H1. Gov't Insurance Study Note Flashcards Preview

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Flashcards in H1. Gov't Insurance Study Note Deck (26):

5 reasons for Government participation in insurance:

1. Filling insurance needs unmet by private insurance
2. Compulsory Purchase of Insurance
3. Convenience
4. Greater Efficiency
5. Social Purposes


2 methods in which Government has the capacity to subsidize losses:

1. Directly taxing taxpayers
2. Indirectly, by using a government-provided fund to subsidize any losses


2 implications to the government in markets where insurance purchase is mandatory:

1. government may feel obliged to provide insurance
2. government may believe that the private market should only be able to make limited profits


List 2 examples of programs where government has subsidized losses:

1. Crop Insurance
2. Flood Insurance
3. Federal Crime Insurance Program (expired in 1995 as private market could profitably insure)


3 levels of government participation in insurance:

1. Exclusive insurer
2. Partner with private insurer
3. Competitor to private insurer


Why may the apparent savings of having the government provide the insurance be overstated:

Possibly other government departments are performing the services on behalf of the government insurance entity


2 examples of Government acting as Exclusive Insurer:

1. Social Security (Federal)
2. Government-run workers compensation program (State)


List a few examples of government partnering with private insurer:

-NFIP, TRIA, Federal Crop Insurance (Federal)
-FAIR, WC, Windstorm plans, Residual Auto plan (State)


List 3 questions that should be asked when evaluating government insurance programs:

1. Is it necessary for the government to supply insurance (does it achieve a social purpose that can not be provided by the private market)?
2. Is it insurance or a social welfare program? (Social welfare is financed by tax, and is designed to provide a benefit to qualified people, without any payment from those people)
3. Is the program efficient and accepted by the public?


List an example where the government acts as a Competitor to private insurer:

WC (some states)


Explain the impact of the fact that in Crop Insurance, the losses have not been shared proportionately between the government and private market:

Historically, the private insurers have made underwriting profits, whereas the federal government has realized underwriting losses


Describe the structure of Crop Insurance:

Private insurers sell and service the policies. The federal government reinsures the losses


Critique the performance of Crop Insurance:

-Even though crop insurance has existed since 1938, the
federal government has periodically had to pass disaster bills to cover uninsured losses
-Many farmers had felt that the insurance did not provide sufficient coverage when natural disasters occur
-Opponents of crop insurance felt that it encouraged overproduction


2 ways in which RMA subsidizes the cost of the Crop insurance program:

1. Subsidizes the premium
2. Reimburses the insurers for the administrative costs


2 changes made to the Crop Insurance program in 2005:

1. Reduced the reimbursement rate to insurers for administrative and operating expenses
2. The risk sharing between the government and insurers was rebalanced


2 changes made to the Crop Insurance program in 2000 to address the concerns:

1. The portion of the premium paid by the federal government increased
2. The level of coverage improved


5 ways that Government participates in State WC programs:

1. Partnership with Private Insurers
2. State Funds
3. Competitive State Funds
4. Exclusive State Funds
5. Residual Markets


List 3 Federal Workers Compensation Programs:

1. Federal Employee Compensation Act (FECA)
2. Longshore and Harbor Workers Compensation Act of 1927
3. Black Lung Benefits Act


2 fears of businesses due to WC laws that encouraged the government to set up State Funds:

1. Refusal of coverage by private insurers (Would be forced out of business)
2. High rates


How does the government act as a partner with Private Insurers:

State laws prescribe benefits for which employers are responsible


Briefly describe Medical Set-Aside Allocation:

MSA calls for all parties to a settlement to agree to set aside money to be primary over Medicare, for the period where the individual is eligible for Medicare


Briefly describe the notion of conditional payment:

Many people begin incurring medical costs before eligibility to collect insurance is determined. Until this time, Medicare will make conditional payments. If the insurer is determined to be primary, it will need to reimburse Medicare


What type of MSAs will be reviewed by CMS:

-The claimant is already a Medicare beneficiary and the settlement exceeds $25K, or
-The claimant is expected to be Medicare eligible within 30 months, and the settlement or expected future medical costs and lost wages exceeds $250K


2 problems of the implementation of MSAs:

1. Medicare administrators did not know if Medicare eligible parties were collecting workers compensation or liability payments
2. Parties had little incentive to agree to MSAs


List some P/C Actuarial Implications of the Recent Changes to Medicare/MSAs:

-Between 2008 and 2010, in advance of the reporting deadline, there may have been an increase in Claims closings and Lump-sum payments -> This jump will distort paid and reported losses

-Since then, there may have been a slowdown in claim settlement rates due to the change in MSA procedures

-A portion of the increasing WC medical trends may be due to the new MSA requirements

-There is also a risk that injured workers who are currently receiving Medicare may have the payments reclassified as workers compensation


2 things that Claimants must agree to once the MSA is approved:

1. Pay the workers compensation related medical bills using the MSA
2. Complete the reporting of the payments