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COURSE8:Fall2005-1-GOTONEXTPAGE
Health,GroupLife&ManagedCare
**BEGINNINGOFEXAMINATION**
HEALTH,GROUPLIFE&MANAGEDCARE
MORNINGSESSION
1.(3points)
(a)Explainnon-financialusesofreinsurance.
(b)Describelimitationsofreinsurance.
COURSE8:Fall2005-2-GOTONEXTPAGE
Health,GroupLife&ManagedCare
2.(3points)YouaretheactuaryforaUShealthinsurancecompany.Youhavebeenasked
tomakeapresentationtoyourBoardofDirectorsregardingtheregulatoryenvironment
foryourcompany.
(a)Describegoalsandobjectivesofinsuranceregulation.
(b)Describethelegalframeworkforinsuranceregulationandmeansofenforcement.
COURSE8:Fall2005-3-GOTONEXTPAGE
Health,GroupLife&ManagedCare
3.(7points)Youareaconsultingactuaryretainedbyanemployergroup.Followingthe
presentationofrenewalratestothegroup,youhavebeenaskedtoattendameetingto
reviewtrendcalculations.
Youaregiventhefollowinginformation:
?Allowedtrend:15%
?Incurredclaims:$5,250,000
?Averagemonthlymembershipofthegroup:2,000members
?ThecurrentplanisPlanA,butthegroupisconsideringPlanB:
PlanAPlanB
Deductible$250$1,500
Coinsurance20%30%
Valueofthemembercostsharing(PMPM)$50$100
?Assumeth*ueofthedeductibledoesnotvaryfromyeartoyear.
(a)Describeindetailexternalsourcesoftrendthatyouthinkmightbehelpfulinyour
trenddiscussion.
(b)Describecommonproblemsincomputingtrendsthatyoumightneedto
investigate.
(c)Calculatethenettrendforthetwoplansandexplainwhytheremightbea
difference.Showyourwork.
(d)DescribemajorissueswhichmightneedtobeaddressedifPlansAandBwereto
bothbeofferedasadualoption.
COURSE8:Fall2005-4-GOTONEXTPAGE
Health,GroupLife&ManagedCare
Questions4-7pertaintotheCaseStudy
4.(7points)YouaretheactuaryatWonderfulLifeandhavereceivedarequestfor
proposalfromJLBCompany(JLB)foramulti-optionhealthquoteeffectiveJanuary1,
2005.JLBcurrentlyoffersonlya$100deductibleindemnityplan.
UsingdatafoundinTablesMM-2aandMM-2bandthefollowingadditionalinformation:
??TotalclaimsincurredforJuly1,2003toJune30,2004were$4,063,000.
??Claimamountsinexcessof$50,000were$278,000.
??Averageemployeeenrollmentduringthisperiodwas500singleand750family
contracts.
??WonderfulLife’sPPOnetworkdiscountis30%.
??In-networkutilizationis85%.
??Useofthenetworkreducesutilizationby5%ascomparedtoindemnity.
(a)Discusspricingconsiderationsinamulti-optionenvironment.
(b)Calculate2-tiergrosspremiumratesfora$100deductibleindemnityoption,and
a$500deductiblePPOoption,assumingnoselectionimpact.Showyourwork.
(c)OutlineconsiderationsifJLB’scurrentplanwasamanagedcareplaninsteadof
anindemnityplan.
COURSE8:Fall2005-5-GOTONEXTPAGE
Health,GroupLife&ManagedCare
Questions4-7pertaintotheCaseStudy
5.(9points)WonderfulLife’smanagementis*uatingthecompany’sprofitandsurplus
requirements.YouaregiventhedatainTableC-1andtheassumptionthatRisk-Based
Capital(RBC)is18%ofpremium.
(a)(1point)Discussmethodsofmeasuringprofit.
(b)(2points)Discussdistortionsthatmayrequireadjustmenttoavoid
misrepresentationofprofits.
(c)(3points)Describeimplicationsofthefollowingwhenmodelingrequiredsurplus
forWonderfulLife:
i.Reinsurancestrategy
ii.Dividendphilosophy
iii.Expensemanagementcontrols
iv.Premiumgrowth
(d)(3points)DetermineifWonderfulLifeachievedthetargeted12.5%returnon
equityfor2004.Showyourwork.
COURSE8:Fall2005-6-GOTONEXTPAGE
Health,GroupLife&ManagedCare
6.(9points)YouarethegrouppricingactuaryforWonderfulLifeInsuranceCompany.
