Give an example of structural unemployment.
Give an example of cyclical unemployment.
What is considered full employment and why?
What is a market basket.Give an example of market basket.
Outline and describe four common assumptions used for valuing both
pension and retiree group benefits.
Identify assumptions not discussed in part (a) which impact retiree
group benefit plan valuations.
(8 points) The State of Bliss has the highest per capita income in the United States. The state has a Medicaid plan that takes care of 750,000 categorically and medically-needy members. The state pays for outpatient hospital and physician services on a fee-for- service (FFS) basis, and pays per diem for inpatient claims. Benefits Covered: Inpatient Hospital Home Health Outpatient Hospital Non-Emergent Transportation Physician Services Skilled Nursing Facility Early Periodic Screening, Diagnosis and Treatment (EPSDT) Free Standing Birth Center Family Planning Federally Qualified Health Centers (FQHC) and Rural Health Clinics (RHC) Adult Dental Nurse Midwife Prosthetic Devices Eyeglasses Laboratory & X-ray Preventive Care, Prenatal Care Current Office Visit Experience: Average utilization is 2,310 visits/1,000 members at an average cost of $45 per visit. Office Visit Type Distribution of Visits High 15% Medium 30% Low 55%(a) (2 points) Budget constraints mean the state must trim the costs of the program for 2015. (i) Identify general approaches to reduce overall program costs. (ii) Identify one specific action the State of Bliss could take for each strategy. (b) (4 points) Poindexter, an analyst for the state, recommends that the state change its reimbursement schedule for the three most frequently used office visit types. He proposes two new options to pay for office visits. Option A - A Fee Schedule Office Visit Type Payment per Visit High $60 Medium $40 Low $30 Option B-75% of what Medicare pays Relative Value Units per Visit Office Visit Type Work Practice Expense Malpractice High 0.95 0.6 0.20 Medium 0.70 0.4 0.14 Low 0.50 0.3 0.10 Geographic Factor 1.02 1.04 0.95 Conversion Factor = 42.5 Determine the most cost efficient of the three options (including the status quo) based solely on changing the reimbursement for office visits. Show your work. (c) (/ point) Discuss the potential repercussions of reducing office visit reimbursements.(12 points) You are an employee benefits actuary in a consulting firm that has been retained by Dizzy Lizzy, Inc. (DL) to help DL determine costs for its retiree health plan for the current year, 2014. You are given the following information regarding DL's plan: DL Plan Information 12/31/2013 - APBO $590,000 - Unrecognized (gains)/losses $27,000 - Unrecognized past service costs $0 - Expected average remaining service until retirement 10 years - Expected average remaining service until plan eligibility 8 years - Plan discount rate 5.00% - Expected investment interest rate 7.00% Furthermore: The 2014 service cost, calculated as of the beginning of the year, is $40,000 The 2014 expected benefit payments are $10,000 Benefit payments are made uniformly throughout the year Assume the amortization basis minimizes the impact on expense, within the rules prescribed by FAS 106 (a) (1 point) Describe the key components of the net periodic postretirement benefit cost. (b) (2 points) List and describe eight actuarial assumptions used for valuation of life and health group benefit plans. (c) (4 points) Calculate DL's net periodic postretirement benefit cost for 2014. Show your work.(d) (3 points) DL performs a full valuation of its postretirement benefit plan in early 2014, and elects to recognize its results as of January 1, 2014. You are provided with the following information: Revised APBO as of 1/1/2014: $670,000 Revised 2014 service cost: $53,000 . Revised 2014 expected benefit payments: $12,000 . Revised Expected Average Remaining Service Life (EARSL) to retirement: 9 years . Revised EARSL to plan eligibility: 7 years (i) (I point) Discuss possible reasons for the increase in APBO. (ii) (2 points) Calculate the revised net periodic postretirement benefit cost for 2014. Show your work. (e) (2 points) You receive a call from the Retiree Benefits Manager at DL who is forecasting a budget for 2015. She is particularly concerned with the discount rate risk, as it has recently been volatile on a month-to-month basis. Describe the expected impact on the components of the net periodic postretirement benefit cost if the discount rate at December 31, 2014 decreases by 50 basis points
