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A&P(1) > Topic 8 and 9 Risk > Flashcards

Topic 8 and 9 Risk Flashcards

1
Q

How much do ER typically spend on EE benefits and how is the rate of increase?

A
  • Spend high $ on EE benefits, approx. 40% of payroll
  • Rate of increase in cost is high - growing much faster than cash wages (people go on strike for better benefits)
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2
Q

Why do firms offer employee benefits?

A

-Attract and retain capable employees
-Tax advantages
-Productivity and better employee relations
-Employer can take advantage of group insurance

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3
Q

Non-contributory benefits financing

A

-ER pays the full cost of the plan
-EE is covered without making a financial contribution
- all eligible EEs must be covered
-Eligibility = participation

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4
Q

Contributory Benefits Financing

A

-ER and EE share the cost of the plan
-For an eligible EE become a participant, they must make a financial contribution

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5
Q

Voluntary Benefits Financing

A

EE pays for the entire cost of the insurance plan

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6
Q

Section 125 Plans (Cafeteria Plans)

A
  • ER sponsored benefit plan that gives employees access to certain taxable and nontaxable pretax benefit
  • employees contribute a portion of their salary on a pre-tax basis to pay for the qualified benefits
  • ER can deduct the cost of EE benefits as an ordinary business expense (same as salary)
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7
Q

Income Taxes

A

-The EE is sometimes not taxed on the value of their ER-provided benefits
-Method to compensate an EE tax-free (for some benefits)

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8
Q

Flexible Spending Account (FSA)

A

-An EE agrees to reduce their salary pretax by a certain amount and money is deposited into an account
-Three types
~healthcare
~transportation (parking expenses)
~dependent (child care)
~medical care (co-pay & glasses)
-Any unused funds at the end of the plan year are forfeited to the ER

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9
Q

Mandatory/Compulsory Benefits

A

-Common traits are mandated participation and requires the ER to act in a risk-bearing capacity to provide insurance or benefits
-includes social security, worker’s comp, unemployment

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10
Q

Group Insurance

A

-The exposure unit is a group of individuals
-insures the whole group
-no underwriting
-look at the broad characteristics of the group to determine rates

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11
Q

Group Insurance Advantages

A

rates are generally lower than individual insurance
-for the same level of expected cost, GI is less expensive per EE than II
-no individual underwriting – especially helpful if a bad risk
- commissions tend to be lower
- ER helps collect the money

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12
Q

Method to Control Adverse Selection

A
  • waiting periods
  • pre-existing conditions exclusions
    -Minimum participation requirement
  • Minimum group size
  • steady flow of persons through the group (newer, younger, better risks should enter to replace older, less healthy risks)
    -the reason the group exists (should exist other than insurance reasons)
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13
Q

Disadvantages to Benefits Plan

A

-coverage may be temporary
-An EE leaves the group -> coverage might terminate

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14
Q

Issues with Healthcare

A

High costs of healthcare
-high rates of inflation compared to the overall rate of inflation
-high premium for ER
-High costs for the government

High percentage of uninsured or underinsured person
-access problem
-27 million uninsured

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15
Q

High degree of 3rd payment for health care

A

-Insurance companies CIGNA, Aetna, and Blue Cross
-Government
-Employers

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16
Q

What rule can you think of when thinking about FSA?

A

The “Use it or loose it rule”

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17
Q

2-party Typical Market Transaction

A
  • 2 party (supply and demand)
  • price is the equilibrium price
  • consumer know the prices of goods and services
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18
Q

3-party Healthcare Market Transaction

A

3 parties
-supply
-demand
-a financial entity that pays for healthcare goods/service

19
Q

3-party Healthcare Market Transaction - Supply

A

seller/suppliers - usually referred to as a provider of HCGS
-EX: hospital, drug companies

20
Q

3-party Healthcare Market Transaction - Demand

A

Buyers/demand - consumer of HCGS
-patient
-insured person
-EE of ER who provide health insurance as compensation
-Dependent of an EE covered by health insurance

21
Q

3-party Healthcare Market Transaction - Financial Entity

A

Entity financially responsible for pays HCGS
-health insurers
-government
-ER (self-insured)

22
Q

Lethal/Costly Decision

A

-classic moral hazard
-increased quantity demand for HCGS
-Fee-for-service reimbursement of providers

23
Q

Fee-for-service Provider Reimbursement Moral Hazard

A

-payment system used for providers is typically fee-for-service reimbursement
-provider is paid a fee for each service rendered
-The provider then makes a claim to the insurer to pay for services
-insurer pays the fee for service
-retrospective payment by an insurer who didn’t know what the cost would be until they were billed
-an incentive for a provider - supplier induced demand (provide more services)
-incentive for insured - buy more based on degree of cost-sharing - moral hazard

24
Q

Indemnity Plans General Characteristics

A

-1980 - 95% of EEs, 2023 3% of EE
-Insured person has complete freedom of choice of providers
-insured role: indemnity for covered losses

25
Q

Indemnity plans cover

A

-room cost of the hospital
-surgeon’s fee
-follow-up visits from the hospital stay

26
Q

What gaps exist in Indemnity Plans?

