ACTEX Study Manual for Group & Health Core U.S. · ACTEX Learning New Hartford, Connecticut ACTEX...

Learn Today. Lead Tomorrow. ACTEX Learning

ACTEX Study Manual for

Group & Health Core U.S.Volume IFall 2016 Edition

Frank G. Reynolds, FSA, FCIA, MAAA

ACTEX LearningNew Hartford, Connecticut

ACTEX Study Manual for

Group & Health Core U.S.Volume I

Fall 2016 Edition

Frank G. Reynolds, FSA, FCIA, MAAA

Copyright © 2016, ACTEX Learning, a division of SRBooks Inc.

ISBN: 978-1-62542-706-9

Printed in the United States of America.

No portion of this ACTEX Study Manual may bereproduced or transmitted in any part or by any means

without the permission of the publisher.

Actuarial & Financial Risk Resource Materials

Since 1972

Learn Today. Lead Tomorrow. ACTEX Learning

ACTEX Group & Health Core U.S. Study Manual, Fall 2016 Edition

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FORWARD When I first began teaching seminars for the later examinations 30 years ago, I stressed what were then two novel ideas: Be sure to get down the major points and use point form. Over the next ten years, the idea of being sure of the major points was accepted to the point where 75% of students knew substantially all the major points. Unfortunately, this meant that the examiners started having difficulty distinguishing students who should get a 4, a 5, a 6 or a 7. After one preparation session, the students and I sat around discussing the phenomenon and I realised that the major points were all that students were learning. The session also pointed out that students were misreading questions and did not know related ideas because they were working with over summarized notes. (To the point that some people’s manuals were covered with more handwriting than printed material). Discussions with some examiners confirmed that these were problems they were encountering. In setting up this manual, I have tried to provide a set of notes that does give the detailed points as well as the major ones. Outline form has been used as it is what you should be using on the examination - sentences take too long. Each note has been summarized independently so you can see what related facts should be considered. Crossing these areas out as you study is worthwhile but you will still see what goes with what as you prepare. I have included a long answer question with almost all papers. Some are numerical. Most are short 1 to 3 mark pieces of what may be a 15 mark examination question. The real benefit is in comparing what you can put down after studying the material with the model answer. Good Luck.

INDEX Interpreting Financial Statements Analysis for Financial Management Chapter 1 E-3 Financial Forecasting Analysis for Financial Management Chapter 3 E-11 Managing Growth Analysis for Financial Management Chapter 4 E-15 A History of Managed Health Care and Health Insurance in the US Essentials of Managed Health Care Chapter 1 A-3

Types of Health Insurers, Managed Health Care Organizations, and Integrated Health Care Delivery Systems Essentials of Managed Care Chapter 2 A-13 Underwriting and Rating Essentials of Managed Health Care Chapter 22 B-83 Health Plans and Medicare Essentials of Managed Health Care Chapter 24 D-79

Product Development Group Insurance Chapter 3 B-93 Health Policy and Group Insurance Group Insurance Chapter 4 F-5 Medical Benefits in the United States Group Insurance Chapter 5 A-43

Dental Benefits in the United States Group Insurance Chapter 6 A-65 Pharmacy Benefits in the United States Group Insurance Chapter 7 A-73 Retiree Group Benefits Group Insurance Chapter 8 G-3 Government Health Plans In the US Group Insurance Chapter 9 D-3

Medical Benefits in Canada Group Insurance Chapter 10 A-53 Group Life Insurance Benefits Group Insurance Chapter 11 A-27

Group Disability Income Benefits Group Insurance Chapter 12 A-37 Group Long Term Care Insurance Group Insurance Chapter 13 A-81 Principles of Health Insurance Regulation Group Insurance Chapter 15 F-11 Regulation in the United States Group Insurance Chapter 16 F-15 The Affordable Care Act Group Insurance Chapter 18 F-57 Health Benefit Exchanges Group Insurance Chapter 19 C-63, F-67 Pricing of Group Insurance Group Insurance Chapter 20 B-5 Estimating Medical Claim Costs Group Insurance Chapter 21 B-27 Estimating Dental Claims Costs Group Insurance Chapter 22 B-47 Estimating Pharmacy Claim Cost Group Insurance Chapter 23 B-71

Estimating Claims Costs for Life Benefits Group Insurance Chapter 24 B-21 Estimating Claim Costs for Disability Benefits Group Insurance Chapter 25 B-41 Pricing Group Long Term Care Insurance Group Insurance Chapter 26 B-55 Group Insurance Filings and Certifications Group Insurance Chapter 28 F-35

