
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37
Q

Growth management strategies for when actual growth exceeds sustainable growth

A

hint: SID POMP
1. Sell new equity - this strategy is unavailable for many companies and unattractive to others. Many companies find it difficult to raise new equity.
2. increase leverage - raises the amount of debt the company can add for each dollar of retained profits
3. Reduce the payout ratio - raises sustainable growth by increasing the proportion of earnings retrained in the business
4. Profitable pruning - generates cash directly through sale of marginal businesses and reduces the actual sales growth by eliminating some of the sources of growth
5. outsourcing - when a company outsources, it releases assets that would otherwise be tied up
6. increase pricing - attacks growth directly
7. merge with cash cow that would bring in liquidity and borrowing capacity

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38
Q

Growth management strategies for when sustainable growth exceeds actual growth

A

hint: Italian clam linguine with sauvingon blanc

  1. look within the firm to remove internal constraints on company growth
  2. ignore the problem - continue to invest in the core business despite poor returns, or sit on idle resources. This may lead investors or the board of directors to force a management change
  3. return the money to shareholders - done by increasing dividends or repurchasing shares
  4. buy growth - acquire an existing business or start a new product line from scratch
  5. reduce financial leverage
  6. cut prices
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39
Q

Reasons why US corporations don’t issue more equity

A

hint: NEEUU

  1. recently, companies in the aggregate have not needed new equity
  2. equity is expensive to issue (costs about 5% to 10% of the amount raised)
  3. Many managers consider anything that lowers earnings per share as bad, and issuing new equity will initially lower EPS
  4. Most companies feel their stock prices are undervalued, so they choose not to sell new stock at what they think is too low a price
  5. Many managers view the stock market as an unreliable funding source, so they build funding strategies that do not rely on the stock market
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40
Q

Formula for net postretirement benefit cost

A

NPBC = service cost + interest cost - expected return on assets + amortization of transition obligation + amortization of loss + amortization of prior service cost

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41
Q

expected return on assets =

A

E(ROA) = (assets x ROR) - (ben pmts x ROR / 2)

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42
Q

Gain or loss for net postretirement benefit cost

A

loss = actual APBO - expected APBO

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43
Q

corridor gain or loss for net postretirement benefit cost

A

10% x maximum (APBO, assets)

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44
Q

Elements of GAAP footnote disclosure for FAS 106

A

hint: D BRAT

  1. DISCOUNT RATE
  2. BREAKDOWN by component of annual cost
  3. RECONCILIATION of assets and APBO balances
  4. a description of any ALTERNATIVE METHODS used
  5. assumed health care TREND rate
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45
Q

How are settlements and curtailments recognized?

A

If they result in a gain, they are recognized when ee is terminated or amendment is adopted.

If they result in a loss, they are recognized as soon as the loss can be easily and accurately estimated.

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46
Q

Assumptions for liability of retiree medical plan

A

hint: E-diss D- don’t take my remote

  1. economic assumptions
    a. inflation
    b. discount rate
    c. salary increase
    d. social security benefit increase
  2. demographic assumptions
    a. termination rate
    b. mortality rate
    c. disability rate
    d. retirement rate
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47
Q

Additional assumptions needed for the valuation of retiree life and health plans

A

hint:
eat - peanut butter and chocolate truffle cake
drink - cold peppermint and pepsi soda

  1. economic assumptions
    a. current retiree plan costs - the starting point for projecting future benefit costs
    b. current retiree contributions - the starting point for projecting future contributions
    c. health care cost trend - should represent expected long-term trends. trend rates should grade down over time to a lower level than today’s trends (such as GDP plus one percentage point)
    d. Medicare Part B premium rate increase - employers who pay this premium for the retiree need an assumption for future increases
    e. retiree contribution rate increase - should reflect the current and expected future policies regarding retiree contributions to the plan
  2. demographic assumptions
    a. plan participation - needed if a retiree contribution is required
    b. spouse plan continuation after death of retiree - needed if a contribution is required
    c. dependent children plan termination - since dependents’ ages are normally not recorded, an assumption is needed for when the limiting age is reached
    d. plan design change - a valuation may account for future plan design changes if changes are expected
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48
Q

Common problems in selection of actuarial assumptions for retiree medical plans

A

hint: DUC SODA

  1. missing DATA - some claims data may be missing
  2. UNDER AGE 65 premium - determining the costs for under age 65 participants is difficult because their experience is blended with active employees
  3. COMPOSITE PREMIUMS - current rates may be on a per employee basis, rather than having separate rates for retirees, spouses, and children
  4. SPOUSE/ dependent premium - data for dependents may be based on the age of the retiree, rather than the age of the dependent
  5. OLD PREMIUM STRUCTURE - the current premium differences between activities and retirees may be based on outdated studies
  6. DIFFERENT plans - costs developed for current retirees may not be applicable for future retirees due to different plan provisions
  7. costs by AGE- few plan sponsors will have enough retirees to develop the needed costs by age
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49
Q

Reasons for increases in drug costs

A

hint: bad bad ppp

  1. prescription drug pipeline - manufacturers are anxious to recover their investments in research and development of new drugs
  2. biologic - these are very expensive and are not easily replicated, so generics will not be produced for most of them
  3. patents - these protect a drug’s original manufacturer from competition for a period of time
  4. direct to consumer advertising - marketing of high-cost drugs has been effective, resulting in many patients requesting the new drugs
  5. faster approval process - the FDA has streamlined its approval process, increasing the number of high-cost drugs coming to the market
  6. brand name advertising - after generics become available, marketing of brand drugs continues, which helps maintain their sales
  7. aging population - leads to more demand for drug therapies
  8. increase in awareness of and testing for disease - often results in drug therapies to avoid acute illnesses
  9. personalized medicine - genetic testing sometimes leads to unnecessary medication use
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50
Q

Criteria for provincial Medicare plans to qualify for federal contributions under the Canada Health Act

A

Hint: AA cup

  1. comprehensiveness - all medical-required hospital and physician services must be covered under the plan
  2. universality - all legal residents of a province must be entitled to the plan’s services on uniform terms and conditions
  3. accessibility - reasonable access by residents to hospital and physician services must not be impeded by charges made to those residents
  4. portability - the plan may not impose a waiting period in excess of 3 months for new residents, and coverage must be maintained when a resident moves or travels within Canada or is temporarily out of the country
  5. public administration - the plan must be administered on a non-profit basis by a public authority
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51
Q

