Managing Antiselection

Question 1

Managing Antiselection

3 Faces of Antiselection (List, Define)

Answer 1

• External = Person first seeking insurance
• Internal = While period is insured
• Durational = When person makes decision about whether or not to end contract

Question 2

Managing Antiselection

Mechanisms to Control External Antiselection

Answer 2

• Individual medical UW before issue
• Preexisting condition provisions
• Enrollment mechanism that doesn’t permit antiselection

Question 3

Managing Antiselection

UW Actions

Answer 3

• Full coverage with no restrictions
• Offer coverage at higher premium rate
• Offer standard policy, but exclude coverage for specific condition
• Offer different policy than the one applied for
• Offer different plan of benefits than the one applied for
• Decline coverage completely

Question 4

Managing Antiselection

Factors when Deciding to Conduct Investigation and Possible Outcomes

Answer 4

• Factors
  
  • Timing
  • Conditions
  • Sizes
  • Sentinel conditions = some conditions related to others lend themselves to antiselection
• Outcomes
  
  • Reformation
  • Rescission

Question 5

Managing Antiselection

Types of Internal Antiselection

Answer 5

• Premium Leakage
• Buydown Effect

Question 6

Managing Antiselection

Premium Leakage

Answer 6

• Insurers allow PH to change to higher deductible at renewal
• Higher risk PH will keep the richer benefit
• Mix of plan leans more towards high risk members and raises average cost

Question 7

Managing Antiselection

Premium Leakage Calculation

Answer 7

1. Look at expected costs after buydown = necessary premium
2. Expected premium (from buydown calculation)

Question 8

Managing Antiselection

Buy-Down Effect (Define and Calculation)

Answer 8

• Insurer never receives full value of premium increase because PHs switch to lower cost plan

1. Increased Premium Expected with No Member Changes
2. Increased Premium with Member Changes

Question 9

Managing Antiselection

Durational Antiselection

Answer 9

• More low risk PH lapse than high risk PH
• Higher lapse rate = more opportunity for antiselection

Question 10

Managing Antiselection

ACA Prohibitions for Individual Major Medical

Answer 10

• UW
  
  • Includes denying or offering alternative coverage
• Health status rating
• Preexisting condition exclusions
• Exclusionary riders
• Lifetime/Annual dollar limits
• Limiting coverage or imposing high cost-sharing to attract healthier risks
• Rescissions
  
  • Except in cases of fraud or intentional misrepresentation
• Marketing practices that discourage unhealthy risks from signing up

Question 11

Managing Antiselection

ACA Measures to Control Antiselection

Answer 11

• Coverage mandate and premium subsidy
• Aligning market rules on and off Exchanges
• Open enrollment periods
• Minimum benefit levels
• Premium stabilization Programs (Traditional Reinsurance, Risk Corridor, Risk Adj)

Question 12

Managing Antiselection

Requiring Coverage Reduces Antiselection Only If:

Answer 12

• Significant penalty
• Requirement applies to broad population segment
• It is enforced