Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

7 Cards in this Set

  • Front
  • Back
Goals of Insurance Regulation
 prevent inadequate/overadequate premiums
 prevent Ins Cpy insolvency
 by requiring reserves to be held
 to prevent ph from being left without coverage
 promote fairness in competition among competing companies
 raise tax money (from State premium taxes)
 Social goals:
 Disclosure to policyholders
This involves:
 a summary of key features of the product
 clear wording; readability requirements
 illustrations of benefits
 educating the consumer
 prevent misleading marketing materials
 Reasonableness of Premiums and Benefits
 state mandated benefits
 premiums must be reasonable in relation to the benefits
 this is accomplished through Loss Ratio requirements.

 Fairness
 Prevent discrimination by age, sex, race, handicaps, etc.

 HI Reform
HI Reform goals include making Health Insurance more affordable and more secure (that is, less susceptible to huge rate hikes if the insured gets sick).
How to Regulate Insurance
1. Legal Basis
Simple Laws vs. Complex Laws
Complex laws are expensive to administer and analyze, but hopefully more precise.
 Simple laws are usable if the State has other overriding standards that govern.
 Complex laws are needed:
 in complex markets
 because removing existing laws is difficult
2. Regulatory Enforcement – this includes:
 required State Licensing of a company before the company can sell insurance in that State
To get licensed, the Ins Cpy must provide:
 proof that its Agents are licensed
 proof that a minimum level of capital (RBC) is held
 its list of insurance products
 its corporate by-laws
 biographies of major company officers
 description of a sound financial plan.

 Information gathering (by the State government)
 on cpy’s financial soundness
 to confirm Ins Cpy’s compliance with regulatory standards

 required Prior Approval of policy forms, before the ins cpy can issue them.
 Language,
 new premium rate schedules, and
 diividend schedules
must all be approved by the State Department of Insurance.

 Enforcement of the rules
 investigations often rely on consumer complaints
 there is an Appeals/Legal system

 Receivership (when necessary)
 e.g. the government taking over an insolvent company.
The Regulations Governing Insurance in the U.S.
Federal Regulations
State Regulations
Federal Regulations
 ADA (Americans with Disabilities Act)

 Specifies the rights of participants in pension plans
 Applies only to self-insured plans.
 ERISA (a Federal law) preempts any State-specific laws.
This is reasonable, since most self-insurers are large companies which would have trouble conforming to the different laws in all the states they write business in.
 Applies to insured and to self-insured plans
 Protects individual and small-group health care policyholders by guaranteeing access, portability, renewability, nondiscrimination, and limits on exclusions.
State Regulations
 Capital Requirements
 Risk-based capital (RBC)

 Guaranty Funds
 all Ins Cpys have to pay monthly premiums into a Guaranty Fund.
The Guaranty Fund:
 Guarantees the payment of current claims
 Guarantees continuing coverage to ph’s (even if their Ins Cpy goes bankrupt — this is vital to Health Insurance policyholders)

 HMO’s and self-insuring employers are exempt from participation.

 Reserve requirements
 Active Life reserves
 Contract reserves
 Claim reserves (includes capitation pmts still owed to providers)
 Provider liability reserves (risk-sharing obligations to providers)
also called “Outcome-based contractual reserves”
 Premium Deficiency reserves

See SN 305 for detailed definitions of these types of reserves.

 Consumer Protection (same list as “Goals Of Insurance Regulation”, above)