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Health Plan Finance and Risk Management Questions 71–75 (page: 16)

The following statement(s) can correctly be made about a health plan's underwriting of small groups:

A) Typically, a health plan medically underwrites both the employees of a small group and their dependents, even though small group reform laws prohibit health plans from singling out individuals for rejection or substandard rate-ups.
B) In the absence of laws mandating otherwise, a health plan's underwriting standards grow stricter as group size gets smaller.

State A, which requires guaranteed issue of at least two mandated healthcare plans, has established a typical health coverage reinsurance program for small employer groups. One true statement about this reinsurance program is that it most likely

Kevin Olin applied for individual healthcare coverage from the Mercury health plan. Before issuing the policy, Mercury's underwriters attached a rider that excludes from coverage any loss that results from Mr. Olin's chronic knee problem. This information indicates that Mr. Olin's policy includes

The ability of a health plan to effectively perform the rating and underwriting functions has become critical to the plan's success. In developing its pricing strategy, a health plan has to address the marketplace's ongoing trends and factors, which include

When pricing its product, the Panda Health Plan assumes a 4% interest rate on its investments.
Panda also assumes a crediting interest rate of 4%.

The actual interest rate earned by Panda on the assets supporting its product is 6%. The following statements can correctly be made about the investment margin and interest margin for Panda's products.