YouarepreparingaproposalforBaileyIndustrieswhichincludesananalysisofprior
experience.YouaregiventhedatainTableBI-1bandthefollowingassumptions:
?Theonlyitemscausingdifferencesinclaimscostsareplandesignandutilization
differencescausedbyplandesign.
?TheaveragememberspercontractforboththePPOandHMOplansis2.2.
?MemberCostasapercentageofclaimsisasfollows:
Utilization
AdjustmentRange
MemberCost
SharingRange
ServiceType%ofCostLowHighLowHigh
Facility50.0%0.0%5.0%0.0%25.0%
Professional30.0%-5.0%20.0%0.0%40.0%
Pharmacy20.0%0.0%20.0%0.0%25.0%
Total100.0%
AverageMemberCostSharing
ServiceTypePPOHMO
Facility17.5%0.0%
Professional25.0%5.0%
Pharmacy18.0%18.0%
(a)(3points)DescribethecriteriathatWonderfulLifewouldusetounderwrite
BaileyIndustries.
(b)(2points)Describethemodelsyoumightusetopredictselectioninamultioption
environment.
(c)(4points)CalculatetheexpectedchangeinutilizationfortheHMOplanusing
thememberutilizationcostmodel.Showyourwork.
COURSE8:Fall2005-7-GOTONEXTPAGE
Health,GroupLife&ManagedCare
Questions4-7pertaintotheCaseStudy
7.(7points)YouareanactuaryatWonderfulLifeandhavebeenaskedtodiscusssources
ofprofitusingGroup1dataasanexample.
InadditiontothedatainTablesMM-1,MM-2a,MM-2b,andMM-3a,assume:
?Single/Familymanualratesfor2005aretheresultoftrendinghistoricalmanualrates.
?Expenses,taxes,andinvestmentincomeareexpressedasthepercentagesfromTable
MM-1for2004.
(a)Discussmajorfactorsaffectingfinancialresultsforthegrouplineofbusiness.
(b)Outlinethevarioussourcesofprofitforgroupinsurance.
(c)CalculateprofitsbysourceforGroup1fortheexperienceperiod.Showyour
work.
COURSE8:Fall2005-8-GOTONEXTPAGE
Health,GroupLife&ManagedCare
8.(7points)YouaretheconsultingactuaryforACME,Inc.Theyareinterestedinoffering
aPatientDirectedHealthcareBenefit(PDHB)planwiththefollowingstructure:
Option1
?Multi-planoptionplusFlexibleSpendingAccount(FSA),
?Employerprovidescorecontribution,offersmultiplehealthplanchoices,
andsetsmenu.
Option2
?HighDeductiblePlanplusFSAplusPersonalHealthAccount(PHA),
?Employerprovidescorecontribution,accesstomultiplehighdeductible
plans,andsegregatedPHA’s.
(a)Describefactorsthataremakingconsumerismasignificanttrend.
(b)CompareandcontrastthekeydimensionsofPDHB’sastheyrelatetothetwo
optionsACMEisconsidering.
(c)DescribethehealthcarechallengesthatcanbeaddressedbyPDHB’swithrespect
to:
i.Employees
ii.Employers
COURSE8:Fall2005-9-GOTONEXTPAGE
Health,GroupLife&ManagedCare
9.(5points)YouarethepricingactuaryforEnamelInsuranceCompany(EIC).EICis
interestedinaddingadentalproducttoitsportfolioandhasaskedyoutoprepareareport
toseniormanagement.
(a)Describewaystocontroldentalclaimscosts.
(b)Describetheunderwritingandratingparametersusedfordentalinsurance.
COURSE8:Fall2005-10-GOTONEXTPAGE
HealthandGroupLifeSegment
10.(3points)YouaretheValuationActuaryforBeltandSuspendersHealthInsurance
Company.Yourcompanyoffersavarietyofhealthproductsthatmayrequireavarietyof
methodsfordeterminingclaimliabilities.
(a)Describeconsiderationswhichmightinfluencethelevelofconservatismtargeted
foragivenblockofbusiness.
(b)Describeapproachestointroducingconservatismintoeachofthecommon
methodsusedtocomputeclaimliabilities.
COURSE8:Fall2005-11-GOTONEXTPAGE
HealthandGroupLifeSegment
**BEGINNINGOFEXAMINATION**
HEALTHANDGROUPLIFESEGMENT
BeginningwithQuestion11
11.(4points)Regardingclaimspracticesforshorttermdisability(STD)coverages:
(a)DescribethetoolsavailabletochallengequestionableSTDclaims.
