Government Insurance Study Note Flashcards
2 methods in which Government has the capacity to subsidize losses
- Directly taxing taxpayers
- Indirectly, by using a government-provided fund to subsidize any losses
5 reasons for Government participation in insurance
- Filling insurance needs unmet by private insurance
- Compulsory Purchase of Insurance
- Convenience
- Greater Efficiency
- Social Purposes
List 2 examples of programs where government has subsidized losses
- Crop Insurance
- Flood Insurance
- Federal Crime Insurance Program (expired in 1995 as private market could profitably insure)
2 implications to the government in markets where insurance purchase is mandatory
- government may feel obliged to provide insurance
- government may believe that the private market should only be able to make limited profits
Why may the apparent savings of having the government provide the insurance be overstated
Possibly other government departments are performing the services on behalf of the government insurance entity
3 levels of government participation in insurance
- Exclusive insurer
- Partner with private insurer
- Competitor to private insurer
2 examples of Government acting as Exclusive Insurer
- Social Security (Federal)
- Government-run workers compensation program (State)
List a few examples of government partnering with private insurer
- NFIP, TRIA, Federal Crop Insurance (Federal)
- FAIR, WC, Windstorm plans, Residual Auto plan (State)
List an example where the government acts as a Competitor to private insurer
WC (some states)
List 3 questions that should be asked when evaluating government insurance programs
- Is it necessary for the government to supply insurance (does it achieve a social purpose that can not be provided by the private market)?
- Is it insurance or a social welfare program? (Social welfare is financed by tax, and is designed to provide a benefit to qualified people, without any payment from those people)
- Is the program efficient and accepted by the public?
Describe the structure of Crop Insurance
Public private partnership: Private insurers sell & service the policies. The federal government sets rates, determines which crops can be reinsured, and reinsures the losses
2 changes made in 1980 to increase participation in Crop insurance plan
- expand types of crops and areas in which coverage is provided
- authorized subsidy of premium
Critique the performance of Crop Insurance
- Supporters: it is necessary to bring stability to a volatile sector of the economy
- Opponents: may encourage agricultural overproduction & encourage farming in disaster prone areas, harming the environment, and increasing disaster relief costs
List 3 Federal Workers Compensation Programs
- Federal Employee Compensation Act (FECA)
- Longshore and Harbor Workers’ Compensation Act of 1927
- Black Lung Benefits Act
5 ways that Government participates in State WC programs
- Partnership with Private Insurers
- State Funds
- Competitive State Funds
- Exclusive State Funds
- Residual Markets
How does the government act as a partner with Private Insurers
State laws prescribe benefits for which employers are responsible
2 fears of businesses due to WC laws that encouraged the government to set up State Funds
- Refusal of coverage by private insurers (Would be forced out of business)
- High rates
Briefly describe the notion of “conditional payment”
Many people begin incurring medical costs before eligibility to collect insurance is determined. Until this time, Medicare will make conditional payments. If the insurer is determined to be primary, it will need to reimburse Medicare
Briefly describe “Medical Set-Aside Allocation”
MSA calls for all parties to a settlement to agree to set aside money to be primary over Medicare, for the period where the individual is eligible for Medicare
2 problems of the implementation of MSAs
- Medicare administrators did not know if Medicare eligible parties were collecting workers compensation or liability payments
- Parties had little incentive to agree to MSAs
What type of MSAs will be reviewed by CMS
The claimant is already a Medicare beneficiary and the settlement exceeds $25K, or
The claimant is expected to be Medicare eligible within 30 months, and the settlement or expected future medical costs & lost wages exceeds $250K
2 things that Claimants must agree to once the MSA is approved
- Pay the workers compensation related medical bills using the MSA
- Complete the reporting of the payments
List some P&C Actuarial Implications of the Recent Changes to Medicare/ MSAs
- Between 2008 and 2010, in advance of the reporting deadline, there may have been an increase in Claims closings & Lump-sum payments -> This jump will distort paid and reported losses
- Since then, there may have been a slowdown in claim settlement rates due to the change in MSA procedures
- A portion of the increasing WC medical trends may be due to the new MSA requirements
- There is also a risk that injured workers who are currently receiving Medicare may have the payments reclassified as workers compensation
Why may the new MSA requirements cause WC medical trend to increase?
Historically, settlements may have been attributed fully to indemnity, instead of being segregated into medical vs indemnity. MSAs will require a correct division into the two pieces
