RMI Test 3 Notes Life and Health Risks Chapters 11 14 15 16 17 18 Managing Life and Health Risks What are the risks Financial Impact of Benefits o Premature Death Life Insurance individual group SS Survivor o Poor Health Health Insurance LTC insurance Medicare Medicaid o Disability STD LTD Supplement Insurance SS WC o Long Life annuities retirement savings IRAs Pensions SS What is the Financial Impact of Premature Death of a Wage earning adult Financial Impact of Poor Health Financial Impact of Disability Ability to earn income may decrease or cease as in premature death Evaluative same exposure categories as premature death Living expenses may continue or increase Non wage earning adult o Married o Single with dependents o Single with no dependents o Married o Single with dependents o Single with no dependents Child Financial Impact of Long Life What happens when retired o Income o Expenses Which increases Which decreases Three sources of risk management solutions Individual Employee Benefits Group Insurance Government Social Programs Current Events Obama Care Employee Benefits Purpose is to Retain Good Employees in competitive job markets Employer contributions are a deductible business expense for Qualified status related to compliance with ERISA requirements Many benefits are not taxable to employees Non contributory benefits are employer pay all Contributory programs involve employee contributions Group Insurance Employee Benefits Basic Characteristics o Media contract o Cost savings ER cont marketing savings underwriting claims o No evidence of invisibility o Experience rating Basic Principles of Group Underwriting Eligibility requirements o For the group insurance company seeks after this group to provide a discount to the members of the group through a master contract o For individuals as a member you can enter into an individual contracts Companies seek these benefits to attract and obtain superior employees thus your company contributes paying for those benefits Insurance companies incur the most expenses in marketing underwriting and claims and selling insurance through a group cuts marketing cost and the group usually performs better in their contract loss ratio lower cost is lower Experience rating as a group the insurance company will talk to the employer rise or lower premiums and gives the employer incentives to influence employees to help keep insurance cost down Benefits Group main purpose Flower of participants Automatic detainment of benefits Minimum participation Admin efficiency Social Programs Social Insurance safety net economic security social problem lack of incentive to save spending out of means lack of private market none of these are designed to be your only source of income for your retirement minimal benefit Basic Characteristics o Compulsory no choice in the matter o Floor benefit minimal standard benefit some minimal means for your retirement o Social adequacy individual equity is it fair to me We don t care o Benefits ties to earnings o Prescribed by law change CPI Index o No means testing don t have to be below a poverty line to qualify for Medicare SS or Workers Compensation o Funded Full Money you put in today pays for others retirement o Self supporting Eligibility Requirements Programs o Social security unless you work for the railroad as you work you are required to pay 6 2 for your retirement and your employer will match the 6 2 o Medicare o Workers compensation Social Security OASDHI Most employment situations covered Payroll tax withholding required Participants accumulate credits based on minimum earned income o In 2013 1 160 per credit 4 640 maximum 4 credits Financing is on a pay as you go system Employee pays payroll tax o 6 2 OASDI actually only 4 2 in 2011 o 1 45 Medicare Employer matches employee contribution Maximum taxable earnings set each year o 113 700 in 2013 o Medicare tax applies to all earned income Social Security Insured Status Fully insured 40 total credits o Retirement benefit eligibility o Medicare eligibility Currently insured 6 of last 13 quarters Disability insured 10 of last 20 quarters o Disability benefit eligibility o Modified for younger workers age 31 Social Security Benefits Amounts based on primary insurance amount PIA o Covered earnings averaged o Adjustment for inflation Loss of benefits possible o Disqualifying income must be earned o Loss of eligible status children widows Retirement Benefit deferred annuity o PIA payable to retiree o Survivors benefit eligibility eligible for currently insured look at what your earn average it out o PIA payable to spouse Survivors Benefit life insurance o Payable to spouse o Payable to children Disability benefit o Payable to disabled employee Medicare retiree healthcare Part A paid Hospital Expense Insurance Automatically qualify No premiums o Hospital services o Some nursing home stays covers 90 days per occurrence o Deductible o Graduated cost sharing Part B Physician s services voluntary o Requires monthly premium o Includes cost sharing out of pocket expenses Medicare Choice Optional Part C o HMO or other managed care plan private health plans that are sold through private companies premium paid to private market o May pay extra benefits e g prescription drugs benefits package must be equal or greater to what is provided in part A of Medicare o May remove need for Medigap no longer worry about overlapping of coverages Prescription Drugs voluntary coverage pay government is for o Wide choice of plans different deductibles limits different approved Part D premium drugs Cost differ Covered medications differ o Doughnut hole plan design you pay first 200 300 pay on prescriptions Medicare still pay a copay up to 2 940 a year and then Medicare just stops until your total expenses go above 47 000 and then we will help you cover the rest provides some incentive to drive prescription drug prices down but don t want to struck someone down with catastrophic demands for prescription drugs Workers Compensation Principles State Run Programs Cost is made a cost of production cost passed to consumers Negligence not a factor if I get hurt in the scope of the employment regardless of fault my employer pays o Absolute liability for employer Benefit partial final sole remedy o No payment for pain and suffering Periodic payments Insurance required Workers Compensation Law Provisions Employer Employee relationship required Covered injury or illness must arise out of and in the
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