Benefits covered by most provincial Medicare plans

A
  1. out of Canada claims
  2. hospitals and facilities
  3. physicians
  4. miscellaneous coverages
  5. prescription drugs
  6. equipment
  7. dental
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52
Q

Medicare concerns in Canada

A

hint: lets reds

  1. waiting for months to see a specialist is common
  2. shortages of equipment, specialists, and technicians cause waiting for diagnostic procedures
  3. waiting for elective and non-emergency surgery is common, due to a lack of operating room time and a shortage of hospital beds
  4. emergency rooms are overcrowded, due in part to the unavailability of after-hours clinics
  5. people who need LTC tend to wait in hospitals because of a shortage of beds in LTC facilities
  6. Technology-intensive services are not available everywhere
  7. the demand for services exceeds the supply, resulting in rationing
  8. some essential services (such as prescription drugs for chronic illnesses) are not c5. out of Canaovered by Medicare
53
Q

Benefits commonly covered by Canadian supplemental plans

A
  • pharmacy
  • out of Canada ER facilities
  • hospital
  • health practitioner
  • miscellaneous (x-rays, lab)
54
Q

Anti-selection risks on the exchange

A

If competitors offer different sets of metal plans, the provider with leaner set will attract, on average, younger and healthier people to spread their risks across

55
Q

Anti-selection risks against the exchange

A

Large carriers that used underwriting before the ACA may start with a healthier book

Subsidies on the exchange cause anti-selection because unhealthy people generally need more subsidies

High risk employers may go to the exchange for cheaper rates

56
Q

ACA provisions to control anti-selection against the exchange

A

All provider plans must be at least 60% actuarial value

Individual and employer mandate

Premium subsidies encourage participation

Essential health benefits must be covered both on and off the exchange

57
Q

ACA provisions to control anti-selection in the exchange

A

3Rs:

Risk corridor – a temporary program from 2014-2016. Federal government shares the risk for loss ratio variances. Variances between 3-8% share 50% of gain/loss and 8%+ government covers 80% of gain/loss

Risk Reinsurance also a temporary program from 2014-2016. All fully insured and self-funded plans pay into a reinsurance pool to pay for individual claims on the
exchange exceeding a prescribed threshold.

Risk adjustment is a permanent program where carriers will make or receive payments based on the risk profile of their members. Applies to both individual and small group risk pools. It is a zero sum program.

58
Q

State provisions that can mitigate anti-selection

A

Any-willing-provider law
Require all carriers to provide all metal plans
Additional restrictions on plans offered off the exchange
Don’t let carriers in and out of the exchange at will
Continue the reinsurance program past 2016
Expand Medicaid
Expand the definition of large group to 100 employees

59
Q

Consumer protection added by ACA

A 
Guaranteed issue/ renewability
No rating on health status
Dependent coverage to age 26
No recissions
No pre-existing rating
-in 2010 for kids
-in 2014 for adults
Preventive care at 0% cost share
No annual maximums
Essential health benefits package
OOP limits capped
Waiting periods can't be more than 90 days
MLR requirements
Premium rate increase reviews
Cost sharing subsidies
60
Q

Requirements for offering prescription drug plans to retirees via EGWP

A
  1. average deductible at least as rich as Part D
  2. Deductible is less than or equal to Part D deductible
  3. Catastrophic coverage is at least as rich as Part D
61
Q

Requirements for offering prescription drug plans to retirees via Retiree Drug Subsidy

A
  1. Provide actuarial attestation that coverage is at least as rich as Medicare Part D
  2. Gross value test - coverage is at least as rich as Part D coverage
  3. Net value test - portion of the plan covered is at least as rich as Part D. Net value = gross value - premium.
62
Q

Why employers offer retiree benefits

A

hint: SNUG TV C

  1. retiree group benefits are a tax-effective means of providing retirement financial security
  2. retiree benefits are a valuable benefit for those currently receiving the coverage or who are soon to retire
  3. the benefits can support workforce planning and growth opportunities for employees
  4. providing ongoing health care coverage is a social responsibility of the employer
  5. retiree health care benefits help provide a competitive package of total compensation
  6. the current cash costs are nominal relative to the total spending on benefits
  7. retiree benefits are often at the top of the list of union demands
63
Q

Portability provisions under COBRA

A

Allows continuation of group coverage after a qualifying event, such as termination of employment, divorce, child aging out

Coverage can continue for up to 18 months (36 months in certain cases)

Members pay the full premium plus up to a 2% administrative fee

64
Q

Portability provisions under HIPAA

A

Limits a group’s ability to impose pre-existing condition exclusions

Allows conversion to a guarantee issue individual policy once COBRA coverage is exhausted

Does not allow plan eligibility or premium payment to vary based on health status

Requires special enrollment periods in the middle of the plan year under certain circumstances

65
Q

What is a long-duration contract?

A

Premium is recognized when due from policyholders. Liability is recognized as PV of future expense minus PV of future premium.

Examples include individual LTD, individual LTC, individual major medical, and individual cancer insurance.

66
Q

What is a short-duration contract?

A

Premium is recognized in proportion to protection provided; liability is recognized as incurred, including estimates for IBNR.

Examples include group LTD, group waiver of premium plan, group major medical, and group STD.

67
Q

What are long-term benefits?

A

Benefits that are paid out for many years.

Examples include individual and group LTD and LTC.

68
Q

What are short-term benefits?

A

Benefits that are paid for a short time or for an acute episode.

Examples include major medical, cancer, and STD.

69
Q

How do PBMs add value?

