Week 11 Flashcards
Prepare for final exam
In a basic insurance contract, what do R, E(B), and loading fee, refer to? How are they are related in an equation?
R is the total insurance premium, E(B) is the expected medical benefit, and loading fee is all contractual expenses (processing insurance claims and making appropriate payments)
How does an insurance company spread risk?
An insurance company pools risk by spreading average risk - if risks are independent, average risk of an group with n members is expressed as 1/n
The higher the “real” return on capital for the insurance company, the ______ the loading fee
Lower
Describe the non for profit insurance companies and the major players
The NFP companies, most commonly known as the “blue” plans were organized under special legislation passed during the first half of the 20th century. These plans are exempt from taxation, and do not face the same extent of regulation that other insurers do.
Describe the major for-profit insurance companies and the major players
The for-profit model generally dominates the U.S. insurance market (UHG, Wellpoint, Anthem, Aetna, Humana), profits represent a substantial proportion of these firms overall revenue.
Describe the pressure of conversion from NFP TO FP
1) NFP did not do well in capturing economies of scale
2) the blues had emphasized traditional health insurance with coverage for a specific number of days and fee-for-service
3) the rise of managed care has demanded more expensive claims management processing. NFP cannot access equity markets, consequently NFP organizations could not keep pace with the modern insurance world.
what are the two benefits of group insurance over individual insurance
1) lower loading fees due to economies of scale. loading fees decrease as the size of the insured group go up
2) reduced adverse selection
Each ___ % increase in group size creates about a ___% relative decline in loading fees
10%, 2.7%
Describe how the PPACA established insurance exchanges
the PPACA established a set of regional “insurance exchanges” one for small employer groups, and one for individuals
- 12 states established their own exchanges
- 28 states used healthcare.gov as a source of primary exchange
- 11 states worked with the federal program in a state-federal partnership
What were the 4 levels of plans under the PPACA?
Bronze plan (60% of costs covered)
Silver plan (70% of costs covered)
Gold plan (80% of costs covered)
Platinum plan (90% of costs covered)
Catastrophic: level restricted for enrollees under the age of 30, all other plans must exceed 8% of income
Describe the individual mandate in the PPACA including the phase out
Initially, people had to have at least the bronze plan, or they would face a tax penalty. It was “phased in” so the first year that the maximum penalty enacted would be in 2016, and then the tax penalty was phased out in 2017
Describe how the tax penalty under the PPACA would work
Calculated either on an individual or per family level. The maximum of 695 per person or 2.5% of income past a threshold of 10,300 for an individual. For families, maximum of 2,085 or 2.5% of family income. In no case would paying the tax penalty exceed the cost of the bronze plan.
Unlike every other developed country, the U.S. lacks ________ for all citizens
universal guaranteed insurance
most Americans find health insurance coverage through one of three avenues
employer insurance (the majority), medicaid, medicare (although some receive insurance through the individual market)
describe the American model of health insurance
the American model reflects the American political preference for liberty and free choice
- patients (usually) have a free choice surrounding their doctor, hospital, and insurance plan
- doctors (usually) have a free choice surrounding prices to charge, where to practice, and whom to treat
