govt ins

Question 1

Reasons for govt participation in insurance FCC(ES)

Answer 1

1. Fill unmet need
2. Compulsory
3. Convenience - set up program quickly
4. Efficiency - no agents + no advertising→ lower prices
5. Social purpose - profit doesn’t matter

Question 2

Criteria for evaluating effectiveness of govt insurance programs W/I-SEAN

Answer 2

1. Welfare vs Insurance
2. Social purpose?
3. Efficient?
4. Accepted by public?
5. Needed?

Question 3

Unemployment insurance

Answer 3

1. Provide by govt (not private at all)
2. Elongates unemployment

Question 4

govt participation in Crop insurance is at what level?

who are the parties?

Answer 4

partnership

1. private insurer
2. Federal Risk Managment Agency (RMA)

Question 5

Crop insurance (coverages) (2)

Answer 5

1. Low yields (due to drought/flood)
2. Low prices

Question 6

Crop insurance is partnership between private insurers, federal risk managment agency (RMA), and fed govt

what does each do?

Answer 6

private insurer: market, write, service policies to anyFarmer that applies for coverage

federal risk managment agency (RMA): set rates, reinsurer, subsidize premium

fed govt: reimburse private insurers for expenses

Question 7

Crop insurance advantages

Answer 7

1. Availiability
2. Affordability – govt subsidized
3. Stabilize farming industry (mitigate cat risk)

Question 8

Crop insurance disadvantages & solutions (3)

Answer 8

1. Govt losing $ (solution: shift cost to private market)
2. Encourages farming in high risk areas
3. Encourages over production

Question 9

adv (2) & disadv of crop insurance subsidies

Answer 9

adv: famers buy more coverage

adv: everyone has coverage–>everyone is elgible for disaster relief program (crop insurance is required for disaster relief)

disadv increased costs for taxpayers

Question 10

Fed employee compensation act

what kind of program is it?

who does it cover?

how was it effective?

Answer 10

program: federal workers compensation program

covers employment related peronsal injury of civilian govt employees

effective: fewer law suits→costs down

Question 11

Long shore & harbor WC act

what kind of program is it?

who does it cover?

how was it effective?

why created?

Answer 11

program: federal workers compensation

covers: injured non-seamen

effective : fills coverage gap not provided by state

Created bc: not sure which state WC program applies at harbor

Question 12

Black lung benefits Act

what kind of program is it?

who does it cover?

how is it funded?

why created?

Answer 12

program: federal workers compensation

covers: wages & medical bills (of totally disabled coal miners)

funded: federal tax on coal companies + borrow $ from fed govt

created bc: inadequate state WC compensation

Question 13

State workers compensation markets(4) (WC is compulsory like PP auto)

• Identify*
• Describe*

Answer 13

1. Partnership - state defines benefits but private insurer provides benefits & sells policy
2. Exclusive state funds – employer must use state fund or self-insure
3. Competitive state funds – state govt & private insurers compete (state fund might be a residual market)
4. Residual market - last resort, subsidized by private market, state fund

Question 14

Workers compensation insurance mechanisms (4)

Answer 14

1. Private Market
2. State Govt Program
3. Self Insure
4. State Residual market (last resort) (set up b/c state has no state fund or state fund is not used in last resort)

Question 15

Residual markets lose $ - how are losses made up

Answer 15

1. Low risks (private market) subsidize high risk (residual market)

Question 16

WC Residual market mechanisms (3)

Identify

Describe

Answer 16

1. Assigned risk plan – state assigns applicant to insurer based on WC market share (insurer services policies like normal voluntary policy)
2. Joint UW association – profit and loss shared by insurers in proportion to WC market share
3. Reinsurance facility – profit and loss shared by insurers in proportion to WC market share

Question 17

WC Competitive State Funds advantages vs disadv

adv 1 vs disadv 1

adv 2

Answer 17

adv: Fill unmet need→WC is compulsory

vs disadv might be unnecessary + private market competition can keep P↓

adv: Efficiency →No advertising nor agent commission→P↓

Question 18

WC exclusive state funds advantages vs disadv

adv 1 vs disadv 1

adv 2

Answer 18

adv: Fill unmet need → WC is compulsory

vs disadv: might be unnecessary + lack of competition → P ↑

adv: Efficiency → No advertising nor agent commission → P ↓

Question 19

WC partnership advantages vs disadv

adv 1 vs disadv 1

Answer 19

adv: Fill unmet need→ WC is compulsory + share resources

vs disadv might be unnecessary

Question 20

Describe the interaction between workers comp and medicare

who is primary

who is secondary

Answer 20

Workers comp is primary

medicare is secondary (only pays after WC benefits are exhausted)

Question 21

describe Medicare conditional payment

Answer 21

1. If medical cost happen BEFORE WC (primary) coverage begins THEN Medicare (secondary) pays but is reimbursed by WC

Question 22

Medicare set-aside allowance (MSA)

describe

funding by

who pays

relevance

purpose

Answer 22

Portion of (WC) settlement set aside for future medical costs due to injury

Agreed to & funded by all parties in settlement

WC pays via MSA & Medicare pays after MSA is exhausted

Relevance: when WC coverage begins prior to Medicare eligibility but WC continues after Medicare Elgibility

Purpose: Minimize Medicare payments

Question 23

Medicare Set-aside Allowance (MSA)

problem (1)

solution (3)

Answer 23

1. Medicare didn’t know if injured party was collecting WC so Medicare made payments when they shouldn’t have
2. Solution: MSA must be approved
3. Solution: injured workers must make pmts w/ interest bearing account
4. Solution: injured workers must report pmts

Question 24

Medicare and Medicaid SCHIP extension requirements

Answer 24

1. WC insurers must report claims to CMS (centers for medicare services)

Question 25

Medicare and Medicaid SCHIP extension act actuarial implications

Answer 25

1. MSA now has lengthy approval process→slowdown of claims→–> select lower LDFs–>lower ultimate losses –> underestimate rsvs
2. MSA fully funded→WC rsvs up