Medicare Related Rate Filings and Certifications Group Insurance Chapter 29 D-71 Medical Claim Cost Trend Analysis Group Insurance Chapter 34 B-79 Group Insurance Financial Reporting Group Insurance Chapter 35 E-21 Analysis of Financial and Operational Performance Group Insurance Chapter 41 E-35 The Products Individual Health Insurance Chapter 2 A-97 Setting Premium Rates Individual Health Insurance Chapter 5 B-11

Flexible Expense Accounts The Canadian Handbook of Flexible Benefits Chapter 7 C-45 Adverse Selection The Canadian Handbook of Flexible Benefits Chapter 16 C-51 The Environment of Employee Benefit Plans The Handbook of Employee Benefits Chapter 1 C-3 Functional Approach to Designing and Evaluating Employee Benefits The Handbook of Employee Benefits Chapter 2 C-5 Consumer Driven Health Plans The Handbook of Employee Benefits Chapter 7 C-11

Selected Additional Benefits: Educational assistance, Group Legal Services Plans, Qualified Transportation Fringe Benefits, and Voluntary Benefits The Handbook of Employee Benefits Chapter 18 C-19 Medicare Part D Prescription Drug Benefits The Handbook of Employee Benefits Chapter 21 D-13 Strategic Benefit Plan Management The Handbook of Employee Benefits Chapter 24 C-27 Cafeteria Plan Design and Administration The Handbook of Employee Benefits Chapter 25 C-37,F-69

Employee Benefit Plans for Small Employers The Handbook of Employee Benefits Chapter 32 C-53 GAAP Objectives and Their Implications to Life Insurers Herget US GAAP for Life Insurers Chapter 1 E-41 Statement of Financial Accounting Standards No. 60 E-49 Group Disability Insurance GHC-101-13 B-39 The Challenges of Pricing Health Insurance for the 2014 Exchanges GHC-103-13 B-99 Pricing Considerations for Drugs Covered under Pharmacy Benefit Programs GHC-105-13 B-67 Health Plan Payroll Contribution Strategies and Development for Employers GHC-106-16 C-65

Medicare’s Financial Condition: Beyond Actuarial Balance GHC-800-13 D-77 Health Reform Implementation: Understanding the Terminology GHC-802-13 F-53 Financial Reporting Implications Under the Affordable Care Act GHC-806-15 E-59 Affordable Care Act Risk Adjustment: Overview, Context, and Challenges GHC-808-15 F-85 The HHS-HCC Risk Adjustment Model for Individual and Small Group Markets under the Affordable Care Act GHC-809-15 F-89 Risk Transfer Formula for Individual and Small Group Markets under the Affordable Care Act GHC-810-15 F-95 Medicaid 101 MACPAC GHC-811-16 D-41 Medicaid – A Primer GHC-812-16 D-29

Medicaid and Long Term Services and Support GHC-813-16 D-51

Expanding Medicaid to the New adult Group through Section 1115 Waivers GHC-814-16 D-49 Explaining Health Care Reform: Medical Loss Ratio GHC-815-16 F-83 U.S. Employers’ Accounting of Post-Retirement Benefits Other Than Pensions GHC-816-16 G-35 Mechanics and Basics of Long Term Care Rate Increases Long Term Care News August, 2014 B-91 Risk Adjustment in State Medicaid Programs Health Watch January 2008 D-57 Timing’s Everything: The Impact of Benefit Rush Health Watch May 2008 B-101 Payment Reform under the Medicare-Medicaid Financial Alignment Demonstrations Health Watch May 2013 D-67 Implications of Individual Subsidies in the Affordable Care Act- What Stakeholders Need to Understand Health Watch May 2014 F-103 A Practical Guide to Private Exchanges C-59 Health Watch May 2015 Illustrations Statement of Financial Accounting Standards 106 Appendix C G-11 Measuring Retiree Group Benefits Obligations and Determining Retiree Group Benefits Program Periodic Costs or Actuarially Determined Contributions ASOP #6 G-13 Regulatory Filings for Health Plan Entities ASOP #8 F-45 Responding to or Assisting Auditors or Examiners in Connection with Financial Statements for all Practice Areas ASOP 21 E-57