(b)Discussmethods,includingtheprosandconsformeasuringoverallSTDclaims
levels.
(c)DescribethesourcesofinformationavailabletoaclaimsexaminerregardingSTD
claims.
COURSE8:Fall2005-12-GOTONEXTPAGE
12.(4points)Youareanactuaryresponsiblefordevelopingyourcompany’sfinancial
forecastmodels.Recentlyyourcompanyhasimprovedaccessandqualityofdata.The
ChiefActuaryisnowencouragingyoutoincorporateadditionalsituationsinforecast
modeling.
(a)(3points)Discussbasicprinciplesfordesigningforecastmodels.
(b)(1point)Outlinewaysinwhichforecastmodelingcaninfluencecompany
actionstohelpachievebusinessobjectives.
COURSE8:Fall2005-13-GOTONEXTPAGE
HealthandGroupLifeSegment
13.(8points)YouarethechiefactuaryforABCInsuranceCompany.Youareconsidering
purchasinganindividualinsuranceblockofbusinessbutareconcernedaboutABC’s
abilitytoadministersuchbusiness.
(a)Discussthestepsanagentgoesthroughinsellingandservicingindividualhealth
insurancepolicies.
(b)Describeconsiderationsinplandesign,pricing,anddistributionchannels.
(c)Describethetypicalunderwritingconsiderationsforindividualhealthinsurance.
(d)Describeelementsincludedinratingclassificationsystems.
(e)Explaintypesofpremiumguaranteesthatcouldbeoffered.
COURSE8:Fall2005-14-GOTONEXTPAGE
HealthandGroupLifeSegment
14.(4points)Youareth*uationactuaryforTATHealthInsuranceCompany.Youare
concernedabouttheincreaseinturnaroundtimeforclaimpaymentandhavebeen
workingwiththemanageroftheclaimsareatoaddressthisconcern.
(a)Describethebasicpurposesofclaimsandbenefitsadministration.
(b)Discussthecommonproblemsseeninclaimsandbenefitsadministrationand
theirramifications.
(c)Outlinethebasicprinciplesofinventorymanagementandmechanismsfor
inventorycontrol.
COURSE8:Fall2005-15-GOTONEXTPAGE
HealthandGroupLifeSegment
Question15pertainstotheCaseStudy
15.(5points)AbenefitsconsultanthasapproachedWonderfulLifeaboutinsuringher
client’semployer-sponsoredGroupLongTermDisability(GLTD)coverage.TheGLTD
coveragehasa180-dayeliminationperiod.Thereare1,100employeeseligiblefor
GLTDcoveragewiththefollowingagedistribution:
AgeEmployees
18-24400
25-29300
30-34200
35-39-
40-44100
45-49-
50-54100
55-59-
60-64-
Total1,100
Youestimatethatthegroup’sincidenceratewillbe150%ofthemaleincidencerates
foundinTableGLD-6A.Thegrouphassuppliedpriorexperiencebasedon5,000life
yearsthatproducesanaggregateexperienceclaimrateof$0.98per$100ofmonthly
benefit.
WonderfulLife’sprofitrequirementonGLTDbusinessis5.0%ofpremium.Total
expensewillfollowWonderfulLife’sactualfinancialsforthemostrecentyearasfound
inTableGLD-3A.
(a)Calculatethegroup’scompositemanualmonthlygrosspremiumrateper$100of
monthlybenefit,assuminganaveragereserveof$54peropenclaimper$1of
benefit.Showyourwork.
(b)Calculatetheblendedmonthlygrosspremiumrateusingacredibilityformulaof
N/(N+5,000).Showyourwork.
(c)DiscussthedifferenttypesofreservesthatWonderfulLifewillholdforthis
coverage,andhowtheyaredetermined.
COURSE8:Fall2005-16-GOTONEXTPAGE
HealthandGroupLifeSegment
16.(8points)YouareagroupbenefitsconsultantatNOVADesignInc.Oneofyour
Canadianclientshasthefollowinggroupbenefitsplan:
BenefitsCoverageMonthly
premiumratesVolume
Lifeinsurance3×salary$0.32per
$1,000benefit$46,200,000
Long–term
disability
75%ofmonthly
salary
$1.05per$100
benefit$962,500
Medical
Nodeductible
100%coinsurance
forallservices
Single:$50
Family:$125
Single:120
Family:280
Dental
Nodeductible
90%coinsurance
forallservices
Single:$30
Family:$75
Single:120
Family:280
Theemployerpays100%ofthecostforallbenefits.