A

Negotiating contracts and developing pharmacy networks
Negotiating better AWP discounts
Giving advice on formulary design
Providing MAC lists for generics

70
Q

Factors that contribute to growth in pharmacy costs

A

hint: bad bad ppp

  1. prescription drug pipeline - manufacturers are anxious to recover their investments in research and development of new drugs
  2. biologic - these are very expensive and are not easily replicated, so generics will not be produced for most of them
  3. patents - these protect a drug’s original manufacturer from competition for a period of time
  4. direct to consumer advertising - marketing of high-cost drugs has been effective, resulting in many patients requesting the new drugs
  5. faster approval process - the FDA has streamlined its approval process, increasing the number of high-cost drugs coming to the market
  6. brand name advertising - after generics become available, marketing of brand drugs continues, which helps maintain their sales
  7. aging population - leads to more demand for drug therapies
  8. increase in awareness of and testing for disease - often results in drug therapies to avoid acute illnesses
  9. personalized medicine - genetic testing sometimes leads to unnecessary medication use
71
Q

Why has Rx growth slowed recently?

A

Wave of patent expirations: Additional generics have been able to come on the market as patents have expired on brand drugs

Economy: Economic recession has led to decreased spending in several areas, including pharmaceuticals

Lower overall spending in important therapeutic classes, such as Lipitor, and increased use of generics

72
Q

Recommend strategies, other than increasing co-payments or switching to coinsurance, your company could use to control increasing pharmacy benefit costs.

A

Formularies

Tiered benefit designs

Value-based plan designs

Limits on usage, which could include step therapy, and other utilization control mechanisms

73
Q

What do group basic and group supplemental term life have in common?

A

Eligibility

  • Full-time working minimum number of hours
  • Actively at work
  • Waiting period from hire date

Continuity of coverage
-Ability for insured to covert the group term insurance coverage to an individual life insurance policy upon termination of employment

Disability

  • Waiver of premium for disability
  • Total and permanent disability
  • Extended death benefit

Benefit payment provisions

  • Accelerated benefits
  • Beneficiary
  • Minimum participation
74
Q

Compare the U.S. group LTC market to the U.S. individual and Canadian LTC markets

A

Market for LTC insurance in the U.S. is much more developed than the Canadian market because Canadian Medicare covers some long term care expenses

The group LTC market in the U.S. is much smaller than the individual LTC market

However, the group LTC insurance market has been growing at a rapid pace

75
Q

Describe plan provisions common to both LTC and LTD.

A

Both LTD and LTC have benefit triggers

  • LTD: inability to perform material and substantial occupation duties
  • LTC: inability to perform ADLs

Both have elimination periods

i. Typical LTD elimination period is 3 or 6 months
ii. Typical LTC is usually expressed in days and varies from zero to 365 days. The most common waiting periods are 30, 60, 90, and 100 days.

Both have optional inflation protection
Both have spousal benefits
Both have death benefits
Both have exclusions/limitations

76
Q

Summarize the changes created by the ACA and the associated pricing challenges
in these markets

A

Change #1: Expands private insurance coverage by
Requiring guaranteed issue
Mandating coverage
Making premium subsidies available to lower-income people
Pricing Challenges: Predicting who will enter the exchange for various reasons:
flux of previously uninsured, young/healthy may elect to pay the penalty, % of employers electing to stop providing coverage, etc.

Change #2: Requires new benefit designs to be offered
Including four “metal levels” corresponding to different levels of actuarial value for a benchmark package of essential health benefits
Pricing Challenges: Benchmark plans are left to the states so there is uncertainty as to what the benefits will be; the potential for “rate shock” as the benefits will be richer for many as a result.

Change #3: Eliminates premium differentials by health status and gender and restricts age variation to a 3-to-1 ratio.
Pricing Challenges: Adverse selection may result when younger people see rates go up and older find coverage more affordable; Rules vary by state so selection
effects are complicated.

Change #4: Contains three risk mitigation strategies
Temporary reinsurance
Risk corridors
Risk adjustment program
Pricing Challenges: Full design parameters of these programs are unknown; limited data for actuaries to use to model expected impact.

Change #5: Adherance to Minimum Loss Ratio
>80% SG and Individual
Pricing Challenges: Maintain admin and profitability while maintaining MLR. Additional administrative costs related to tracking MLR and paying rebates as necessary.

77
Q

Describe ways company management uses medical loss ratio information

A

Measuring the financial performance of products
By subgroup – individual vs. group, etc. ; Used to manage care provider groups

Preparing business plans that project earnings - Can be used for applications for license for a new company or expansion to operate in a new jurisdiction

Support filings for new or renewal rates and policy forms

Reporting information concerning results to policyholders such as employer groups

Used by them for budgeting purposes, monitoring experience, and/or understanding rate increases

Setting incentive target earnings for management, employee, and provider compensation

Agents and brokers may be compensated based on loss ratios

Loss ratios may trigger payments to providers subject to profit sharing arrangements

78
Q

Considerations when doing loss ratio comparisions

A

hint: PREP RC

PLANS/ PRODUCTS, geographical footprint, and benefit designs
Financial arrangements such as non-refunding and REFUNDING as their loss ratios can present very different results
How EXPENSES are treated; for example, managed care organizations and commercial insurer treatment of medical care expenses as claims
The effect of combining/POOLING ‘cells’ in order to achieve credibility
REINSURANCE transactions
The presence of CONSERVATISM in pricing and IBNR, particularly for new business or markets

79
Q

How do regulators use MLR information?

A

Prospective rate reviews - determining if premiums are reasonable in relation to claims

Retrospective rate reviews – e.g. refund calculations

As an indicator of the insurer profitability

As an indicator of insurer solvency

80
Q

Disadvantages to the employer of offering a cafeteria plan

A
  1. Higher administration costs
  2. Choice promotes adverse selection
  3. Subject to non-discrimination testing
  4. For FSA, funds must be available at any point in the year
81
Q

Benefits director competencies

A
  1. benefits plan design
  2. benefits plan delivery
  3. benefits policy formulation
  4. communications
  5. applying technology
  6. cost management and resource controls
  7. management reporting
  8. legal and regulatory compliance
  9. monitoring external environment
82
Q

Describe sources of data your firm could use to develop independent premium rates.