Data Quality ASOP #23 B-103 Credibility Procedures ASOP #25 B-75 Compliance with Statutory and Regulatory Requirements for the Actuarial Certification of Small Employer Health Benefit Plans ASOP #26 F-49 Actuarial Communications ASOP #41 F-79 Medicaid Managed Care Capitation Rate Development and Certification ASOP #49 D-61

Determining Minimum Value and Actuarial Value under the Affordable Care Act ASOP #50 G-31

Section A

PLAN PROVISIONS

Section A Index A History of Managed Health Care and Health Insurance in the US Essentials of Managed Health Care Chapter 1 A-3

Types of Health Insurers, Managed Health Care Organizations, and Integrated Health Care Delivery Systems Essentials of Managed Care Chapter 2 A-13 Group Life Insurance Benefits Group Insurance Chapter 11 A-27

Group Disability Income Benefits Group Insurance Chapter 12 A-37 Medical Benefits in the United States Group Insurance Chapter 5 A-43

Medical Benefits in Canada Group Insurance Chapter 10 A-53 Dental Benefits in the United States Group Insurance Chapter 6 A-65 Pharmacy Benefits in the United States Group Insurance Chapter 7 A-73 Group Long Term Care Insurance Group Insurance Chapter 13 A-81 The Products Individual Health Insurance Chapter 2 A-97

Essentials of Managed Health Care Chapter 1 A-3

ACTEX Learning Group and Health Core

Kongstvedt Essentials of Managed Health Care Chapter 1 “A History of Managed Health Care and Health Insurance in the United States”1

I. Introduction A. a few insurers offered occupational coverage in the late 19th century. It gradually morphed into 24/7 coverage II. 1910 to the mid-1940s A. Early plans 1. earliest proto-HMOs appeared which combined insurance and health care delivery 2. Blue Cross and Blue Shield (Blues) appeared characterized by exclusive use of existing hospitals and privately practicing physicians B. Prepaid medical group practices 1. first plan in Washington provided a broad range of medical services solely through its providers for a monthly fee a. available to lumber mill owners2 b. gave the clinic a flow of patients and revenues 2. the first rural co-operative was established in 1929. The physician lost his license for his efforts 3. in 1929 Ross and Loos established a plan providing physician services and hospitalization for the Los Angeles Department of Water and Power. Both lost their licenses a. emphasis was on prevention and health maintenance 4. in 1932 the American Medical Association took a strong stance against prepaid group practices, favoring indemnity insurance a. this was in response to the findings of Committee on the Cost of Medical Care (citizens group) that recommended group practice 5. initial impetus for prepaid group practices arose from a. employers b. providers seeking revenues c. consumers seeking access to improved and affordable care d. a housing lending agency seeking to reduce the number of foreclosures 6. Kaiser Foundation Health Plan started in 1937 for construction workers 7. Group Health association was formed in Washington DC in 1937. a. a response to Home Owner’s Loan Corporation’s desire to reduce foreclosures b. D.C. Medical Society sought to restrict participating physicians’ admitting privileges and threatened expulsion c. the US supreme Court eventually ruled in favor of the plan

1 This is an entirely new chapter in 2013. It is marked in the Syllabus as ``background only``. Many students have interpreted that to means `ignore`` to their sorrow. What it really means is that this is information that you must know in order to be able to prepare an answer to exam questions. You get no marks for the material in the question BUT you can do the question. Without the information from this chapter, the question will not make sense. The chapter provides a history of the development of health care in the U.S. 2 Lumber mills are often in remote areas. Bad accidents are common. To this day, it remains common for mines, etc to subsidize a surgeon for the community in which they operate

