course5_solutions04 - Fall 2004 Course 5 Written-Answer...

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Fall 2004 Course 5 Written-Answer Solutions Question #1 Solution (a) Business overhead expense disability income policy: individual health insurance product covers normal and customary costs of running and maintaining one’s office during a period of disability pays the actual share of one insured’s costs up to a pre-determined monthly maximum until a maximum multiple of the monthly benefit is paid coverage is independent of other disability income products replacing income but is not independent of other business overhead expense policies covers rent, utilities, taxes, insurance premiums, depreciation, and employee salaries some policies cover salary of temporary replacement long elimination period (90 days) and short benefit period (6 to 24 months) can buy disability buy-out option: other partners can buy out disabled’s share of business (b) Maximum benefit: 30,000 15 450,000 × = . Disability period: 26 months Benefit period: [ ] minimum 24 months, 26 3 23 months −= Scenario I) [ ] min 30,000, 36,000 23 690,000 max of 450,000 ×= > Total payout to insured = 450,000 II) 18,000 23 414,000 max of 450,000 < Total payout: 414,000 III) 22,500 23 517,500 max of 450,000 > Total payout: 450,000
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Question #2 Solution (a) Insurance Companies offer range of life and medical coverage typically indemnity type benefits Health Care Service Corporations (HCSOs) write medical and dental coverages not-for-profit most Blue Cross/Blue Shield are HCSOs Health Maintenance Organizations (HMOs) offer comprehensive service benefits direct contract with health care providers usually cover a local service area co-payments used, rather than coinsurance/deductible Preferred Provider Organizations (PPOs) do not take insurance risk; risk stays with Insurance company/enployer performs utilization review services often two levels of benefits are offered Self-Insured Employers employer assumes risk, done to save money (taxes) avoids having to provide state mandated benefits gives greater flexibility Provider Organizations (PHO, PSO, PSN) providers accept risk accept capitation and perform admin functions Government Medicare provides medical coverage for elderly and disabled Medicaid provides health coverage to low income individuals Canadian Medicare (b) Single employer employer is policy holder (contractholder) employees and/or dependents are insured premium is paid by employer and/or employee benefits are paid to employees/dependents Multiple employer trusts on insured or self insured basis master trust agreement requires sign of participating employers premiums paid by employer and/or employee benefits paid to employees/dependents
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Labor union groups union is sometimes policy holder benefits sometimes self-insured contract may be issued to trustees of Taft-Harley fund Association groups professional or trade associations (e.g. doctors) association is usually policy holder professionals/dependents are insured
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course5_solutions04 - Fall 2004 Course 5 Written-Answer...

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