3502(drennan) topic 2 notes

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  1. What are some examples of social insurance programs?
    • OASDI + Medicare, Workers
    • Compensation, Unemployment Insurance, Temporary Disability Income (TDI)
  2. Why do Social insurance programs exist?(3)
    • 1.Individuals
    • are myopic (shortsighted)

    2.Issues with requirements of an insurable risk

    ·Moral hazard

    ·Loss is not definite

    · Adverse selection problem

    ·Catastrophic loss possibility

    3. Private Insurance market experiences “market failure”
  3. Why is it important for Employer to understand Social Insurance programs?
    Employers provide much of the funding for the programs, so it must be coordinated and integrated into plan design.
  4. What are the major characteristics of social insurance programs?(2)
    • 1.Compulsory purchase of insurance or compulsory participation in a program
    • 2. the government acts in a risk bearing capacity.
  5. What happens when the government acts in a risk bearing capacity?
    The government acts as an insurer.
  6. oasdi
    old age-retirement
  7. oasdi
    survivor-life insurance
  8. In oasdi, who is the risk bearer?
    the federal government
  9. What percentage of earned income comes out of payroll taxes to fund oasdi and medicare(part a)
  10. what percentage of payroll taxes goes to oasdi?
  11. what percentage of payroll taxes goes to medicare part a?
  12. are amounts paid to oasdi and medicare pt a matched by the employer?
  13. where does the money collected from oasdi go?
    into one of several trust funds
  14. what is the maximum taxable wage base for oasdi?
  15. what does pia stand for
    primary insurance amount.
  16. What is pia a function of?
  17. what are oasdi benefits based on?
    All based on the PIA (Primary Insurance Amount)
  18. is there a wealth or income transfer in oasdi?
  19. for oasdi who does compliance with the law rest with?
    the employer
  20. who is the risk bearer for workers compensation?
    1.   Private Insurance

    2. Employer if they are self-insured

    3.State Funds

    ·Monopoly funds

    · Competitive Funds
  21. what are the two types of state workers compensation funds?
    monopoly funds and competitive funds
  22. monopoly fund
    type of wc program that is the only way to get workers compensation(ex ohio)
  23. competitive funds
    funds run by the state that compete with private insurers
  24. types of workers compensation benefits
    • On-the-job injuries/death    
    • Medical expenses 
    • Loss of income
  25. what type of workers compensation funds are subject to adverse selection
    competitive funds
  26. too make up for the adverse selection problem in competitive funds, what type of rate regulation is performed?
    private insurers are taxed to make up for the difference in lower price.
  27. what are the main sources of funds for wc?
    premiums or self-insurance contributions.
  28. must an er comply with wc laws?
  29. who is the risk bearer for unemployment insurance?
    state and federal government
  30. what are the sources of funds for unemployment insurance?
    state and federal government
  31. what are the sources of funds for unemployment insurance?
    payroll taxes paid by employers
  32. futa
    federal unemployment tax act
  33. what is different about the tax rate to an employer under the federal unemployment tax act?
    • It is Experience rated back to the Employer
    •  This controls moral hazard
  34. What happens to the er tax rate under the federal Unemployment tax Act if an er has fewer layoffs?
    tax rate decreases. (increases with more layoffs)
  35. how many states offer temporary disability insurance?
  36. how long does short term non-occupational disability insurance last for?
    up to 6 months
  37. who is the risk bearer under short term disability insurance?
    state funds and private insurance
  38. sources of funds for short term disability insurance?
    premiums paid by the employer and ee payroll taxes
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3502(drennan) topic 2 notes
3502(drennan) topic 2 notes
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