A

Insurer studies
Use company’s own LTD claims experience to conduct loss ratio studies and actual-to-expected incidence and termination rate studies

TSA Reports – 1984 Reports
Containing annual claim incidence rates per 1,000 by age group, gender and elimination period and ratios of actual to tabular incidence rates

SOA 2000 Basic Experience Table
Intercompany studies performed by the SOA Disability Experience committee

1987 Commissioners Group Disability Table
Includes rates that vary by gender and elimination period

83
Q

Goals and objectives of insurance regulation

A
  1. eliminate policies not providing the benefits expected
  2. prevent insolvency
  3. eliminate policies that provide poor value
  4. solve minor consumer problems
  5. maintain fair competition
  6. raise tax money
  7. promote social goals
84
Q

Describe the legal framework for insurance regulation

A
  1. Laws vary from simple to complex
  2. Simplicity in the laws will be effective where regulation can rely on other standards and there is a general understanding and agreement on the standards
  3. Complex laws will be needed where markets are complex and simplicity has not worked in preventing problems
  4. Various levels of legal requirements include:
    a. constitutions and laws are usually fairly simple
    b. regulation is detailed and complex
    c. administrative directive and bulletins address very specific and timely issues
85
Q

Means of enforcement for insurance regulation

A

hint: LIP ER

  1. licensing - the firm agrees to be regulated. Agents may also be required to get a license.
  2. Information gathering - the purpose is to monitor financial soundness, confirm compliance, provide consumer information, and design new regulatory requirements
  3. Prior approval of policy language, premium rates, reinsurance arrangements, dividends, mergers, and investments
  4. Enforcement - includes penalties such as fines, legal action, and/ or license removal
  5. Receivership - may initially track financial condition, or may take over an insolvent company
86
Q

Describe the typical LTC plan features

A

hint: tie, sir, cab, men

  1. Benefit TRIGGERS - the insured must satisfy the benefit trigger to become eligible for benefits. For tax-qualified policies, the trigger must be:
    - the inability to perform at least two ADLs or
    - a cognitive impairment that requires substantial supervision to protect the health and safety of the insured
  2. INFLATION protection - increases the benefit limits as LTC costs increase over time
  3. ELIMINATION or waiting period - a time period during which the insured must remain disabled and benefit eligible before benefits are paid
  4. SPOUSAL RIDERS and discounts
  5. INTERNATIONAL COVERAGE - some plans provide limited benefits for care received abroad
  6. RESTORATION OF BENEFITS - many plans restore the lifetime maximum benefit if an insured recovers before exhausting the plan’s benefits
  7. CASH BENEFITS
  8. ALTERNATE plan of care - allows the insurer to pay benefits for services not explicitly covered by the contract
  9. BENEFIT LIMITS - enrollees select a daily benefit maximum for institutional care. Other benefits are tied to this daily benefit.
  10. Share lifetime MAXIMUM BENEFIT POOL - some plans allow an insured who uses all of his or her benefits to tap into any remaining benefits of a spouse’s policy
  11. policy EXCLUSIONS - examples include pre-ex conditions, alcoholism, drug addiction, and treatment covered by other policies or Medicare
  12. NONFORFEITURE benefits - sold as an optional benefit. Provides a reduced, paid-up benefit to insureds who lapse coverage
87
Q

Describe various methods of pooling claims experience data that could be used in developing experience rates

A
  1. catastrophic claim pooling - forgive any amount over a certain limit
  2. loss ratio or rate increase limits - accomplished in one of the following three equivalent ways:
    - setting an upper limit on the loss ratio which will be used in setting future rates
    - setting an upper limit on the percentage rate increase which a group will be charged
    - setting an upper limit on the aggregate claim dollars a group will be charged
  3. Credibility weighting - incurred claims after pooling = C * incurred claims before pooling + (1-C)* expected incurred claims
  4. Multi-year averaging - combine several years of experience in order to smooth out the statistical fluctuations. Weighted average pooled loss ratio in year Z = 5/9 x LR(year Z) + 3/9 x LR(year Z - 1) + 1/9 x LR(year Z - 2)
  5. Combination of methods
88
Q

List the three steps of the rate setting process

A
  1. Measuring the past
  2. Evaluating and adapting the past to future
  3. Using the past to project the future in order to determine needed rate levels
89
Q

Describe different approaches that are used for determining rates

A

Rerating approach - rating based on existing experience

Fundamental pricing approach - rating from other data sources, which are adjusted to apply to the current situation. Three methods

  • Tabular - existing table such as 1985 CIDA is used as the morbidity basis for pricing. Used for long term, non-inflation sensitive products
  • Buildup and density functions - A model is built to determine expected claims in the rating period. Buildup: each claim type has its own claim cost calculation (frequency x severity). Density: calculates a distribution of the expected total annual claims for an individual.
  • Simulation - existing claim distribution is projected into the rating period, using all known information about the claimants.
90
Q

Explain what actuaries must consider when calculating premiums

A
  1. The market - competitor pricing sets expectations for consumers, so it limits options
  2. Existing products - the company’s existing products set expectations for future products
  3. Distribution system structure, compensation system, and level of company control
  4. Regulatory situation - impacts how rates are set and whether rate increases are allowed
  5. Strategic plan and profit goals
91
Q

Major design considerations for Canadian HSAs

A

These non-taxable accounts may cover any health care expenses that would be tax deductible under the Income Tax Act, as long as they are not already covered by the provincial plan or other private insurance

Employer must decide whether to offer an HSA

Consider how the presence of the account will impact other benefit choices

Funding considerations - decide if contributions to the accounts will be monthly or annually

Limits on how much the employee can allocate to the flexible account

How to handle changes during the year (such as family status changes, termination, and retirement)

Disposition of funds at year end - depends on rollover approach used

92
Q

Main advantages and disadvantages of Canadian HSAs

A

Advantages:

Expand the types of benefits offered with little or no additional employer cost
Add a new benefit without subsidizing an expensive coverage area
Offer a benefit that might appeal to only a small segment of the employee population
Contain costs by setting a defined contribution while providing employees with flexibility over how funds are spent
Test the appeal of flexible benefits without committing to a full-choice program
Deliver compensation tax effectively
Encourage employees to self-insure predictable and budgetable expenses
Soften the impact of higher employee cost sharing
Replace existing coverage, allowing the employer to gain control of future cost increases
Obtain the maximum value form health benefits under the Quebec tax system

Disadvantages

Administration costs may be too high
Balance may be forfeited if unused at year end

