Module 5 Funding Of Health And Welfare

Question 1

What are the three types of funding methods for health and welfare insurance plans?

Answer 1

Self-insured
Fully insured
Partially insured 

Question 2

In regard to insured health and welfare plans, what does the term fully pooled mean?

Answer 2

Premium rates are based on the Claims experience of the pool or community

Question 3

When funding health and welfare plans with an insurer, what are key advantages?

What is the one downside?

Answer 3

Limited administration on the employer -managing enrollments and changes)

Easier to budget because the only charge is the premium invoice

Claims risk gains 100% with the insurer

Downside: The employer does not have much flexibility in the plan

Question 4

What are the elements of an insured premium structure?

Answer 4

Margin (potential profit)

Expenses (Taxes, fees, administrative charges, carrier, profit, commissions)

Expected claim charges (Included in expenses above)

Question 5

What type of employers typically decide to be self insured

Answer 5

Larger employers go with self insured option because they can mitigate the financial risk better than smaller employers

Question 6

What type of employers typically decide to be self insured

Answer 6

Larger employers go with self insured option because they can mitigate the financial risk better than smaller employers

Question 7

How are claims paid on a self insured plan?

Answer 7

The organization pays Claims and administration fees directly out of the general assets

Question 8

What are advantages of a self funded plan?

Answer 8

Lower cost

More control over plans

Protection under ERISA employee, retirement, income, security act

Question 9

What are important factors and deciding whether to self fund insurance plans

Answer 9

Risk tolerance

Degree of predictability of cost required

Availability of cash reserves

Time and skills to administer

Question 10

What are key characteristics of self insured plans?

Answer 10

Lower cost

Favorable experience

Lower administration

Cash flow management opportunities

Avoid state, mandated benefits

No state premium tax

Flexibility and plan design

Question 11

Fully insured plans have pooling charges, how do self funded plans protect against high cost claims?

Answer 11

Stop Loss protects employer from large individual claims and excessive total claims

Question 12

What type of employer would use a partially self funded medical plan?

Answer 12

Smaller employer, who doesn’t have the financial ability to go fully self insured

Question 13

Define aggregate stoploss

Answer 13

Liability for plan sponsorship is Capt at some percentage of expected total claims

Example 125%

Question 14

Define specific stoploss

Answer 14

Liability for plan sponsor is capped at specific amount

Question 15

What are the essential functional areas for self-insured plans?

Answer 15

Enrollment (ensure employees independence are properly identified)

Claim processing

Communication

Utilization review

Case management

Lost control and prevention (employee one this programs employee assistance programs)

Plan design and redesign

Legal services

Claims review process

Cobra administration, and processing

Question 16

Regarding risk management and benefits programs, a program with the right price and low risk to the employer and employee is ideal

What are the goals of an employee benefit program?

Answer 16

Meet the reward strategy of the business

Meet legal obligations

Meet contractual obligations

Question 17

When managing risk associated with benefits programs, what are the three main areas to focus on?

Answer 17

The process of analyzing procedures and practices that are in place

Identifying risk factors

Implementing procedures to address those risks

Question 18

What are some common risks that accompany and organizations benefits plan?

Answer 18

Financial risk
Accounting risk
Compliance risk
Governance risk
Operational risk
Employment brand, and talent risk

Question 19

What are three methods of handling risk?

Answer 19

Avoidance
Cost sharing expenses
Contractual transfer

Question 20

When handling risk what is meant by avoidance?

Answer 20

Exclusions
Pre-pre-existing condition limitations
Evidence of ensure ability
Plan limitations

Question 21

When considering methods of handling risk, what is meant by cost sharing expenses?

Answer 21

For predictable loss patterns, it might make sense to self ensure

Large deductibles

Question 22

When handling risk associated with benefits plans what is the term contractual transfer mean?

Answer 22

Risk sharing arrangements

rate guarantees

Hold harmless agreements

Indemnification agreements

Question 23

Financial risk factors, how do claims cost impact an employer?

Answer 23

Actual claims experience strongly determines health insurance premium rates

Alternative funding strategies offer a different way to manage other cost

Either way employers are affected by the cost of actual claims

Question 24

When considering the loss management model associated with benefits plans, what are the four steps of the continuous improvement loop?

