562 Chapter 13 Insurance and Risk Management
Topic Key Ideas, Formulas, and Techniques Example(s)
Deductibles and Coinsurance
with Health Insurance, p. 539- The deductible may be stated as an amount per
person and an overall deductible. - To fi nd what the insurer will pay, subtract the per
person deductible from each person’s claims
and apply the coinsurance percent. - Do not subtract more than the overall deductible
however.
Ken is a single father with
three children covered under
a family health insurance
policy. The policy provides
80/20 coinsurance with a
$250/$500 deductible. Ken
submits claims of $840
for himself, $100 for one
child, and $670 for another
child. He has not submitted
any other claims this year.
How much will his health
insurance pay?
(Example 13.2.4)Adjusted Community Rating,
p. 541- Determine the appropriate demographic or other
multipliers for the employer group. - Multiply these factors by the community rate.
Greatest Lakes Health
Insurance Corp.’s community
rate for its standard
HMO plan in the Detroit
metropolitan area is $280
single, $590 family. A Detroit
area school district wants
to offer this HMO to its
employees. Great Lakes
uses adjusted community
rating. The rate factor for
public schools is 1.15, while
the demographic factor for
this school district is 0.844.
Determine the premium for
this school district.
(Example 13.2.6)Experience Rating, p. 541 • Project the claims for the group based on prior
year claims.- Multiply by load factors for administrative and
other costs. - If the loads do not change from one year to the
next, the experience rate may be estimated by
multiplying:
Current rates prior claims projection___current claims projection (^)
Last year, the premiums
for the Zarofi re plan were
$258.10 for a single contract
and $787.50 for a family
contract. Those premiums
were based on projected
claims of $3,108,103.
This year’s projection is
$4,174,435. The loads did
not change from last year to
this year. What will the rates
be this year?
(Example 13.2.8)
Credibility Tables, p. 542 • Smaller groups may have rates that are only
partially based on their own experience.
- A credibility factor is based on the group’s size.
- The group’s rate is the credibility factor times
their rate based on their own experience
plus (100% the credibility factor) times the
community rate.
From experience, Greatest
Lakes’ health insurance rates
for the health insurance plan
offered to Burned Beans
Coffee Roasters would be
$108 single/$242 single
plus spouse/partner/$455
family. The community rates
are $175/$360/$700. The
company has 125 covered
employees. What rates will
they be charged?
(Example 13.2.9)(Continued)