YourclientwantstoreviewitsplandesignandintroduceaHealthCareExpenseAccount
(HCEA).Thenewplandesignhastobecostneutralinthefirstyear.Yourclientexpects,
however,tosavesomecostovertimethroughmaintainingafixedHCEAcreditformula.
Youareproposingthefollowingdesign:
BenefitsCoverage
Lifeinsurance1×salary
Long–termdisability66.7%ofmonthlysalary
MedicalNodeductible
80%coinsuranceforallservices
DentalNocoverage
HCEAOffered
(a)(1point)DescribetheadvantagesofanHCEA.
(b)(2points)DescribehowtheHCEAcanbefundedandthedecisionsyourclient
mustmakeinsettingitup.
(c)(3points)CalculatethemoneyavailabletofundtheHCEApool,developacredit
formulatoallocatecreditstoemployees,andexplaintheprosandconsofyour
formula.Showyourwork.
(d)(2points)Calculateaggregatesavingsforyourclient’snextrenewal,assuming
medicalanddentalinflationof15%and7.5%respectively,andanaverage
increaseinsalariesof3%.Showyourwork.
COURSE8:Fall2005-17-GOTONEXTPAGE
17.(3points)YouarethechiefgroupunderwriteratamajorinsurancecompanyintheU.S.
Anumberofyourunderwriterswillberetiringshortly,andyoumusttrainjuniorstaffto
fillthesepositions.Yourgrouplineofbusinessproductsincludelifeinsurance,longterm
disability,andlong-termcare.Outlineunderwritingconsiderationsforeachofthese
products.
COURSE8:Fall2005-18-GOTONEXTPAGE
HealthandGroupLifeSegment
18.(6points)YouareavaluationactuaryforTheWorld’sBestInsuranceCompany.You
havebeenaskedtoestimateexpectedclaimcostsfornon-institutionallong-termcare
(LTC)benefitsfora62-yearoldmale.Youhavethefollowinginformationforyour
company’sLTCproduct:
BenefitAmount:$100/day
BenefitTrigger:2ActivitiesofDailyLiving(ADL)or
CognitiveImpairment(CI)
BenefitPeriod:24months
EliminationPeriod:6months
Lapserateinformation:
DurationLapseRate
Anti-selective
lapsefactor
06%0.8
15%0.7
24%0.6
33%0.5
42%0.4
Youarealsogiventhefollowinginformationspecifictoa62-yearoldmale:
AnnualIncidenceper$1,000:10.15
Non-InstitutionalDisabilityDayAverage:882
Publishedindustryexperiencetabulardataonthedistributionofnon-institutionalclaim
durationsformalesage62:
Non-institutionalDisabilityDaysbyDurationfromIncurralandADL/CIStatus
Age62Male
PercentageofNon-institutionalDaysBeyondDuration
NoCIWithCI
Durationin
months0ADL1ADL2ADL3+ADL0ADL1ADL2ADL3+ADL
0n/a40.8810.8511.8531.492.341.281.65
6n/a31.908.969.7030.672.151.181.52
24n/a14.284.734.7828.061.650.911.13
30n/a10.823.783.7927.191.510.841.02
(a)(3points)Calculatetheestimatednon-institutionalclaimcostpermonth.Show
yourwork.
(b)(2points)DiscusshowvoluntarylapseratesareusedinindividualLTCvaluation
methods,andhowtheyrelatetoanti-selection.
(c)(1point)Calculatethemorbidityloadatduration4.Showyourwork.
COURSE8:Fall2005-19-GOTONEXTPAGE
HealthandGroupLifeSegment
19.(6points)YouaretheconsultantforBigFishInc.,whorecentlyacquiredLittleFishInc.
BigFishInc.hasaflexiblebenefitsplan,whileLittleFishInc.hasatraditionalplan.
BigFishandLittleFishoperateinseparatemarkets.Nemo,thePresidentofBigFishInc.
hasaskedyoutoprepareareportontransitioningLittleFish’splantoBigFish’splan.
Currentpricinginformationisshowninthetablebelow:
BigFishInc.PlanInformation:
PriceTagsRelativeValue
MedicalDental
PlanOptionSingleFamilySingleFamilyMedicalDental
A$100$250$105$28060%80%
B$200$500$150$400100%100%
C$350$875$225$600150%125%
?Credits:$350forSingleCoverage
$900forFamilyCoverage
LittleFishInc.PlanInformation:
MedicalDental
SingleFamilySingleFamily
CurrentCosts$225$550$140$420
ExpectedParticipationinLittleFishFlexPlan
MedicalDental
PlanOptionSingleFamilySingleFamily
A5%10%10%5%
B25%30%25%40%
C10%20%5%15%
?Thecurrentmedicalplanis20%richerthantheBigFishmedical
flexplanOptionB.
