Group ins Chpt 31 Pricing Of GI

Question 1

Manual Premium Rates

Answer 1

1. Rating characteristics: age, gender, health status, rating tiers, geographic, industry codes, group size
2. Rating tier choices
3. Marketing, competitive, and Regulatory issues
   
   3. 1 ACA introduced federal rating restrictions

Question 2

Pricing Assumptions

Answer 2

1. Admin expense
   
   1. 1 Expenses to develop, sell, UW, administer, and overhead
   2. 2 Design and development amortized over a number of years
   3. 3 Pricing on the margin: only expenses directly with product included
   4. 4 Considerations
      
      1. 4.1 How are expenses allocated to the product? How should administrative expenses be allocated to groups? What does the competition include as expenses in its pricing?
   5. 5 Sources of data: internal and external
2. Commissions and other sales expenses
3. Premium taxes and other taxes
   
   3. 1 premium taxes vary by state
   4. 2 Other Taxes - Federal and state income taxes
   5. 3 self-insured products do not pay premium taxes
   6. 4 Other taxes: 2 introduced by ACA
      
      3. 4.1 A federal assessment in health coverage (even self-insured)
      4. 4.2 a comparative effectiveness research assessment
4. Risk and profit charges
5. Investment earnings

Question 3

Group Specific Adjustments

Answer 3

1. Large groups based on group’s own experience
2. Adjustments made for new business discounts
3. Economies of scale with jumbo groups in enrollment, billing and administration
4. Self-insured loading based on cost of administrative services and stop-loss

Question 4

Rating tier choice

Answer 4

1. One tier: composite
2. Two tier: employee only, family
3. Three tier: employee only, employee and one dependent, family
4. Four tier: employee only, employee with one dependent, employee with children, family
5. Five tier: employee only, couple, employee with child, employee with children, family