Multiple Choice Environment Flashcards
1
Q
Multiple Choice Environment
Favorable vs. Unfavorable Selection
A
- Favorable = low risk EE choose plan option
- Unfavorable = high risk EE choose plan option
2
Q
Multiple Choice Environment
Why is Multiple Choice More Expensive than Single Choice?
A
- Individuals minimize their costs at expense of insurer or ER
- Less economy of scale and negotiating leverage
- Communications = complex
- Higher admin expenses
3
Q
Multiple Choice Environment
Advantages for Insurers and Employers
A
- Introducing new option
- Taking advantage of favorable selection
- Encouraging consumerism
- Implementing defined contribution concept
- Offering choice distinguishes an insurer or ER as leading-edge
4
Q
Multiple Choice Environment
What Factors Influence EE Choice?
A
- Introducing new option
- Taking advantage of favorable selection
- Encouraging consumerism
- Implementing defined contribution concept
- Offering choice distinguishes an insurer or ER as leading-edge
5
Q
Multiple Choice Environment
Common Multiple-Choice Scenarios
A
- Medical coverage vs. no coverage (creates antiselection)
- Choice between:
- ER plan and other coverage
- Member cost-sharing
- Provider networks
- Rx formularies
- Insurers
- Optional riders
- Consumer-directed or traditional plans
6
Q
Multiple Choice Environment
Underwriting Techniques in Multiple Choice Situation
A
- Additional premium margin
- Limit spread in EE contributions from lowest cost option to highest
- Limit spread in benefits between richest and lowest option
- Mix favorable provisions among options
- Avoid options with selection potential for specific issues
- EE participation requirements
7
Q
Multiple Choice Environment
Pricing Strategy
A
- Additional premium margin
- Limit spread in EE contributions from lowest cost option to highest
- Limit spread in benefits between richest and lowest option
- Mix favorable provisions among options
- Avoid options with selection potential for specific issues
- EE participation requirements
8
Q
Multiple Choice Environment
Monitoring Results
A
- Loss ratios for each option
- Actual to expected selection patterns
- Changes in health status by options over time
- Competitor pricing and UW
- Market research what influences insureds choices