?Thecurrentdentalplanis10%lessrichthantheBigFishdental
flexplanOptionB.
?LittleFishpays100%ofthecosts.
?Theenrollmentis40%Singleand60%Family
(a)(4points)CalculatetheimpacttoBigFish’scostofmovingLittleFishinto
BigFish’sflexplan,withoutchange.Showyourwork.
(b)(2points)DiscusswhyBigFishmaywanttomaintainaseparatebenefitspricing
structurefromLittleFish,andtheadvantagesanddisadvantagesofdoingso.
COURSE8:Fall2005-20-GOTONEXTPAGE
20.(3points)YouareanactuarialconsultanthiredbyXYZCorporationtohelpthem
redesigntheirmedicalplan.XYZCorporationisamanufacturingcompanythathas
3,000activeemployeesand500retirees.Allemployeesarelocatedinasingle
metropolitanarea.TheHumanResources(HR)manageratXYZCorporationhastold
youthatshewantstoredesignthemedicalplanoptionstoencourageemployee
responsibilityandconsumerism.
(a)Describefactorswhichwouldmakeapatientdirectedhealthcarebenefitapproach
appropriateforXYZ.
(b)OutlinenextstepstheHRmanagercouldtaketoimplementthistypeofplan.
COURSE8:Fall2005-21-GOTONEXTPAGE
HealthandGroupLifeSegment
21.(5points)Youhavebeenaskedtoreviewtheimpactofchangingthespecificdeductible
fortheaggregatestoplossarrangementofoneofyourclient’sself-fundedplans.
Youaregiventhefollowinginformationforthemostrecentplanyear:
StopLossInformation
Expectedtotallosses(PEPM)$400
ExpectedMonthlyEmployees240
AggregateAttachmentFactor120%ofexpectedtotallosses
MinimumAttachmentPoint90%oftheexpectedannual
attachmentpoint
ActualLossInformation
EmployeeMonths3,000
TotalLosses$1,635,000
CoveredLossesExceeding$100,000
PersonA$300,000
PersonB$125,000
PersonC$250,000
Youareconsideringtwospecificstoplossdeductiblescenarios:
i.$100,000(currentplan)
ii.$250,000(alternativeplan)
(a)Explaintheprocessforsettingtheexpectedlossesandaggregateattachment
factor.
(b)Describeaggregatestoplossunderwritingconsiderationsfromtheinsurer’spoint
ofview.
(c)Calculatethetotalstoplossreimbursementforthemostrecentplanyearunder
eachspecificstoplossdeductiblescenario.Showyourwork.
COURSE8:Fall2005-22-STOP
Health,GroupLife&ManagedCare
22.(4points)YouarethepricingactuaryofONLYLifeInsuranceCompany.Thecompany
islookingintoenteringtheIndividualDImarket.TheV.P.ofMarketinghascometo
youwiththefollowingproposedplan:
?TargetMarketAssociationofPhysicians
?UnderwritingNon-Cancelable
?Definitionof
Disability
PureOwnOccupation
?PremiumRate
Structure
Unisex,varyingbyage
?MonthlyBenefitGreaterof:averagemonthlybenefitoverprior12months;or
greatestaveragemonthlyearningsforany2successiveyears
overtheprior5years
?InflationCOLAridersincludedwithaminimumannualincreaseof
6%peryear
?MaximumBenefitUnlimited
?EliminationPeriod1month
(a)Discusseachelementoftheproposedplandesignwithrespecttothecompany’s
exposuretoriskandrecommendchangestolimitthecompany’srisk.
(b)Discussvariousfactorsthatshouldbeconsideredtoensureprofitabilityofthe
productintoday’senvironmentintermsofpricing,underwriting,andmanagement.
高顿网校之考试箴言：不管怎样的事情，都请安静地愉快吧!这是人生。我们要依样地接受人生，勇敢地、大胆地，而且永远地微笑着。 —— 卢森堡
高顿网校之考试箴言：不管怎样的事情，都请安静地愉快吧!这是人生。我们要依样地接受人生，勇敢地、大胆地，而且永远地微笑着。 —— 卢森堡