A
  • nonhospital based expenditures are not covered
  • even hospital stays has limited coverage
  • balance billing - owe hospital amounts not covered by insurance
27
Q

Major Medical Plans

A

-Benefits provided for a broad array of inpatients and out-patient services
- pays for routine, non-hospital based expenses not covered by basic indemnity plans
- higher limits for hospital stays
- broad coverage - few exclusions
- features cost-sharing (deductible and coinsurance)

28
Q

Role of Insurers in Indemnity Plans

A

-Just indemnify insureds for covered losses
-Manage or coordinate care? -No
-Freedom of choice of providers? Yes

29
Q

managed care plans

A
  • Medical expense plan that provides covered services to the members in a cost-effective manner
  • Choice of physicians and hospitals may be limited
30
Q

Health Maintenance Organizations (HMO)

A
  • removes incentives present under fee-for-service plans to do more rather than less
  • does not always pay providers more for doing more
    ~ Key: places providers/hospital at financial risk for overutilization
  • providers can also not balance bill
31
Q

HMO - Capitation Provider Reimbursement

A

-providers of HCGS are at financial risk for over-utilization
- risk shifting dynamic has changed from those under fee-for-service

32
Q

Disadvantage to HMO Enrollment

A

-less freedom of choice when picking providers
-may have to change providers to join HMO
-Primary Care Physician gatekeeper
-no coverage for out-of-plan utilization

33
Q

PPO general characteristics

A

-PPO contracts with preferred providers
-form a network of providers
-preferred providers agree to
~provide service at a discount from their “full charge”
~accept the PPO payment + any deductibles/copay as payment in full for service
-No balance billing
- not placed at financial risk for under utilization

34
Q

How is a Consumer-Directed Health Plan (CDHP) different?

A
  • Healthcare financing model in which consumers have an economic incentive to manage their care
    -designed to engage people to make decisions on health and wellness-based consumption
    -buy healthcare like other products
35
Q

Why consumer directed health plans?

A

-behavior is responsible for 50% of Health care cost
-force employee awareness of costs
-enable empowered consumers
-80% of claims come from only 20% of the population

36
Q

3 components of a CDHP

A

1) a healthcare reimbursement account
2) ER offers a high deductible health plan
- deductible is much higher than seen in other plans
- high out-of-pocket costs
- no charge for preventative costs
3) insurer makes info available to the insured to help them make better decisions

37
Q

Consumer-Directed Health Plan (CDHP)

A
  • coinsurance
  • high deductible
  • health care reimbursement account
  • EE and ER can add funds (pre-tax)
  • If you spend too much, you pay more
  • covers catastrophic events- cost per person is capped
38
Q

Health Reimbursement Account (HRA)

A
  • EE can use money to pay deductibles and out-of-pocket costs
  • funds roll over year-to-year
  • HDHP - for catastrophic loss
  • HRA for day-to-day health care costs
39
Q

Medicare

A

A federal health insurance program for
- people 65 or older
- certain young people with disabilities
federally funded and federally administered

40
Q

Medicaid

A
  • provides coverage for low-income Americans
  • joint federal and state program
  • federal (60%) and state-funded
  • state-administered (benefits and eligibility can vary from state to state since joint funding)
41
Q

Patient Protection and Affordable Care Act

A

AKA Obama Care
-dependents covered to age 26
-lifetime limits are banned
-no charging higher rates for those with preexisting conditions and coverage of those conditions may not be excluded or reduced
- all preventative care and checkups free

42
Q

How is Obama Care actually paid for?

A

-cost shifting to employers
-2000 penalty for employers who do not offer EE health insurance
-Additional Medicare tax on income over $200,000 annually is subjected to an additional tax of 0.9%
~250,000 for married couples filing jointly or 125,000 for married filing separately

43
Q

Current Trends in Health Insurance

A

-pressure from the government on providers to provide transparency on costs
-specialty medications are driving costs exponentially (wegovy, HIV med, and cancer treatments)
-drugs to treat genetic diseases
-tele health and mental health have been pushed to the forefront

44
Q

Employee benefits

A

any type of compensation other than direct current salary or wages

A&P(1) (17 decks)

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