Some Group (torture) Querries

[Soccerboy]

1. Can someone please tell me the difference between FSA (Flexible Savings Account) and MSA (Medical Savings accout). My understanding is that FSA has tax advantage and you put pretax dollars in a kitty to fund medical expense and MSA is a hybrid that also includes some sort of deductible is this correct?.

2. In underwriting, there is a talk of age related reduction to cover for group large plans, does anyone know what this mean?. My understanding is that as the person gets older, you reduce the amount of group life coverage for the individual, if this is so, why do that?

3. Under risk pooling, you have reinsurance programs and risk adjustment fomulas, i wont even try to give my take on this one cos i dont understand the concept of risk pooling or the two ways of pooling risk, any takers?

4. Performance guarantees - is this a case where the insurance company pays a penalty for not meeting some criteria?, I thought it is usually the insurance company that gives bonuses for good performance of the plan

5. durational rating - is this when you are rated based on how long you have had the plan?, like in car insurance where you get discounts for having the insurance for a long period of time?

i thank you in advance for your assistance

[thing]

1. An FSA and a MSA are essentially the same idea, but there are differences in which groups are elligible for which. I think it's that only HIPAA sized groups (50 and under) are eligible for MSA; and that owners are eligible for MSAs but not FSAs. Also FSAs need to be cashed out annually, MSAs roll over.

2. I think that's right, and the rationale is because the economic needs of the dependents are less for older folks. Also old people are more likely to die...

3. A reinsurance program means the claims above $x are paid by a re-insurer. A risk adjustment formula is the same idea but done in house: that is, there is a pooling charge added to everyone's renewal but any individual's claims above $x are dropped from the experience portion.

4. & 5. I'll leave for someone else.

[Soccerboy]

Thanks Thing,

Question on 3, who takes care of the portion above $X for risk adjustment formula

[Emily]

An MSA is a savings account in conjuction with an insurance plan. The amount that goes into the MSA every year is always less than the deductible for the insurance plan. If you spend carefully you can use the balance in the MSA at retirement to purchase post retirement health insurance. An FSA is just a way to use pretax dollars to pay for minor medical costs like copays or uncovered services like dental and vision.

[thing]

Originally Posted by Soccerboy

Thanks Thing,

Question on 3, who takes care of the portion above $X for risk adjustment formula

The insurance company. It's just an accounting trick.

[toms]

Originally Posted by Soccerboy

2. In underwriting, there is a talk of age related reduction to cover for group large plans, does anyone know what this mean?. My understanding is that as the person gets older, you reduce the amount of group life coverage for the individual, if this is so, why do that?

as far as I remmember there is the law impact on rates that they cannot be adjusted for age unless this is actuarialy justified

but to make things simplier u leave the rates unchanged but u reduce your risk by shorter coverage