Question

Given what we have discussed during this week, apply what you know to some issues that relate to health insurance markets since passage of the Affordable Care Act and expansion of some managed care options in those markets.

• What happens to actuarially fair premiums?
• What about the loading charge?
• Do consumer preferences for risk change? How?
• What about employers and employee plans?
• Also, think about the 80% Medical Loss Ratio limitation. Does that impact the market and if so, how?

Answer 1

1. Actuarially fair preiuims are those premiums which are paid equally to the risk factor or equal to the expected claims receivable in view of consumers. But the companies charge more than fair premiums because it results in burden of loss.

2. Loading charges are the charges that are paid with the premium more than the expected amount of medical care expenditures borne by insurance companies

3.Yes consumer preferences to risk change by analyzing potential incentives to switch among them as per price sensitive or prcie insensitive as per the risk

4.There are many type Employer and employee plans. The employer should mandatorly provide various health care plans to their full-time employees and their children upto age 26years in which organisation there are 50 or more full time employees or equivalents are present. Employees working for 30 hours or more should be considered as full time employees

5. 80% medical loss ratio limitation has a greater impact on market. If the insurers cannot meet the obligation of minimum 80% of premiums received should be used for health care claims and quaity improvement and remaining 20% for administrative or profit purpose, then he should give rebates to the consumers. Hence this has a great impact on market form consumer point of view getting more secured to pay premiums.