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View Full Version : 8GM - Case study questions/clarifications


Not Mike
10-24-2002, 03:10 PM
Since we'll be receiving these on the exam and some of the points are a little confusing to me, I'd like to clear up the questions that I have...

Any and all help is appreciated...

Core section:
- I'm really confused by premiums and premium equivs. They say that the prem equivs are the ones sold though the "ASO biz unit". To me this implies that all of these premiums are basically used to pay admin fees for adjudication and what not and NOT for claims. But in the chart, Prem is like 2MM, while PEs are like 3.5MM, AND claims are 4.5MM, while Op Expenses are about 1MM. Can someone explain this? To me, this implies that some of the PEs are for claims, not ASO only.
- They also say that GPs are developed on a composite basis and then adjusted to to 2.5:1.0 ratio. I'm confused because it says that admin expenses are the same for everyone regardless of tier (which to me implies that they are added after net premiums are developed. Am I to assume that the net prems (adjusted for area, bft factor, etc) + admin + expenses + load is developed in composite and then the final rate is a 2.5:1.0 ratio? I'm guessing that's the case, but I'm not positive.
- They don't really say how pooled claims are allocated. Are we to assume that it's based on premium ratio?
- Under processing considerations, they say that "claim system edits for commonly approved claims were removed to speed up processing." Should we assume that this would decrease the accuracy?
- For the prospective client, they don't really say how many tiers of premiums they had (although data is provided by 4 tiers). Also, they say that EE cont is 80% of PPO plan cost or 100% of actual plan cost. Does "plan cost" refer to Average Annual Premium or Average Annual Claim? In practice, I'd say that COST refers to Avg Ann Claim, but I think they mean Premium. What do you think?

Group Extension:
- I'm confused by the reinsurance lingo. If they have reins on amts in excess of $500,000, and share in exposure up to a maximum exposure of $1,000,000 per life (which is the "maximum retained liability"), does that mean that (assume 50% reins) for any claim over $1,000,000, the company retains the first 500 + (50%)*(next 500) OR does it mean that they retain 1,000,000 (which is first 500 + 50% of next 1,000,000). There is also similarly ambiguous wording w.r.t. reinsurance of max disability monthly bft.

Any help is greatly appreciated!

yunr
10-24-2002, 03:48 PM
Since we'll be receiving these on the exam and some of the points are a little confusing to me, I'd like to clear up the questions that I have...

Any and all help is appreciated...

Core section:
- I'm really confused by premiums and premium equivs. They say that the prem equivs are the ones sold though the "ASO biz unit". To me this implies that all of these premiums are basically used to pay admin fees for adjudication and what not and NOT for claims. But in the chart, Prem is like 2MM, while PEs are like 3.5MM, AND claims are 4.5MM, while Op Expenses are about 1MM. Can someone explain this? To me, this implies that some of the PEs are for claims, not ASO only.
<YUNR> I THINK PREMIUM EQUIV.= FULL COST , INCLUDING EXPECTED CLAIMS, ASO FEES, POOLING CHANRGES (IF ANY) AND ANY OTHER ADJUSTMENTS THAT THE EMPLOYER WANTS TO ADD.
- They also say that GPs are developed on a composite basis and then adjusted to to 2.5:1.0 ratio. I'm confused because it says that admin expenses are the same for everyone regardless of tier (which to me implies that they are added after net premiums are developed. Am I to assume that the net prems (adjusted for area, bft factor, etc) + admin + expenses + load is developed in composite and then the final rate is a 2.5:1.0 ratio? I'm guessing that's the case, but I'm not positive.
- They don't really say how pooled claims are allocated. Are we to assume that it's based on premium ratio?
<YUNR> YES, AS I UNDERSTOOD, THE NET PREMIUM IS DEVELOPED BASED ON HOW MANY DEPENDENTS YOU HAVE, BUT THE ASO FEES AND OTHER CHARNGES ARE ALL CHARGED ON A PER EMPLOYEE PER MONTH BASIS. IE, REGARDLESS OF THE TIER EACH EE ELECTS.
- Under processing considerations, they say that "claim system edits for commonly approved claims were removed to speed up processing." Should we assume that this would decrease the accuracy?
<YUNR> GOOD POINT. i WILL LOOK INTO THIS
- For the prospective client, they don't really say how many tiers of premiums they had (although data is provided by 4 tiers). Also, they say that EE cont is 80% of PPO plan cost or 100% of actual plan cost. Does "plan cost" refer to Average Annual Premium or Average Annual Claim? In practice, I'd say that COST refers to Avg Ann Claim, but I think they mean Premium. What do you think?

Group Extension:
- I'm confused by the reinsurance lingo. If they have reins on amts in excess of $500,000, and share in exposure up to a maximum exposure of $1,000,000 per life (which is the "maximum retained liability"), does that mean that (assume 50% reins) for any claim over $1,000,000, the company retains the first 500 + (50%)*(next 500) OR does it mean that they retain 1,000,000 (which is first 500 + 50% of next 1,000,000). There is also similarly ambiguous wording w.r.t. reinsurance of max disability monthly bft.

<YUNR> I SHOULD HAVE MORE TIME TO LOOK AT THIS TONIGHT. MY FRIEND AND I ARE ACTUALLY TALKING THROUGH THE CASE STUDYS TOMORROW. IF YOU WANT TO JOIN US ON A CALL, GIVE ME YOUR PHONE NUMBER.
Any help is greatly appreciated!

Not Mike
10-24-2002, 04:01 PM
yunr, check your PMs.