8. (10 points) You are an underwriter at Wonderful Life and have been given the following
information:
•Tables BI with the following assumptions:
¾The experience shown is for July 1, 2000 to June 30, 2001
¾Amount of claims greater than $50,000 totals $540,000
•Tables MM-2
•Table MM-3a
(a) (3 points) Calculate the retrospective refunds for Group 4 and for Group 5. Show
your work.
(b) (5 points) Wonderful Life is quoting its most popular $250 deductible plan to
Bailey Industries for a March 1, 2002 effective date. Assume the quote will cover
existing PPO employees with a fully insured plan and that quoted benefits are the
same as their current plan. Calculate the composite, employee only, and
employee plus dependent rates. Show your work.
(c) (2 points) Explain considerations in using past experience data for projecting
future experience.
COURSE 8: Fall 2002 -8- STOP
Managed Care Segment
Morning Session
9. (3 points) Your consulting firm is hosting a roundtable breakfast for business leaders.
The topic of your presentation is “Recent Managed Care Trends Affecting Employers.”
Most attendees will be large, local employers.
(a) Describe general considerations related to this topic affecting all employers.
(b) Describe other relevant factors specific to the size of the employer.
**END OF EXAMINATION**
MORNING SESSION
COURSE 8: Fall 2002 -9- GO ON TO NEXT PAGE
Managed Care Segment
Afternoon Session
**BEGINNING OF EXAMINATION 8**
MANAGED CARE SEGMENT
AFTERNOON SESSION
Beginning With Question 10
10. (4 points) Senator Ima Crook from Anystate, USA has proposed a bill requiring
Medicare to provide a prescription drug benefit.
This plan would be separate from medical benefits and would be the primary plan for
purposes of coordination of benefits.
The plan would offer the following benefits:
•90% of generic drugs after a $50 annual deductible.
•80% of brand drugs after a $100 annual deductible.
•Unlimited annual benefit.
ACME Widget Company currently pays the entire cost of a retiree prescription drug plan
with the following copayments per prescription:
•$10 on generic drugs
•$20 on brand drugs
Jill Pill is a retiree of ACME anticipating the following monthly drug usage:
Number of
Prescriptions
Average
Cost/Prescription
Generic 5 $20
Brand 5 $100
If this bill is adopted:
(a) Describe the different coordination of benefit (COB) approaches an employer
could consider in relation to the new plan.
(b) For each COB approach, calculate the total annual cost to ACME in connection
with Jill’s anticipated claims.
COURSE 8: Fall 2002 -10- GO ON TO NEXT PAGE
Managed Care Segment
Afternoon Session
11. (3 points) You are the individual health insurance actuary for XYZ Insurance company.
(a) Describe the type of expense allocations that could be used for individual
health products.
(b) Describe expenses that are typically taken into account in the pricing process
and how they are reflected.
(c) Explain the criteria that the expense allocation method must meet.
12. (5 points) Using the US and Canadian tax treatment as examples, discuss the impact of
taxation of premiums and benefits received on the design of employer-provided insurance
programs. Include examples for Life, Disability, Medical, and Long-Term Care and
discuss from both the employee and employer perspective.
COURSE 8: Fall 2002 -11- GO ON TO NEXT PAGE
Managed Care Segment
Afternoon Session

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