Shared Flashcard Set


SOA Health Core Exam - Objective 6
SOA Health Core Exam - Objective 6

Additional Insurance Flashcards




The "triple aim" (three goals) of health policy (26)
1. Better care for individuals - the Institute of Medicine lists six characteristics of quality health care: safe, effective, patient-centered, timely, efficient, and equitable
2. Better health for populations - public health initiatives should address the upstream causes of poor health (see separate list)
3. Lower per-capita costs
Causes of poor health and public initiatives to address them (28)
1. Environmental factors that contribute to poor population health:
a) Unsanitized water
b) Pollution (air and water)
c) Violence (domestic and street)
d) Unhealthy living environment
e) Food-borne illnesses
f) Lack of access to fresh, healthy foods

2. Community disease prevention - initiatives include childhood immunization requirements and free flu shots and preventive screenings
3. Lifestyle (e.g., obesity epidemic) - initiatives include healthy school lunch programs, safe pedestrian walkways, and taxes on unhealthy foods
4. Smoking and substance abuse - anti-smoking laws have been effective
5. Socioeconomic factors - income is related to poor health. Social programs such as Medicaid try to address this.
6. Wellness and disease management solutions - include programs around disease preventions, smoking, diet, fitness, or weight loss
PPACA individual and group market reforms (34)
1. Individual mandate (see separate list from GHC-802-13)
2. Employer mandate - beginning in 2014, employers with 50 or more full-time employees must offer coverage or pay a fee. The fee = $2,000 * (full-time employees - 30), but is adjusted based on the number of employees who receive a premium tax credit.
3. Essential benefit package - required to be offered by all qualified health benefits plans beginning in 2014. Will provide a comprehensive set of services, cover preventive services without cost sharing, cover at least 60% of the actuarial value of the covered benefits, and limit annual cost sharing to the current law HSA limits.
4. Medical loss ratio (MLR) - starting in 2011, plans must provide rebates to consumers if the MLR is below 85% for large groups (101 or more employees) or 80% for small group and individual plans
5. Benefit and coverage requirements (see separate list)
6. Rating requirements (see separate list)
7. Benefit tiers - all new plans must be either platinum (covering 90% of benefit costs), gold (80%), silver (70%), or bronze (60%). Insurers may offer a catastrophic plan to enrollees under age 30 and those who are exempt from the individual mandate.
8. Grandfathering of existing plans - plans in existence on September 23, 2010, are exempt from many PPACA requirements. But most of the benefit and coverage requirements do still apply.
PPACA benefit and coverage requirements effective in 2010 (35)
1. All individual and group plans must cover dependent children up to age 26
2. Rescissions of insurance coverage are prohibited except in cases of fraud
3. Pre-existing condition exclusions for children are prohibited
4. No individual or group plans may impose lifetime limits. And plans may impose annual limits only for non-essential health benefits (this requirements was graded in through 2014).
5. Services rated A or B by the US Preventive Services Task Force must be covered at 100%
PPACA rating requirements effective in 2014 (36)
1. Individual and small group plans must be offered on a guaranteed issue and renewal basis
2. Plans may not impose pre-existing condition exclusions
3. Rating variation is only allowed based on:

a) Age (limited to a 3 to 1 ratio from highest to lowest age band)
b) Geographic rating area
c) Tobacco use (limited to a 1.5 to 1 ratio)
d) Family composition
4. Waiting periods for coverage must not exceed 90 days
Provisions of PPACA health insurance exchanges (37)
1. Each state will have an American Health Benefit Exchange for individuals and a Small Business Health Options Program (SHOP) Exchange for businesses with up to 100 employees
2. Plans in the exchanges must cover essential health benefits, have an out-of-pocket limit at or below the HSA limit, and fall into one PPACA benefit tiers (described in separate list)
3. Risk pooling - insurers must pool all individual market plans (other than grandfathered plans) into a single risk pool. Similarly, all small group plans must be pooled together.
4. Participating insurers must meet many qualification requirements such as networks, marketing, reporting, and consumer assistance
5. Exchanges may also offer Consumer Operated and Oriented Plans (CO-Ops), which are nonprofit, member-run health insurance companies
Other PPACA provisions (39)
Other major topics not covered by prior lists
1. Premium credits and cost sharing subsidies for those with low incomes (effective in 2014)
a) Premium credits for qualified individuals and families with incomes between 133% and 400% of FPL for coverage purchased through the exchanges
b) Cost sharing subsidies for those enrolled at the silver level in an exchange with incomes between 100% and 400% of FPL

