Module 2: Rating and Premium Setting Flashcards
What is pure premium?
The expected claims experience. Defined as the probability of loss times the magnitude of the loss.
What’s the loading percentage?
Markup insurer applies to cover objective risk, profit, marketing, adjudicating, claims processing, coordinating benefits, and providing access to its network.
The ACA requires the medical loss ratio for small groups up to 100 to be no less than ___% and ____% for fully insured large groups.
Small Groups: 80%
Large Groups: 85%
What’s carve-out coverage?
Coverage that may have been provided as part of a plan but is now provided separately. Examples: prescription & mental health.
The larger the expected loss, other things equal, the _________ the objective risk
Smaller
Dispersion in losses related to some measure of expected losses and number of covered lives
Objective Risk
What is community rating?
When all individuals or all groups are put in a single risk pool.
What’s manual rating?
A system in which insurers place insureds in groups according to their loss-producing characteristics.
What are the two basic types of experience rating?
Prospective and Retrospective.
What is prospective rating?
A rating that uses past experience to develop a future premium.
What’s retrospective rating?
A rating where current experience is used to calculate the current premium. Similar to self funding arrangements.
What is a credibility factor?
Refers to the extent to which an insurer can reply on the loss data of an employer when using experience rating.
What are the 2 stop loss types?
Aggregate (total) and specific
What does aggregate stop loss do?
When the annual claims expenditures reached a predetermined level, the firm is not liable for additional claims for remaining of the year. Just like OOPM for individuals.
What does specific stop loss do?
Thai limits the amount that a firm would pay on any single claim or individual.
How did the enacted of ERISA in 1974 impact retrospective experience-rates health plans?
The legislation allowed plans that were self-insured under the terms of the legislation to be exempt from state insurance regulation. As a result, many converted to being truly self-insured to avoid premium taxes and state regulations.
What’s an ASO contract?
Administrative service only. The firm bears finance risk of claims (self insures) while paying for admin services from an insurer or TPA.
What’s the % of workers in partially or completely self insured health plans?
60%
What’s adjusted community rating?
Uses the HMO’s entire pool of utilization experience and applies specific characteristics of a firm to weight these data to better reflect the characteristics of the employers workforce.
What’s community rating by class?
Uses the same adjusted community rating factors but adds analogous adjustments for the industry and for the age and gender mix of the group.
Which eating methods are federally qualified HMO’s allows to use?
Adjusted community rating or community rating by class is they do not use community rating.
What the consequence of combining groups with significant different claims experience into the same risk pool?
Produces lower premiums and more coverage for the high risk groups but higher premiums and less coverage for low risk groups.
ACA eliminated the use of _________ in setting health premiums.
Gender
What stipulation does the ACA make regarding the relationship in health insurance premiums between an aged insured and a younger insured?
ACA requires premiums for the oldest insured to be no more than three times that of the youngest insured
