"Subsidization" in WC State Funds
In Spring 2019 #9, the answer to (b)(i) is that WC state funds have no subsidization.
In the Germani source material, the state WC programs section says, "The voluntary market effectively subsidizes the higher-risk residual market."
Can you help me reconcile these two statements?
Comments
That comment is made about residual markets, rather than state funds.
I find the following comment in the source text:
". . . State funds are, by law, designed to be self-supporting from their premium and
investment revenue. . . ."
This suggests that their rates are overall adequate. But technically, this doesn't mean there is no subsidy of the higher-risk insured by the lower.
Besides this, I don't find any other comment about subsidy in state funds. I guess the examiner interpreted the authors' silence on this as there being no subsidy.