A-4 Essentials of Managed Health Care Chapter 1


C. The Blues 1. in 1929 Baylor Hospital agreed to cover 1500 teachers for inpatient care a. plan expanded to cover more and have more participating hospitals b. other Blue Cross plans followed elsewhere, sponsored by local hospital association and including all the area’s hospitals i. wanted to establish a revenue stream 2. Blue Shield emerged in the US northwest in 1939 in response to employer demands a. physicians were paid a monthly fee 3. Blues relied on independent private practices unlike HMOs which had dedicated delivery systems a. payment based on charged fees b. hospitals created cost based charge lists c. plans developed payment rates for defined procedures 4. in time Blue Cross and Blue Shield plans tended to merge 5. Blues now often part of a profit or non-profit larger organization 6. Blues may compete but usually respect each other’s boundaries III. The Mid1940s to the Mid1960s: the Expansion of Health Benefits A. 1942 wartime Stabilization Act restricted wage increases but permitted health benefits as non-taxable benefits – lead to a major expansion in health benefits B. HMOs continued to form slowly 1. Independent Practice Association (IPA) model appeared in 1950s a. provide fee for service contracts with physicians b. a reaction to staff model HMOs c. plans used relative value schedules, heard grievances against physicians and monitored quality of care C. HMOs and insurers often regulated by different state departments D. McCarran Ferguson Act reversed the Southwestern Underwriters Association US Supreme Court ruling which had overturned the long standing rule that insurance regulation was a state responsibility. The Act also provided an anti-trust exemption for insurers pooling data. IV. The Mid 1960s to the Mid 1970s: The Onset of Health Care Cost Inflation A. Medicare 1. Parts A and B enacted in 1965 for those over 65 a. financed by general revenues and enrollee premiums b. benefits and payments similar to Blues 3. Medicaid passed in 1965 for the low income, B. Results of third party payment 1. as a result of Medicare, Medicaid and insurance the percentage of health care costs paid out of pocket dropped from 55.9% in 1960 to 14.2% in 2000 2. means there is no longer a link between the patient and the provider, which generates increased fees and use 3. are the increased services necessary? 4. as a percentage of GDP health care rose from 5.8% in 1965 to 7.4% in 1970 (Medicare mainly)



C. Cost control attempts 1. Blues analyzed claims to identify excess usage 2. California’s Medicaid introduced hospital pre-certification and concurrent review 3. Congress introduced the Professional Standards Review Organization to review appropriateness of care for Medicare and Medicaid a. established a reliable infrastructure and data capacity b. now called the Quality Review Organization which oversees clinical services for government programs and some employers 4. in the 1970s employers began introducing pre-certification and concurrent review for inpatient care. Others introduced wellness programs and negotiated payment levels with providers D. Employee Retiree Income Security Act (ERISA) 1974 1. established appeal rights for the denial of benefits 2. enabled self-funded benefits to avoid state taxes and regulations E. Inflation 1. problem became a topic of public discussion 2. role of the 30 HMOs modest V. The Mid-1970s to the Mid 1980s: The Rise of Managed Care A. Basics 1. triggered by rising health care costs B. HMOs 1. Main features of the 1973 HMO Act a. federal grants and loans available for the planning and startup of new HMOs and service area expansions of existing plans b. state restrictions on HMOs were overridden by federal qualification c. dual choice provision required employers of 25 or more that offered indemnity coverage to also offer two federally qualified HMOs – a closed panel (group) HMO and an open panel (IPA) model HMO if the HMOs asked i. most HMOs used the mandate although there were fears exercising it would antagonize employers ii.. dual choice mandate expired in 1995 2. Federal qualification process a. required i. minimum benefit standards ii. demonstrating provide networks adequate iii. having a quality assurance system iv. being financially stable v. having an enrollee grievance process b. some states emulated these rules c. no longer exists 3. Reasons to seek federal qualification a. a seal of approval which helped in marketing b. ensured access to employer market via the dual choice option c. overrode state laws d. gave access to grants and loans



4. Retarding provisions a. due to two congressional purposes i. fostering competition ii. expanding access to coverage b. harder to compete with indemnity plans who were not subject to same provisions c. provisions i. benefit comprehensiveness ii. open enrollment – i.e. accept anyone regardless of health status iii. community rating which limited plan’s ability to relate premiums and enrollee’s or group’s health status d. provisions modified in late 1970s 5. Political considerations a. support for HMOs was bi-partisan b. states did not oppose the override of their rules c. most employers did not react negatively to the dual choice option d. regulation effectively fostered competition 6. HMOs focus a. managing use b. changing payment system to better align goals of HMO and provider i. salaried employees ii. capitation for primary care physicians iii. financial incentives to control referrals to specialists c. patients required to go through primary care physician to obtain access to specialists or hospitals d. pre-certification for elective hospital admissions: lengths of stay reduced e. lengths of hospital stay monitored f. outpatient care substituted for inpatient care 7. Hospital discounts for HMOs a. approached or exceeded those for Blues b. competition forced hospitals to discount services to HMOs c. per diem fees arrived – a flat payment for services d. also case rates and capitation appeared e. negotiations with hospitals and other providers became sophisticated 8. Tax Equity and Fiscal Responsibility Act (TEFRA) a. authorized Medicare to capitate HMOs b. felt that HMOs with better cost control could offer better benefits i. less cost sharing ii. drug coverage iii. preventative services c. debate arose over whether better benefits due to efficiencies or attracting healthier lives 9. Medicaid a. in 1982 Alabama allowed to only capitate id est no fee for service payments 10. Public acceptance a. due to increased benefits i. preventive services ii. child and women’s preventive health visits iii. prescription drugs b. other carriers responded by adding drugs and prevention to their offerings