2. Small business tax credits (this is covered in a list from Rosenbloom chapter 32)
3. Medicare provisions

a) Medicare Advantage plans can receive bonuses or re-allocations of rebates based on quality. Beginning in 2014, plans are subject to MLR requirements.
b) Medicare Part D - beneficiary coinsurance in the coverage gap will be phased down from 100% to 25% by 2020. Retiree drug subsidy payments lost their tax exempt status beginning in 2013.
4. Revenue provisions
a) New health insurer tax will collect $8 billion in 2014, grading up to $14.3 billion in 2018, and indexed thereafter
b) Excise tax for high-cost health plans (beginning in 2018)
c) Limitations to tax-favored allowances for FSAs and HSAs
d) New taxes on certain medical devices
5. Medicaid - expanded to all non-Medicare eligible individuals with incomes up to 133% of FPL. Due to
Supreme Court ruling, federal government can't withhold original Medicaid funding from states who do
not expand.
Potential problems in an unregulated insurance market (193)
1. A dishonest company could gain a competitive edge via:
a) Misleading marketing materials
b) Unfair price (only appears to be a good value)
c) Inadequate reserves

2. Customers do not have the time or expertise to determine which firms are dishonest
3. Companies could become insolvent with no warning, leaving policyholders without coverage
Goals of insurance regulation (194)
1. Eliminate policies not providing the benefits expected
2. Prevent insolvency
3. Eliminate policies that provide poor value
4. Solve minor consumer problems
5. Maintain fair competition
6. Raise tax money
7. Promote social goals
The steps of regulation (195)
1. Licensing - the firm agrees to be regulated. Agents may also be required to get a license.
2. Information gathering - the purpose is to monitor financial soundness, confirm compliance, provide consumer information, and design new regulatory requirements
3. Prior approval of policy language, premium rates, reinsurance arrangements, dividends, mergers, and investments
4. Enforcement - includes penalties such as fines, legal action and/or license removal
5. Receivership - may initially track financial condition, or may take over an insolvent company
Actions commonly taken by state regulators to help prevent insolvency (199)
1. Capital requirements (such as RBC) - protect against adverse deviations in experience
2. Guaranty funds - all companies are assessed to create a fund to protect the insureds of insolvent companies
3. Reserve requirements - for claim reserves and liabilities, contract reserves, provider liabilities, and premium deficiency reserves
Types of consumer protection regulation in the United States (200)
1. Disclosure - must disclose to a potential customer the key features of the insurance policy. This may include a shopper's guide, outline of coverage, summary of benefits, or illustration.
2. Reasonableness - includes mandated benefits and prohibited exclusions. Premiums must be reasonable in relation to benefits (loss ratio requirements)
3. Fairness - includes prohibitions on discrimination even though data may support it (e.g., unisex rates)
Responsibilities of the insurance commissioner (204)
1. Oversee the operation of the insurance department
2. Interpret insurance laws
3. Make regulations implementing insurance laws
4. License insurance companies, agents, brokers, and consultants
5. Conduct examinations of licensed insurers, and assess penalties for violations of laws
6. Review form and rate filings - some states require that the commissioner approve the forms and rates prior to use
7. Regulate advertising - to protect consumers from unfair, inaccurate, deceptive, and misleading advertisements
8. Regulate business practices - such as underwriting and claims practices
9. Enforce prompt pay laws
10. Regulate insurer solvency - this is the most important duty of the commissioner
Reasons for an insurance commissioner to assume an insurer's assets (207)
1. Non-cooperation with examiners
2. Refusing to remove questionable officers
3. Charter violations
4. State law violations
5. Endangered capital or surplus
6. Technical insolvency
Standard group contract provisions required by most state insurance laws (209)
1. Grace period - there must be a 31 -day grace period for the payment of premium
2. Incontestability - the validity of the policy cannot be contested after the policy has been in force for two years
3. Application and statements - the application has to be made part of the policy, and statements made by the insured are considered representations (not warranties)
4. Evidence of insurability - the policy must state when evidence of insurability is required
5. Misstatement of age provision - a policy must state how premiums or benefits will be adjusted due to misstatement of age
6. Certificates - the insurer must issue certificates to the policyholder for delivery to each insured
7. Benefits and eligibility - the policy must state the benefits and to whom they are payable, and include specific terms of eligibility for coverage
Additional contract provisions for group health plans (265)
These are in addition to the standard group contract provisions from a separate list
1. Preexisting conditions - this provision describes the exclusions or limitations that apply to preexisting conditions
2. Notice of proof of claims - establishes a time limit for notifying the insurer of a loss
3. Legal actions - this provision specifies the time period when a legal action may not be brought on a claim (e.g., during the claim's first 60 days)
Additional contract provisions for group life plans (210)
These are in addition to the standard group contract provisions from a separate list
1. There must be a provision identifying the designated beneficiary
2. Conversion rights - this provision allows the policy to be converted to an individual policy (in certain situations)
3. Death during the conversion period - if a person dies within the conversion period, the amount available to be converted will be paid as a claim
4. Disability continuance - active employees that become totally disabled can continue coverage for up to six months by paying the premium
Provider protections related to preferred provider arrangements (217)
1. Any-willing-provider laws - require insurers to accept any provider that meets the insurer's terms for participation