93
Q

Desired characteristics of premium rates

A

Adequate - high enough to generate an acceptable return on equity
Competitive - low enough to enroll enough members to meet volume and growth targets
Equitable - to avoid an unreasonable amount of cross-subsidization among groups (which will improve persistency)

94
Q

Purpose or the rate formula and what it should do:

A

The rate formula provides the mechanism to adjust the base rate to a group-specific manual rate based on demographics, area, group size, industry, and other characteristics allowed by law

The formula should:
Recognize all health plan costs
Be easy to apply in most situations
Result in an appropriate premium rate

95
Q

Steps in using the rate formula for managed health care:

A
  1. develop the projection period base rate PMPM - based on historical medical costs trended forward, and reflects the average characteristics of the block of business
  2. Apply group-specific additive adjustments - such as the added cost of covering mandated services in a given state
  3. Apply group-specific multiplicative adjustments - includes factors for the benefit plan, geographical area, age/ gender, degree of health care management, and health status
  4. Add retention loads - includes administrative expenses, a buildup of contingency reserves, coordination of benefits savings, and profit
  5. Convert to a contract rate - for group coverages, this includes developing tiered rates (employee only, family, etc.)
96
Q

Definition of the functional approach

A
  1. An organized system for classifying and analyzing the risks and needs of active employees and their dependents into logical categories of exposures to loss and employee needs
  2. A method of analyzing the entire employee benefits package
  3. A systematic approach to ensure that benefits are integrated with other benefits
  4. It evaluates the program as a whole to assess its effectiveness at covering employee risks and exposures and addressing overlaps and gaps in coverage
97
Q

Steps of the functional approach

A

hint: open the closed gate so an old abandoned insider can return

  1. Classify employee needs and OBJECTIVES into logical categories
  2. Classify the TYPES OF PERSONS the employer wants to protect through the benefit plans. For example, current employees, dependents, past employees, etc.
  3. Analyze CURRENT plan benefits in terms of the functional categories and who is being protected
  4. Determine any GAPS or overlapping benefits in the plan
  5. Estimate the costs or SAVINGS from the changes described above
  6. Evaluate ALTERNATIVE methods of financing or securing new benefits and existing benefits
  7. Consider OTHER cost-saving STRATEGIES in connection with the plan’s proposed or existing benefits
  8. Decide upon the APPROPRIATE BENEFITS, methods of financing, and sources of delivery based on this analysis
  9. IMPLEMENT the changes
  10. COMMUNICATE benefit changes to employees
  11. Periodically REEVALUATE the employee benefit plan
98
Q

List the trust funds used to pay for Medicare services

A

Hospital Insurance (HI) trust fund - pays primarily for hospital services (Medicare Part A)

Supplementary Medical Insurance (SMI) trust fund - includes accounts for Medicare Part B (physician and OP hospital services) and Part D (prescription drugs)

99
Q

Discuss the financing challenges facing the Medicare program

A
  1. Income to the HI trust fund is not adequate to fund the HI portion of Medicare benefits
    - this trust fund is projected to be depleted in 2024
    - at that time, payroll tax revenues are projected to cover only 87% of program costs
    - using assumptions based on current law, the projected deficit over the next 75 years is 1.35% of taxable payroll. Eliminating this deficit would require an immediate 47% increase in payroll taxes or a 26% reduction in benefits
    - The situation is likely worse, since current law includes reductions in provider payments that are unlikely to occur
  2. Increases in SMI costs increase pressure on beneficiary budgets and the federal budget
    - this trust fund is expected to remain solvent because its financing is tied to projected future costs
    - but this will require increases in beneficiary premiums and general revenue contributions
    - under current law, SMI spending is projected to grow from 2% of GDP in 2011 to 3.1% in 2030 and 4.0% in 2085
  3. Increases in total Medicare spending threaten the program’s sustainability
    - total Medicare expenditure were 3.7% of GDP in 2011
    - under current law projections, they are expected to grow to 6.7% of GDP in 2085
100
Q

Briefly describe the provisions included in PPACA that were meant to address the financing challenges of Medicare

A
  1. Reductions to provider payment updates - to reflect productivity improvements
  2. Medicare Advantage plan payments will be reduced gradually relative to FFS costs
  3. Health care payment and delivery system improvements - for example, initiatives on bundled payments and accountable-care organizations
  4. Increases in Medicare revenues - increasing the payroll tax, Part B premiums, and Part D premiums for those with higher incomes
  5. Creation of the Independent Payment Advisory Board - to recommend changes to provider payments if Medicare spending exceeds a target per capita growth rate
101
Q

Challenges for small companies offering group medical plans

A

hint: Justin - marinated galbi and dragonfruit

  1. small companies are most often fully insured, they are subject to state-MANDATED benefits
  2. because employees are usually in a relatively small GEOGRAPHIC AREA, plans must be designed using options available in that area
  3. small companies may have to provide additional DOCUMENTATION so that insurers can verify the existence of the company
  4. most states do not allow companies to JOIN FORCES to form larger purchasing pools in order to get group discounts
102
Q

Reasons a small company should require employee contributions for medical insurance

A

hint: allie - orange infused lemonade

  1. most employees today are ACCUSTOMED to paying some level of contribution
  2. requiring a contribution motivates employees who have OTHER COVERAGE options to use those options
  3. it is easier to require contributions beginning at the plan’s INCEPTION that it is to start requiring contributions at a later date
  4. Requiring a contribution can help avoid LEGAL PROBLEMS since the contribution makes it clear who is covered by the plan versus who opted out
103
Q

Reasons why insuring an STD plan may be more efficient than small companies self-insuring th erisk

A
  1. the cost is not expensive when intelligently designed
  2. it takes the employer out of the role of having to deal with privacy issues and claim adjudication
  3. just one claim per year could pay for the cost of the annual premium
104
Q

Communications process for

i. new employees
ii. annual open enrollment
iii. communications throughout the year
iv. retirees

A

i. new employees - HR has developed communication tools that incorporate notification and disclosure requirements and present their benefits program with the most advantageous aspects. Common problems are misunderstandings about actual benefits offered, missing applications, vendor enrollment delays, and employee challenges to mandatory benefits.
ii. annual open enrollment - open enrollment communications process requires a major commitment of HR resources. Much effort is devoted to updating and revising personal data reports, printed materials, and web-app programs.
iii. Communications throughout the year - using the life events approach, the plan sponsor extracts from each its benefits plans applicable information for a specific events and then in one place the sponsor communicates step by step the options available and actions required
iv. retirees - predominantly communication has been through print, but now web-based programs are becoming popular. Explain what hasn’t changed and avoid jargon.