C. Preferred Provider Organizations and Use Management 1. Basics a. people covered by a PPO have lower cost sharing when using a covered physician but have a choice of physician – no gate keepers b. providers agree to cost control measures i. pre-certification for elective hospitalization ii. second opinion programs – patient required to get a second opinion for certain procedures – now rare D. Large case management 1. developed in indemnity insurance 2. care coordinated for people with expensive conditions such as a. certain accident victims b. cancer c. low birth weight children d. chronic illness causing functional limitations E. Medicare 1. shifted to a fixed payment which varies by diagnosis group VI. The Mid 1980s to 2000: Growth, Consolidation, Maturation, and Backlash A. Managed care expands rapidly 1. The expansion of HMOs a. from 15 million in 1984 to 105 million in 1999 2. by 1999 PPOs had more members than HMOs c. traditional indemnity went from 75% of the market to less than 10% in the period 2. Point of service plans (POS) a. enrollees required to select a gatekeeper which could be changed at any time b. stalled out due to high costs 3. Medicare and Medicaid a. Medicare managed care grew from 1.3 million to 6.8 million b. Medicaid managed care grew from 2.3 million to 18.8 million (10% of recipients to 56%) 4. Consequences a. some HMOs out stripped their ability to run the business b. service eroded and mistakes increased c. failures began d. proliferation of organizations lead to the cover name of managed care organizations (MCOs) B. Consolidation begins 1. Entrepreneurs entered the market a. started new HMOs and either sold them or consolidated them with others b. financially troubles MCOs made cheap, easy targets c. failing MCOs sometimes taken over by state authorities and sold



2. Small plans at a disadvantage a. employers wanted national coverage b. computer system upgrades expensive c. new technologies costly d. unless market concentrated, discounts hard to negotiate e. even large firms consolidated f. by 1999 large firms 75% of the market 3. Conversion from not for profit to for profit a. required the creation and funding of foundations (conversion foundations) with the assets of the non-profit plans b. split now about 50-50 4. Physicians moving to group practice 5. Hospitals consolidating to rationalize clinical and support system 6. Provider bargaining power has increased by being willing to only enter into comprehensive contracts i. bilateral monopolies appeared and competition was muted C. Integrated Delivery Systems (IDS) appear 1. physicians and hospitals joined together 2. generally consisted of hospital and all physicians with admitting privileges there a. physicians with high use benefited the hospitals and could not be excluded b. physicians required to use the hospital’s outpatient facilities for lab tests even if a better price available c. these restrictions hurt the IDS’s ability to compete 3. initial problems included a. organizational fragmentation b. misaligned payment systems for physicians c. inadequate information systems d. inexperienced management e. lack of capital 4. many tried to become risk bearing organizations a. in 1997 they could be risk bearing with Medicare b. global capitations accepted from HMOs c. most failed 5. some IDSs formed HMOs a. highly touted as vertical integration b. also most failed D. Use management shifts focus, 1. from inpatient care to drugs, outpatients diagnostics and specialists. Also to disease management of the small number of high cost patients 2. primary care physicians felt caught between role of lowering costs and the patient who questioned their loyalty a. shift is away from primary care physicians as gatekeepers and toward use of coinsurance as the control over use of specialists 3. carve out companies provide specialist care in return for a capitation. Used for a. prescription drugs b. mental and behavioral health c. disease management d. dental e, chiropractic 4. carve out companies market to health plans and self-insured employers as they are not licensed insurers 5. recently trend is to reintegrate to help coordinate services