Answer 24

Loss avoidance

Loss reduction

Loss settlement

Loss diagnosis

Question 25

In the loss management model, what is meant by loss avoidance

Answer 25

Drug testing Physical exams Pre-existing conditions Evidence of insurability Preventive care Safety programs Seat belts

Question 26

In the loss management model what is meant by loss reduction

Answer 26

Plan limitations Disease management Screenings Provider discounts Medical management Case management Plan design

Question 27

In the loss management model what is meant by loss settlement

Answer 27

Claims administration Electronic data interface Capitation Diagnostic related groups (DRGs) Swipe cards

Question 28

In the loss management model what is meant by loss diagnosis

Answer 28

Data analysis Performance metrics Clinical quality Outcomes Financial Utilization

Question 29

What are three measures of loss control?

Answer 29

Transfer of risk Pooled exposures for greater predictability Law of large numbers - Greater number of exposures greater predictability

Question 30

What are the elements that comprise the cost of insurance? The cost of insurance is a function of the following

Answer 30

Expected losses(paid claims and required reserves) Administrative cost Required statutory payments Predictability of loss Distribution cost (sales and commission) Profit

Question 31

What are advantages of an employer using public healthcare exchanges?

Answer 31

Employers may elect to consent employees to see coverage to the federal and state marketplace Transfers, risk to the employee for coverage Avoids the Cadillac tax (40% tax unemployment, sponsored healthcare coverage that exceeds a certain value )

Question 32

What are the advantages of private healthcare exchanges for employers?

Answer 32

Employers may choose to offer coverage through through private healthcare exchanges through primarily a fully insured approach Provide great cost predictability for the organization Transfer of administration processes Fully insured approach avoid the Cadillac tax Employers must comply with employers shared responsibility, provisions

Question 33

Explain fully pooled community rated rate design

Answer 33

Rates are based on the Claims experience of a pool Normally used in rating, small groups, lacking, sufficient statistical predictability of claims experience Insurance company bears the entire risk either wins or loses

Question 34

Two Methods for setting rates for fully insured health plans

Answer 34

Prospective rating Retrospective rating

Question 35

Define rate setting using prospective rating

Answer 35

A method used in reaching an insurance rate and premium for a policy period. Based on the loss experience of a prior period

Question 36

Define rate setting using a retrospective rating

Answer 36

A method that combines actual losses with graded expenses Produces a premium that more closely reflects the current experience of the insured group

Question 37

Characteristics of a prospectively experience rated policy

Answer 37

Rates are at prospectively (Set for the future, fully or partially based on historical claims experience Credibility - The larger the group being covered the higher the credibility assigned(predict) Losses are pooled Insurance organization accepts the entire risk (wins or loses)

Question 38

How do retrospective rating agreements work?

Answer 38

The insurer calculates actual losses in comparison to anticipated Claims If losses exceed anticipated claims the insurer can retrospectively call in an additional amount of premium to a previously specified maximum (example 10%) Losses don’t exceed the designated levels the employer retains funds

Question 39

What’s the definition of a self insured minimum premium plan?

Answer 39

The employer pays all claims up to an agreed amount, and the carrier pays the rest. Due to this special arrangement, a unique approach is required to set rates.

Question 40

How is risk offset for self funded or partially self funded plans?

Answer 40

Stop loss program either aggregate or specific amount Administrative fee is paid to a third-party Accrual rates are used to estimate the total cost of self-insured plans

Question 41

How to develop the accrual rate

Answer 41

Estimate incurred Claims per employee or member Add an appropriate margin Add administrative expenses Total per employee per member cost Convert to monthly rates and spread across right tiers Interest on reserves

Question 42

As a cost containment strategy, what is reference based pricing

Answer 42

Healthcare cost containment model that limits what a group health plan will pay for certain high cost services, including hospital and outpatient facility charges

Question 43

Which of the following is an advantage of a self insured plan? Known cost May avoid potentially higher cost State mandated benefits Enhanced Employee Relations

Answer 43

May avoid potentially higher cost

Question 44

If an organization is managing risk through a retention strategy, it is most likely to be doing which of the following Obtaining rate guarantees Self ensuring Negotiating indemnification agreements Building exclusions and plan limitations into the plan design

Answer 44

Self ensuring

Question 45

Disease management and screenings are tactics used under what type of loss management Loss avoidance Loss reduction Loss settlement Loss diagnosis

Answer 45

Loss reduction

Question 46

Under which approach does the insurer assume the greatest degree of risk? Fully pooled community rated Retrospectively experience rated Experience rated refund eligible Minimum premium

Answer 46

Fully pooled community rated

Question 47

Who assumes the most risk at a prospectively experience rated plan? The insurer The employer The employee The provider

Answer 47

The insurer

Question 48

Which type of self funded insurance includes the purchase of services from a single vendor Aggregate Integrated Unbundled Specific

Answer 48

Integrated