105
Q

Components of medical trend

A

hint: matt - diced salmon, bread, raspberry milkshake

  1. general MACRO ECONOMIC FACTORS - the force of trend is the trend in average per capita reimbursement to providers of medical care services from all types of private payers
  2. changes in DEMOGRAPHICS and health status of the covered population
  3. the STRUCTURE of the carrier’s provider contracts, and changes in that structure
  4. BENEFIT and cost sharing PROVISIONS, and changes in those provisions
  5. RANDOM fluctuations - is a major source of variation for small blocks
  6. MANAGED CARE initiatives - some initiatives will have a one-time effect on trends, while others will have longer term impacts
106
Q

Retention items on net premium

A

Expense Loadings: This is usually the largest part of retention, and is generally included as a number of separate charges. These would include salaries, administrative expenses, rent, taxes, etc.

Pooling Charges: This spreads the cost of any pooled claims over all policy holders. May be included in retention or elsewhere in pricing.

Profit Charge or Contribution to Free Reserves: This is the profit that the insurer chooses to include in its pricing formula. Non-profit insurers call this “contributions to free reserves.” Profit charges may be embedded in other assumptions, so it may or may not be an explicit retention loading.

Investment Income: Some insurers provide for the crediting of investment income on reserves or other money held, and treats this income as an offset to other retention items.

Explicit Margin: An insurer may include a specific margin in the retention calculation to reduce the insurer’s risk and increase the confidence in the pricing assumptions built into the rates.

Deficit Recovery Charge: If a policyholder has caused incurred losses by the insurer in prior years, and those losses have not yet been recovered, the insurer may build in a deficit recovery charge intended to recoup past losses
within a reasonable period of time.

Termination Risk Charge: Occasionally, a policyholder in a deficit position will terminate its contract, leaving the insurer who has chosen a deficit recovery charge philosophy no means to recover the losses from that policyholder. A risk charge may therefore be made in advance on all policyholders in order to finance this business risk.

107
Q

Types of health insurers and MCOs

A

hint: in some marraiges, people evolve. Parents have to cherish children.

  1. indemnity - indemnifies the beneficiary from the financial cost of health care. there are few controls for managing cost.
  2. service plans - similar to indemnity, but adds contracting with providers as a way to manage costs
  3. managed indemnity - overlays some manage care features onto indemnity plans
  4. PPOs - contract with a network of participating providers who agree to accept the PPO’s payment structure and levels. Members who see PPO providers have higher levels of coverage.
  5. Exclusive provider organizations - similar to PPOs, but care received by nonparticipating providers is not covered
  6. POS plans - combine an HMO with indemnity-type coverage for care received outside HMO. Members decide at the point of service whether to use the HMO or go out of network
  7. HMOs - provides basic and supplemental health services in the manner prescribed by the HMO Act
  8. CDHPs - combined a high deductible health plan with some form of individual pretax savings account
  9. Third-party administrators - administer benefits for self-funded employer groups, but do not assume risk
  10. consumer operated and oriented plans - member-run health insurers created to offer coverage to small groups and individuals through the ACA exchanges
108
Q

Describe ACOs

A

ACO stands for Accountable Care Organization

Shared savings program using performance measures

Written into ACA

Approach to achieve more integrated and efficient care

Local organizational accountability for quality and costs

109
Q

Structural requirements of accountable care organizations (ACOs).

A

hint: elf BMI

  1. Those ELIGIBLE to form an ACO include
    a. group practices
    b. networks of individual practices
    c. hospitals
    d. rural health clinics
    e. federally-qualified health centers
  2. must be a LEGAL ENTITY that is authorized to conduct business in each state in which it operates
  3. must be FORMED for the purposes of
    a. receiving and distributing shared savings
    b. repaying shared losses or other monies owed to CMS
    c. establishes, reporting, and ensuring provider compliance with health care quality criteria
  4. at least 75% of the ACO’s BOARD seats must be held by ACO participants
  5. MANAGEMENT STRUCTURE must be similar to what is found in a nonprofit health plan
  6. participants must have a sufficient INVESTMENT such that ACO losses would be a significant motivator
110
Q

Key characteristics of patient-centered medical homes

A

hint: QT CAVE P

  1. QUALITY and safety are key parts, enhanced by evidence-based medicine
  2. patients receive care from a TEAM of individuals led by the personal physician
  3. the patient’s care is coordinated or integrated across all elements of the health care CONTINUUM
  4. personal physicians take responsibility for providing or ARRANGING all of the care for the patient
  5. payment should appropriately recognize the added VALUE provided to patients
  6. patients have ENHANCED ACCESS to care through open scheduling and expanded hours
  7. patients have an ongoing relationship with a PERSONAL PHYSICIAN
111
Q

Items included in asset share projections

A

hint: creep c

  1. claim values - paid claims, incurred claims, claim reserves, claim adjustment expense reserves, and policy reserves
  2. exposure value - including the number of policies sold or in force, number of claims or claim payments, number of premium collections, and number of units sold or in force
  3. revenue values - including premium, investment income, and explicit subsidies
  4. expense targets - expense loadings may be very detailed. the cost of capital is sometimes treated as an expense
  5. profit targets - profit is calculated in one of the following ways
    a. percent of premium - present value of profits divided by PV of premium
    b. ROI - this is the interest rate at which the PV of future profits will exactly equal the initial investment
    c. ROE - this is like the ROI method, except the initial investment is increased by the amount of capital that is set aside to cover the business
  6. capital values - must model the cost of the capital used by the line of business
112
Q

Considerations in developing administrative expense assumptions

A

hint: eagles attract far more active communities

  1. how expenses are allocated to the product. methods include:
    a. activity based allocation - distributes expenses according to some measure of use
    b. functional expense allocation - determines how expenses are split by line of business for new and renewal business
    c. multiple allocation methods - a combination of the other two methods
  2. how administrative expenses should be allocated to groups - should differentiate between first year and renewal expenses
  3. What the competition includes as expenses in its pricing - adjustments may be needed to match what others are doing in the marketplace
113
Q

Common rating characteristics included in manual rates for group health insurance

A

hint: P gag shit

  1. age
  2. gender
  3. health status
  4. rating tiers
  5. geographic factors
  6. industry codes
  7. group size
  8. length of the premium period
114
Q

Similarities and differences between health spending accounts and health savings accounts.

