Funding

Question 1

How are state benefits funded?

Answer 1

• Pure PAYG
• Smoothed PAYG
• Equalised PAYG
• GAP
• Terminal funding
• Scaled premium

Question 2

What are the risks of each state funding benefit method?

Question 3

Why are liabilities valued?

Question 4

What is the implication of the valuation basis?

Question 5

What are the different funding methods for an employer?

Answer 5

• Terminal funding
• Lump sum in advance
• Regular premium
• Just-in-time.

Question 6

What are the different funding methods for DB funds?

Question 7

How can funds ensure there is enough funds to meet expenses and unforeseen cashflows?

Question 8

Discuss the main funders of healthcare

Question 9

What are the main healthcare funding models?

Answer 9

In healthcare, the term ‘funders’ is often synonymous with payers as opposed to being ‘funded’. The state can use any of the unfunded or partially-funded financing methods available to it to finance healthcare. Similarly for the employer and individual. Different regulations and tax rules across different entities can influence the financing model adopted.

Question 10

What framework can be used to compare different funding methods?

Answer 10

• Security: Ensures that contributions provide long-term protection and stability, minimizing the risk of shortfalls for members.
• Affordability: Evaluates whether contributions are cost-effective and manageable for both members and employers.
• Realism: Assesses the practicality and feasibility of the funding model, considering the financial health of the funds and contributors.
• Regulation: Ensures compliance with legal requirements and governance standards, keeping contributions within regulatory guidelines.
• Stability: Focuses on maintaining consistent and reliable funding, avoiding sudden financial disruptions or changes.
• Flexibility: Allows for adjustments in contribution levels or timing based on changing circumstances or financial needs.
• Liquidity: Ensures there is sufficient cash flow to meet obligations without causing financial strain on funds or employers.
• Opportunity Cost: Considers the trade-offs between contributing now versus potential investment returns from alternative uses of the funds.
• Accounting: Reflects how contributions are recorded in financial statements, ensuring transparency and consistency with accounting standards.
• Tax: Addresses the tax implications of contributions, ensuring they are treated appropriately for individuals and organizations.