Government Insurers Study Note

Question 1

Reasons for Government Participation in Insurance

Answer 1

Fill insurance need unmet by private insurance
Compulsory purchase of insurance
Convenience
Greater efficiency
Social Purposes

Question 2

Why government requirements for insurability are different to private insurers’

Answer 2

Capacity to subsidize losses: taxes, use government-provided fund (Crop, Flood)

Question 3

Levels of government involvement in insurance

Answer 3

Exclusive insurer (Social Security)
Partner with private (offers reinsurance: NFIP, TRIA, FAIR, WC)
Competitor to private (WC)

Question 4

Evaluation of gov’t insurance (questions)

Answer 4

Is it necessary?
Is it insurance or social welfare?
Is it efficient and accepted?

Question 5

Crop insurance

Answer 5

Operated by Federal Crop Insurance Corporation

Question 6

Crop insurance structure

Answer 6

Private companies sell/service; Federal government reinsures losses (disproportionately), RAM subsidizes cost of program

Question 7

Crop insurance evaluation

Answer 7

Since 1938, but not well covered early on
Opponents felt it encouraged overproduction
Changes – reduce reimbursement to private insurers, rebalanced risk sharing

Question 8

Federal Employee Compensation Act (FECA)

Answer 8

Benefits to non-military federal employees for employment related injuries and disease

Question 9

Examples of Federal WC programs

Answer 9

FECA
Longshore and Harbor WC Act of 1927
Black Lung Benefits Act

Question 10

Examples of State WC programs

Answer 10

Partnership with Private insurers
State funds (insurer of last resort)
Competitive state funds (may or may not be last resort)
Exclusive state funds
Residual Markets

Question 11

Black Lung Benefits Act

Answer 11

Claims financed from excise tax (sufficient to cover current costs of benefits and admin), but must borrow to service debt from prior years; and federal general revenues

Question 12

Evaluation of WC Insurance

Answer 12

Significant competition (18.5%)
Proponents of state funds argue they are specialists (higher levels of services than multilines)
State funds designed to be self-supporting (lower overhead)

Question 13

Medicare overlap with WC

Answer 13

WC is primary; Medicare only pays in WC coverage exhausted

Question 14

Medicare overlap with Liability

Answer 14

Medicare Secondary Payer Act of 1980

Question 15

Medicare Secondary Payer Act of 1980

Answer 15

Medicare secondary to liability; makes conditional payments before eligibility is determined, get reimbursed if insurer determined to be primary

Question 16

Medicare Set-Aside Allocation

Answer 16

Calls for parties to a settlement to agree to set aside money to be primary over Medicare; implicit threat that Medicare would refuse payment if MSAs not submitted/approved and become more aggressive towards reimbursement

Question 17

Center for Medicare and Medicaid Services

Answer 17

Reviews MSAs where the claimant is already Medicare beneficiary and settlement exceeds $25K, or claimant is expected to be Medicare eligible within 30 months, and expectation > $250K

Question 18

Areas of concern, MSAs

Answer 18

Pharmacy costs (some drugs not covered by Medicare)
Life expectancy (MSAs based on actual age vs. rated age)

Question 19

Implications of changes to MSAs

Answer 19

Between ‘08-‘10, jump in closed claims
Since, slowdown in settlement rates (longer process w/MSAs)
Portion of increasing WC med trends may result
Risk that workers currently receiving Medicare may have payments reclassified as WC