E. Industry oversight spreads 1. Industry a. National Committee for Quality Assurance i. many employers require/encourage its endorsement ii. now the seal of approval iii. originally focused on HMOs but now looks at 1). PPOs 2). credentialing organizations 3). managed behavioral care organizations 4). primary care medical homes b. similarly for URAC and Accreditation Association 2. Performance measures a. called report cards b. primary is Health Plan Employer Data and Information Set (HEDIS) c. developed by the NCQA 3. Federal a. Consolidated Omnibus Budget Reconciliation Act (COBRA) i. allowed individuals who had lost coverage to continue it at 102% of employer’s cost for 18 months b. Health Insurance Portability and Accountability Act (HIPAA) i. provided continued access after COBRA continuance exhausted ii. expensive and young people could get individual coverage more cheaply iii. person often eligible because they had lost their job iv. created standards for privacy, security and electronic transactions F. The managed care backlash 1. Roots a. plans said “no” for the first time and health care is an emotional issue b. employers eliminated traditional health plans in favor of managed care c. requirement to obtain prior approval for specialist lists d. requirement to use specialists within the network – resented by those forced to change physicians and who had not chosen managed care freely 2. Other causes – plan growth problems a. mistakes in paperwork or claim processing b. ability to handle the delivery system c. coverage decisions became more bureaucratic d. inconsistencies in coverage decisions – public saw decisions as made by “bean counters” e. decisions delegated to unqualified people without proper support f. plans accused of routinely denying coverage and caving in on appeal g. plans were poor at self-policing and the public lost confidence h. denial of care for services not medically necessary or proven – seen as overzealousness 3. Other causes – threats to health a. denial of authorization for payment b. sometimes treatment not a covered benefit c. public expected low premiums and excellent coverage d. medical necessity or a convenience or cosmetic? 4. Accusations - plans deliberately refusing care to enrich executives and owners 5. Were stories fairly presented?



6. Reactions a. prudent layperson rules for emergency care b. stronger appeal and grievance rights c. any willing provider provisions which allow any provider willing to accept the plan’s terms to join d. prohibition of gag clauses under which physician cannot tell the patient the best options for care. Government Accountability Office found no basis in fact e. press continued with horror stories f. lawsuits alleging interference with physician’s decisions proliferated g. lawsuits alleged capitation gave physicians an incentive to withhold care – research studies refuted the idea h. industry countered by pointing to i. coverage of preventive services and drugs ii. absence of life time limits iii. coverage of expensive care i. other results i. networks expanded ii. use management became less aggressive iii. gatekeepers eliminated (and replaced with higher coinsurance levels if primary care physician did not make the referral) iv. health care costs rose VII. 2000 to 2010: Costs Rise and Coverage Declines A. Basics 1. HMO market share peaked in 1999 and has since declined to 17% 2. POS plans have declined to10% 3. PPO plans have risen to a market share of 55% 4. conventional plans are about 1% 5. high deductible has risen to 17% 6. Medicare managed care enrollment declined after the 1997 budget reduced payments 7. Medicare Modernization Act of 2001 a. added Part D b. Medicare +Choice became Medicare Advantage c. payment method to HMOs changed to increase payments to 8.7% above the fee for service Medicare payments d. numbers doubled to 12 million e. payments will decline to about parity under the affordable Care Act (ACA) f. for Medicare Advantage plans 65% are HMOs and 27% PPOs 8. Medicaid. states turned to managed care 61% enrolled in 2004 B. Health care costs again exceed economic growth 1. National health expenditures reached 17.6% of GDP in 2009 2. Became a political issue because of a. per cent of government spending on Medicare and Medicaid b. rising cost of private coverage c. impact on economy 3. Causes a. price increases by large health systems b. price increases by drug and appliance manufacturers c. increased use d. new technologies priced at high profit margins



e. increased demand – partly due to direct advertising by drug manufacturers f. higher consumer expectations g. use of providers facilities and equipment h. defensive medicine – minor cause i. an aging population j. managed care backlash made CMOs reluctant to intervene except for chronic diseases k. rising administrative costs – will decline with electronic record keeping and comparative information on plans l. ACA’s limits on administrative costs – will cut commissions C. Out of pocket spending increases 1. employers pay 70% of costs 2. employees’ costs rose due to a. increased contributions b. higher deductibles c. higher co-payments d. introduction of tiered cost sharing for drugs 3. Consumer Directed Health Plans (CDHP) appeared which saved the enrollee taxes and premiums a. aimed at enhancing consumer choice and accountability b. focused on consumer education c. controversial as those with high incomes profit more and people with continuing high expenses pay every year 4. managed care has responded with a. pay for performance programs to align incentives with quality goals b. value based insurance design – lowering effects of cost sharing for the chronically ill D. Increasing numbers uninsured 1. numbers have increased due to a. fewer small employers offering coverage b. decline in manufacturing jobs c. increasing numbers who decline coverage d. more people who cannot obtain coverage due to health or cost e. rose to 17% in 2009 E. The Patient Protection and Affordable Care Act 1. changes will depend on politics

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