COURSE 8: Fall 2002 -1- GO ON TO NEXT PAGE Health, Group Life &. Managed Care Morning Session Fall 2002 Society of Actuaries **BEGINNING OF EXAMINATION 8** HEALTH, GROUP LIFE &. MANAGED CARE MORNING SESSION 1. (5 points) You are the COO of ABC Insurance Company. You are considering outsourcing the claim and benefit administration function. (a) Describe common claims and benefit administration problems and their effects. (b) Describe measures of claim quality and methods to increase quality. (c) Describe methods commonly used to control claims costs and claims administrative expense. (d) Review circumstances under which you might outsource claims administration. Course 8M COURSE 8: Fall 2002 -2- GO ON TO NEXT PAGE Health, Group Life &. Managed Care Morning Session 2. (5 points) A company has successfully implemented a flexible benefits program for its salaried employees with the following benefits: Basic Coverage Non-hospital and drug: $300 deductible, 75% coinsurance Hospital: Semi-private room, $150 maximum per day Out-of-country: $50,000 maximum per year $500,000 lifetime maximum Vision: No coverage Enhanced Coverage Non-hospital and drug: $100 deductible, 90% coinsurance Hospital: Semi-private room, $250 maximum per day Out-of-country: $80,000 maximum per year $1,000,000 lifetime maximum Vision: $200 maximum per year Employee Palpatine incurred the following medical expenses over a one-year period: Apr. 5 formulary drug prescription of $125 Jun. 10 formulary drug prescription of $180 Jul. 18 hospital stay, semi-private room at $180 Jul. 19 hospital stay, semi-private room at $180 Jul. 20 hospital stay, semi-private room at $180 Sept. 22 formulary drug prescription of $60 Dec. 5 new glasses at $280 (a) Identify and address the concerns the union might have with the company’s proposal to offer this program to union members. Include design alternatives that could be substituted. (b) Explain the general principles regarding 0selection that should be considered when implementing a flexible benefits program. (c) Calculate the out-of-pocket expenses Palpatine would have paid under the Basic and the Enhanced options. COURSE 8: Fall 2002 -3- GO ON TO NEXT PAGE Health, Group Life &. Managed Care Morning Session Questions 3 – 8 pertain to the Case Study 3. (5 points) Wonderful Life s small group block of business is experiencing deteriorating profits. The Chief Actuary believes part of this deterioration is due to the wearing off of underwriting. You have been asked to design a durational study for Wonderful Life’s closed block of small group business using the data found in Table MM-7. (a) (1 point) Describe the information that would be required to compile this study. (b) (1 point) Describe the potential limitations of the data used in a durational study and the factors you should consider in adjusting the data. (c) (3 points) Calculate the annual durational factors for Wonderful Life’s closed block of small group experience using the data in table MM-7 and other relevant information on the small group block discussed in the case study. Show your work. COURSE 8: Fall 2002 -4- GO ON TO NEXT PAGE Health, Group Life &. Managed Care Morning Session Questions 3 – 8 pertain to the Case Study