POSSIBLE ESSAY QUESTIONS AND OTHER ITEMS FOR REVIEWSECOND EXAMFALL 2016Questions 1 – 7 are possible essay questions. 1. Under the ACA, funds were allocated for the formation of so-called CO-OP plans. Recently, many of these plans have failed or are no longer accepting any new insureds. Write an obituary for the CO-OP program. 2. Consider the MLR regulation as part of the ACA. a. What is the purpose or rationale for this regulation? b. Explain carefully how this could actually have the impact of increasing premiums. c. What impact might this have on taxpayers? Explain. 3. L. Bart Adams, is an operations manager at Mountainview Mushrooms, a producer of fresh mushrooms in Fillmore, Utah. Fillmore is a rural community, so the company’s 120 workers mainly get medical care from local providers. Why then, he wondered, should the company pay for networks with doctors and hospitalstwo or three hours away if its employees rarely use them?He called the hospital administrator at the
POSSIBLE ESSAY QUESTIONS AND OTHER ITEMS FOR REVIEWSECOND EXAMFALL 2015Questions 1 – 7 are possible essay questions.1. Under the ACA, funds were allocated for the formation of so-called CO-OP plans.Recently, many of these plans have failed or are no longer accepting any new insureds.Write an obituaryfor the CO-OP program.Consumer Operated and Oriented Plans, as known as “CO-OPs”, died an unfortunate policy death in 2015, mostly due to insolvency.CO-OPs were born in 2014, designed as member-run, nonprofit “insurers” to offer qualified health insurance to individual, small groups in the Marketplaces under the ACA. It was supposed to be funded by taxpayers’ money through the Risk-Corridor Program.Numerous factors contributed to CO-OPs death: Little or no historical actuarial data to support them; No access to equity markets and advertising dollars compared to insurance companies; Low premiums due to their member-owned nature at the expense of financial viability.After multiple failures to collect funds from the Risk-Corridor Program under the ACA, many CO-OPs shut down, leaving thousands of members without health insurance. 2. Consider the MLR regulation as part of the ACA.a. What is the purpose or rationale for this regulation?To limit the portion of premium dollars health insurers may spend on administration, marketing, and profits, in order to provide better value to consumers and increase transparency.b. Explain carefully how this could actually have the impact of increasing premiums.First, it is likely to require higher average annual premiums (averaged over several years) for insurers to meet state solvency requirements. In low-claim years insurers will have to pay higher rebates rather than accumulate more reserves. This means that premiums will, on average, have to be higher to pay for claims in high-claim years.Second, it might end up rewarding who raise premiums. Those insurers with higher premiums will have to pay higher rebates to consumers, but the MLR formula (probably inadvertently) allows them to retain higher profits if they do so.c. What impact might this have on taxpayers? Explain.