2. Limitations on benefit differentials between preferred and non-preferred providers - to limit how much extra coinsurance the member must pay for using a non-preferred provider
3. Coverage of non-preferred providers (required in some states) - effectively precludes exclusive provider arrangements
4. Requirements that allied medical practitioners (such as chiropractors, dentists, and optometrists) be included in PPOs - these requirements are not common
Consumer protections related to preferred provider arrangements (218)
1. Insurers must assure reasonable access to covered services and an adequate number of providers
2. Some states have tried to regulate quality assurance (measuring quality is difficult)
3. Requirements that patients receiving emergency care will have costs reimbursed as though treated by a preferred provider
Requirements for an HMO to obtain a certificate of authority (224)
1. A description of the HMO's organization, governance, and management
2. Contracts with providers - including copies of contracts between providers, third-party administrators, and other third-party vendors
3. Coverage agreements - including copies of individual and group contracts and evidence of coverage forms
4. Financial information - including financial statements and a financial feasibility plan
5. Provider information - including a description of the geographic service area, and a list of all providers
6. Grievance procedure - a description of the HMO's procedure for handling grievances
7. Quality assurance program - details of the program for credentialing providers, evaluating care, initiating correction, and reevaluating deficiencies
8. Insolvency protection measures - must satisfy minimum net worth requirements, and a deposit of cash or securities is usually required
Advantages of federal qualification for HMOs (232)
1. The equal contribution requirement - employers that offer a federally-qualified HMO cannot financially discriminate against a person enrolling in that HMO
2. The HMO is allowed to contract as a Medicare or Medicaid carrier
3. The federal HMO Act preempts all state laws that would prevent the HMO from acting in accordance with the federal HMO Act
4. Federally-qualified HMOs may be automatically deemed to comply with ERISA's claim appeal requirements
Disadvantages of federal qualification for HMOs (233)
1. The HMO must establish a separate line of business for any non-qualified HMO business
2. Minimum coverage requirements of federally-qualified HMOs
3. Restrictions on the use of anything more than "nominal" copayments
4. Federal restrictions on rating may be more restrictive than state requirements
HIPAA reforms related to portability and availability (242)
1. Pre-existing condition exclusions - may not be imposed except in certain situations
2. Health status underwriting - eligibility cannot be based on health, and evidence of insurability cannot be required
3. Health status rating - higher premiums cannot be charged on the basis of health status
4. Special enrollment periods - to permit eligible individuals who lost other coverage to enroll
5. Multi-employer health plans may not deny a participating employer continued coverage except for nonpayment of contributions, fraud, or noncompliance with plan provisions
6. Guaranteed issue - small group carriers must accept all small employer groups and all eligible individuals in those groups
7. With certain limited exceptions, insurers must renew or continue inforce coverage for all groups
Administrative functions that health benefit exchanges must provide (268)
1. Certifying and assigning quality ratings to plans
2. Presenting benefits information in a standardized format
3. Providing consumers with eligibility determinations
4. Providing certifications for people who are exempt from the individual mandate
5. Ensuring that all participating health plans satisfy the exchange's requirements
Key decisions states must make related to health benefit exchanges (269)
1. Should the state establish an exchange? If a state does not, the federal government will set one up for it.
2. Governance structures - the exchange could be established within an existing state agency, independently, or through a quasi-government entity
3. Influencing the level of participation - e.g., by making the HBE attractive and available to more customers
4. Should carriers be required to participate in the HBE?
5. Should the state merge the individual and small group rating pools?
6. Should groups with 51-100 employees be allowed to join the exchange in 2014?
7. Controlling antiselection - e.g., by implementing a risk adjustment system
8. Standardized benefit packages - should the state require specific benefit packages at each plan level?
9. Intra-state exchanges - should regional exchanges be set up?
10. Should a basic health plan (BHP) be established (which would be outside the exchange)? - BHPs are for residents under 200% of FPL who are not eligible for Medicaid and lack affordable access to comprehensive employer coverage
11. How should the state control which carriers participate in the exchange? (see separate list)
12. What value-added services should the exchange provide? - e.g., it could enhance the required online comparison tool
13. How will the exchange fund administration costs - e.g., through premium taxes, carrier assessments, and provider assessments
Approaches for the state to control which carriers participate in the exchange (272)
1. Open market - allowing all plans that meet minimum PPACA requirements
2. Setting additional standards for qualified plans
3. Selective contracting agent - selecting plans based on comparative value
4. Active purchaser - negotiating premiums with insurers
Major federal laws governing group health plans (316)
1. ERISA - applies to benefit plans sponsored by private-sector employers. Includes provisions related to reporting and disclosure, fiduciary standards, civil enforcement and preemption, and claim procedures.
2. COBRA - provides enrollees of an employer-sponsored group health plan the opportunity to keep that coverage for a period of time after employment ends, or after certain other qualifying events
3. HIPAA - limits the ability of group health plans to impose pre-existing condition exclusions and prevents plans from basing eligibility or premiums on:

a) Health status
b) Medical condition
c) Claims experience
d) Receipt of healthcare
e) Medical history
f) Genetic information
g) Evidence of insurability h) Disability
4. PPACA - amended HIPAA rules to prohibit pre-existing condition exclusions. Requires large employers
to provide adequate and affordable coverage or pay a financial penalty.
Taxation of major group insurance benefits (321)
1. Health (medical, dental, vision, and prescription drugs)
a) Employer receives a current tax deduction for its expenses
b) Value of the benefits (the coverage and the insurance proceeds) for the employee and dependents is free from income and employment taxes
c) No limits on the amount of tax-favored benefits
2. Group term life insurance
a) Employer receives a current tax deduction for its expenses
b) Value of the benefits for the employee (but not dependents) is free from income and employment taxes
c) Tax-free coverage is limited to a $50,000 death benefit
3. Disability insurance
a) Employer's expenses are deductible as they are paid
b) If the value of the coverage is taxed, the proceeds paid to disabled individuals are not taxable
c) But if the value of the coverage is not taxed, then the proceeds are taxable
4. LTC insurance - proceeds under a qualified plan are deemed to be health insurance and receive the same
tax-favored treatment
Types of coverage and nondiscrimination tests for cafeteria plans (709)
1. Eligibility test - this test is designed to measure whether the plan discriminates in favor of highly-
compensated individuals. Includes a length-of-services test and a facts and circumstances determination
a) Highly-compensated individuals are officers, 5% owners, highly-compensated employees, and the spouses and dependents of these individuals
2. Contributions and benefits test - this test involves mathematical testing as well as general nondiscrimination with respect to benefits
3. Key employee concentration test - nontaxable benefits provided to key employees cannot exceed 25% of the aggregate benefits provided to all employees a) Key employees are officers with annual pay of more than $160,000, 5% owners, and 1% owners with annual pay of more than $150,000
Taxation of employee health benefits in the US (2)
1. Premium
a) Employer contributions for the employee, spouse, and dependents are not taxable to the employee
b) The employer may deduct contributions from its taxable income. For post-retirement plans, this deduction is only allowed if certain pre-funding rules are followed.
2. Benefits
a) Medical expense coverage - the employee is not taxed on reimbursements
b) Disability income coverage - if the premium is from the employee's post-tax income, then benefits are tax-free. If the premium is from the employee's pre-tax income, then benefits are taxed (for certain taxpayers, up to $5,200 of disability benefits are excluded if income is less than $15,000).
c) Cafeteria plans (flexible benefit plans or Section 125 plans) - employees can choose cash (taxable) or qualified benefits (non-taxable)
Cafeteria plan benefits (3)
Qualified benefits (can be offered on a pre-tax basis)
(includes information from a similar list in Rosenbloom chapter 25)
1. Premium for accident and health coverage
2. Premium for long-term disability
3. Group term life coverage up to $50,000
4. Coverage under qualified group legal plan
5. Post-retirement life insurance (only for employees of educational organizations)
6. 401(k) elective deferrals
7. Medical care reimbursement (such as from an HSA or FSA)
8. Dependent care assistance benefits
9. Employer-provided adoption assistance Permissible but taxable