A

Similarities
Both can be used for eligible medical expenses
Both have tax advantages such as tax free distribution for qualified expenses, as well as tax penalties for misuse
Both have states/provinces that dictate tax treatments of accounts

Differences
Spending accounts do not need to be tied to a High Deductible Health Plan
Eligible expenses broader for Spending Accounts than Savings Accounts
Spending accounts have only one annual election unless life event. Savings accounts can change elections throughout the year.
Spending accounts have time-limiting rollover/forfeiture characteristics. Savings accounts do not have limits.
Savings accounts are owned by the employee (portable), whereas Spending accounts are not.

115
Q

Tax issues of a personal account

A

Personal accounts can cover many items, ranging from health-related items such as gym memberships to personal items such as gas or vacations.

Reimbursed items generally count as taxable income to the employee

Employers tax the account based on the allocations rather than the reimbursements

Balance remaining in account at year end can be rolled over indefinitely

116
Q

What did each of these do and how did each of these impact the balance of power over health insurance in the US?

i. McCarran-Ferguson Act of 1945
ii. Federal HMO Act of 1973
iii. ERISA of 1974
iv. HIPAA of 1996

A

(i) This Act overturned the Supreme Court ruling that had previously given the federal government regulatory authority over interstate insurance transactions. It was significant in that it put virtually all health insurance regulation in the hands of the states.
(ii) This Act was created to promote the growth of HMO’s. Federally qualified HMO’s were exempt from state laws that prevented them from acting as an HMO. This Act shifted regulatory power away from the states and back to the federal government.
(iii) This Act imposed reporting and disclosure requirements (ex. Form 5500) on employers who sponsor welfare benefit plans. Other requirements include a plan fiduciary and Summary Plan Description. This Act shifted more regulatory power back to the federal government.
(iv) This Act focused on three areas: 1) Insurance Portability and Availability, 2) Health Insurance Fraud and Abuse, and 3) Administrative Simplification. This Act allows federal regulations to govern when no state laws are present.

117
Q

Decisions states must make related to ACA exchanges

A

hint: EGG, BIB, CLAM, FPV

  1. should the state ESTABLISH an exchange? if a state does not, the federal government will set one up for it
  2. GOVERNANCE STRUCTURES - the exchange could be established within an existing state agency
  3. should GROUPS with 51-100 employees be allowed to join the exchange in 2014?
  4. should CARRIERS be required to participate in the HBE?
  5. influencing the LEVEL OF PARTICIPATION - e.g. by making the HBE attractive and available to more customers
  6. controlling ANTISELECTION- e.g. by implementing a risk adjustment system
  7. should the state MERGE the individual and small group rating pools?
  8. standardized BENEFIT PACKAGES - should the state require specific benefit packages at each plan level?
  9. INTRA-STATE exchanges - should regional exchanges be set up?
  10. should a basic health plan (BHP) be established (which would be outside the exchange)? -BHPs are for residents under 200% of FPL who are not eligible for Medicaid and lack affordable access to comprehensive employer coverage
  11. how will the exchange FUND administration costs - e.g. through premium taxes, carrier assessments, and provider assessments
  12. how should the state control which carriers PARTICIPATE in the exchange?
  13. what VALUE-ADDED SERVICES should the exchange provide? e.g. it should enhance the required online comparison tool
118
Q

ACA items in retention loads

A

Health Insurer Tax
o new tax of $8 billion in 2014 ($8 billion in 2014, increasing to $14.3 in 2018 and indexed thereafter) to be used to fund various ACA provisions
o not-for-profits pay 50% of the assessment and certain plans pay 0% so we pay 100%
o assessed across all health insurance sector but not assessed on ASO products so applies to individual and small group insured but not on large group ASO

Excise Tax for High Cost Health Plans
o New tax on rich plans equal to 40% of the excess costs over $10,200 single ($27,500 family)
o Tax is to discourage overly rich coverage (as well as just a source of funds for other ACA provisions)
o Tax doesn’t apply until 1/1/2018 so not applicable for any of the coverage for 2014 pricing

Reinsurer Fee
o Used to pay for high risk members in the individual products but funded assessed across all products, including ASO.
o Covers 80% of the expense between $60K and $250K
o So, all three products need to include an estimate of this fee in their retention but you should also factor in any expected recoveries on the individual product claims
projections

Patient Centered Outcomes Research Institute Assessment
o Fee paid to cover the cost of this new not-for-profit institute on the clinical effectiveness of medical treatments
o Assessed on health plans and employers so should be included in retention for all three products

Health Benefit Exchange Fee
o Amount paid to exchange for its services (marketing, enrollment, subsidy checking, etc.)
o Since offering individual and small group products off and on the exchange, need to estimate % that will be sold on the exchange so that you can calculate the average amount to include in retention
o Do not need to include in large group ASO retention since it is not sold on the exchange

119
Q

Differences between a dual-eligible SNP plan and a Medicare-Medicaid Financial Alignment Demonstration

A

D-SNPs
o Provide coordinated provider network and schedule of benefits across Medicare and Medicaid to dual eligibles
o But level of integration varies across states
o Federal contract for Medicare benefits
o Health plan may or may not be at risk for Medicaid-covered services under separate contract with the state
o Medicare and Medicaid revenue streams are kept separate
o Prospective payments based on plan’s bid

Medicare Financial Alignment plans
o Fully coordinated care for dual eligibles
o Medicare and Medicaid revenues are combined and savings are shared between state and federal government
o Capitated model – three way contract between plan, state, and CMS; prospective payments that anticipate savings; health plan is fully responsible for providing integrated Medicare and Medicaid benefits; plans receive separate caps for Medicare A/B, Medicaid, and Medicare
Part D, quality withhold on Medicare A/B and Medicaid pieces

Managed FFS Model – state is responsible for establishing program to coordinate care for duals; in return state will be eligible for share of savings based on retrospective measurement as long as quality thresholds are met

120
Q

Identify sources of potential savings from Medicare-Medicaid Financial Alignment Demonstrations.