1. Group term life coverage over $50,000
2. Elective paid vacation days
3. Cash Impermissible benefits

1. Deferred compensation
2. Cash value life insurance
3. Dependent life insurance
4. Educational assistance benefits
5. Meals and lodging for the employer's benefit
6. Reimbursement for cosmetic surgery
7. Retirement health benefits paid for working employees
8. Overnight camp
Advantages and disadvantages of pre-tax qualified benefits (3)
1. The benefits are not taxable
2. The benefits are a substitute for taxable wages Disadvantages

1. Funds for medical care reimbursements cannot be carried over from one plan year to the next
2. The plan must comply with many qualification rules
3. Elections must be made before the plan year begins (with some exceptions, such as a family status change)
4. The plan may not discriminate in favor of highly compensated individuals
Special state funds to solve health insurance problems (5)
1. Solvency funds - solvent companies are assessed for losses arising from insurer insolvencies
2. High-risk pools - cover individuals who have difficulty qualifying for underwritten coverage. Pools charge premiums, but they are inadequate, so carriers are assessed for the shortfall.
3. Small group pools - many states require insurers to offer 2 plans (basic and standard) on a guaranteed basis to individuals who were rejected for other coverage
Terminology used in health reform (1)
Other items from this paper that are described elsewhere are not listed here
1. Actuarial value - refers to the average share of medical spending that is paid for by the plan (rather than the insureds)
2. Actuarially equivalent - plans with the same actuarial value are referred to as actuarially equivalent
3. Comparative effectiveness research - compares new treatments and technologies to those that already exist, with the intent of refocusing care delivery on the value of care received
4. Pay-for-performance - incentive programs that reward providers for meeting certain performance-based measures related to quality, safety, and efficiency
5. Value-based insurance design - this type of plan design varies cost sharing in a way that encourages the use of medical services with evidence of clinical benefit and discourages the use of services with little or no evidence of benefit
PPACA individual mandate tax penalties (2)
All individuals (with a few exceptions) must have health insurance coverage or pay a tax penalty, which is the greater of:
1. A dollar amount ($95 in 2014, $325 in 2015, $695 in 2016, and indexed thereafter)
2. A percentage of taxable income (1% in 2014, 2% in 2015, and 2.5% in 2016 and beyond)
PPACA risk sharing mechanisms (2)
Established to mitigate adverse selection and pricing risk resulting from guaranteed issue requirements
1. Risk adjustment - permanent program beginning in 2014. Applies to all non-grandfathered individual and small group plans. Redistributes payments across health plans to account for the relative risk of those who enroll.
2. Reinsurance - program to be in effect from 2014 to 2016. Payments will be made to non-grandfathered individual market plans that cover high-risk individuals.
3. Risk corridors - mechanism to be in effect from 2014 to 2016 for individual and small group plans in the exchanges. Payments based on the plan's target amount (total premiums minus administrative costs).

a) If actual costs (net of risk adjustment and reinsurance payments) vary from the target by more than 3%, the government shares in the gains or losses
b) The government bears 50% of the spending between 3% and 8% of the target and 80% of the spending beyond 8% of the target
Supporting users have an ad free experience!