A

Savings sources

Acute
o Coordinate treatment of multiple chronic conditions
o Provide care in most appropriate setting, emphasizing community-based care
o Reduce or eliminate unnecessary tests or procedures
o Better manage ambulatory sensitive admissions to reduce avoidable emergency room visits and inpatient admissions or readmissions

Behavioral Health
o Improve coordination between Medicare and Medicaid with emphasis on community-based care

Long-term care
o Delay members entry in to nursing homes by use of HCBS waiver services
o Discourage unnecessary hospital admissions from nursing homes

Admin
o Increase enrollment in order to help spread fixed costs
o Reduce marketing costs
o Integrate Medicare and Medicaid appeals process

121
Q

What do CMS savings vary by?

A
  1. population included under demonstration
    a. seniors not eligible for nursing homes
    b. nursing home eligibles only
    c. dual-eligible enrollees under age of 65
  2. services covered under demonstration and other program structure benefits
  3. penetration of manged care prior to the implementation of the demonstration program
  4. historical acute care and long-term care utilization patterns of the targeted population
122
Q

Differences between simple and traditional cafeteria plans

A
  1. Simple plans were established by the ACA for plan years after 2010. Traditional plans were established by Revenue Act of 1978.
  2. In simple plans, all employees who were credited with at least 1000 hours of service for the preceding year are eligible. For traditional plans, In traditional plans, present or former employees’ include common law employees, leased employees, and fulltime life insurance salesmen are eligible.
  3. In simple plans, can exclude certain classes of employees (e.g. those under age 21). In traditional plans, can exclude employees who have not completed three years of employment and may be excluded as long as participations begins no later than the first day of the first plan year beginning after the three-year requirement has been satisfied.
  4. In simple plans, exclusion application is applied throughout the year. In traditional plans, exclusion application is met before initial plan year or participation.
  5. In simple plans, employer contribution is required. In traditional plans, employer contributions are not required.
  6. In simple plans, contribution minimum is 2% of each qualified employee’s compensation or Amount equal to lesser of 6% of the qualified employee’s salary twice the salary-reduction contribution of each qualified employee. In traditional plans, no minimum contribution minimum is required.
  7. In simple plan, if it passes eligibility and contribution requirements, there is a safe harbor and doesn’t have to do Section 125 eligibility, contribution, benefits, and key employee contribution tests. Traditional plans are subject to an eligibility test, a contributions and benefits test, and key employee concentration test.
123
Q

Changes you can make to cafeteria plan mid year due to pregnancy

A

Can change the following:

adoption coverage
dependent/ spouse coverage
group term life insurance
accident and health coverage

124
Q

Examples of services covered under a Section 1915c Home and Community-Based Services Waiver

A

Adult day care
Respite care
Personal Care
Training of a caregiver

125
Q

Federal requirements for states choosing to implement Section 1915c Home and Community-Based Services Waiver

A

Waiver is no more costly than FFS

The program ensures that measures are taken to protect the health and welfare of consumers

126
Q

Elements of effective managed LTC models

A

hint: CRAB PIT PC

Care Management – a team of providers makes a coordinated care plan that includes many types of providers and is culturally sensitive.

Rates – Design reimbursement rates to encourage care in a community setting and to discourage use of more expensive institutional care.

Authority – The waiver should have the authority to ensure adequate access to cost effective waiver services

Benefits – cover all of Medicare and Medicaid at least.

Program design – the program should demonstrate savings.

Identification and Stratification. – Members are interviewed early in the process and are identified as high risk in order to make sure they are in a program that meets their needs.

Transition Care – There is a care team to make sure that transitions from care settings are smooth and the member can stay in the community.

Population – cover as broad a population as possible

Comprehensive Care management – The care plan should go beyond regular medical benefits.

127
Q

Describe the 3Rs

A

Risk adjustment:
o A tool used to redistribute total payments across health plans to account for the relative risk of plan participants
o Mitigate anti-selection among insurers; help ensure plans are appropriately compensated for risks they enroll
o Applies to non-grandfathered small group and individual, on and off exchange
o Permanent beginning in 2014

Reinsurance:
o Protect individual market plans against financial losses from individuals with unusually high claims
o Funds for those payments will be collected from all individual and group plans, including grandfathered plans and self-funded plans
o Applies to non-grandfathered individual market plans, on and off exchange
o Applies 2014 – 2016

Risk Corridor:
o Temporary program to limit gains and losses for insurers
o Applies to individual and small group plans on exchanges
o Applies 2014 - 2016

128
Q

Describe:

UPR
DPAC
PDR

A

Unearned premium reserve (UPR)
UPR is a reserve held for premiums in advance of their due date.
It is treated as a LIABILITY equal to the premiums received, but not recognized.
Since group contracts are generally short in duration, straight-line depreciation is used in calculated UPR.

Deferred policy acquisition costs (DPAC)
DPAC is an ASSET that is equal associated with unearned premiums.
It should be recognized/timed similarly to that unearned premium.
DPAC is generally relatively low for group coverage.
It should only be held up to the point of RECOVERABILITY.
RECOVERABILITY is demonstrated when:
(Loss Ratio) + (Total Expense Ratio) 100%
It applies to the entire premium guarantee period, even if the period extends beyond the current contract year.
Investment income may be used to determine recoverability

129
Q

Key conceptual differences between STAT and GAAP

A

GAAP reporting attempts to match the incidence of revenue and expenses, while statutory reporting tends to accelerate recognition of expenses and defer recognition of revenue

Statutory reporting attempts to determine the value of the insurance company if it were to liquidate, while GAAP looks at the insurance company as a going concern

Many of the conservative assumptions require for statutory reporting can be replaced by a much less conservative margin for adverse deviation in GAAP

Group and Health Core (5 decks)

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