Ch. 3* - Medical Expense Insurance

Question 1

Basic medical expense insurance

Answer 1

insurance is a health insurance policy that provides “first dollar” benefits for specified (and limited) health care, such as hospitalization, surgery, or physician services. Characterized by limited benefit periods and relatively low coverage limits.

Question 2

Major medical expense policy

Answer 2

is a health insurance policy that provides broad coverage and high benefits for hospitalization, surgery, and physician services. Characterized by deductibles and coinsurance cost sharing.

Question 3

Deductible

Answer 3

an amount of expense or loss to be paid by the insured before a health insurance policy starts paying benefits

Question 4

Flat deductible

Answer 4

deductible is a stated dollar amount that applies to a covered loss (e.g. $500). This deductible is applied per occurrence, per insured individual. Sometimes referred to as an “initial deductible”

Question 5

Corridor Deductible

Answer 5

comes in to play when a major medical policy is supplementing basic coverage that contains no deductible), the corridor deductible is not applied until the basic coverage has been exhausted

Question 6

Integrated Deductible

Answer 6

is used when a major medical plan is supplementing basic coverages. Example - if the major medical has a $400 deductible and the insured has basic coverage of $500 or more, then in the event of a claim, the amount paid by the basic coverage satisfied the major medical deductible. However, if the basic does not cover the entire deductible amount of the major plan, the insured is required to make up the difference.

Question 7

Per-cause deductible

Answer 7

the insured must satisfy a deductible for each accident or illness

Question 8

all-cause deductible

Answer 8

the insured only has to meet the deductible amount once during the benefit period

Question 9

carryover provision

Answer 9

allows an insured to defer current health charges to the following year’s deductible. The major medical deductible carryover period normally applies to expenses incurred during the last three months of the plan year.

Question 10

coinsurance

Answer 10

is the principle under which the company insures only part of the potential loss, the policyowners paying the other part. For instance, in a major medical policy, the company may agree to pay % of the insured expenses, with the insured to pay the other %.

Question 11

Stop-loss

Answer 11

is designed to stop the company’s loss at a given point, as an aggregate payable under the policy, a maximum payable for any one disability, or the like; also applies to individuals, placing a limit on the maximum out-of-pocket expenses an insured must pay for health care, after which the health policy covers all expenses.

Question 12

Preexisting Conditions

Answer 12

is an illness or medical condition that existed before a policy’s effective date; usually excluded from coverage, through the policy’s standard provision or by waiver.

Question 13

Health Savings Accounts (HSA)

Answer 13

are tax-advantaged medical savings accounts available to taxpayers in the US who are enrolled in a high-deductible health plan (HDHP). the funds contributed to an account are not subject to federal income tax at the time of deposit.

Question 14

Health Reimbursement Arrangements

Answer 14

are employer-funded and employer-established, tax-advantaged health benefit plans that reimburse employees for out-of-pocket medical expenses and individual health insurance premiums. Unused amounts may be carried forward for reimbursement in future years. Reimbursements may be tax-free if the employee paid for qualified medical expenses or a qualified medical plan.

Question 15

Medical savings account (MSA’s)

Answer 15

were created to help employees of small employers, as well as self-employed individuals, pay for their medical care expenses. MSA’s are tax-free accounts set up with financial institution such as banks and insurance companies. Qualified medical savings accounts are available for employers with no more than 50 employees.

Question 16

Flexible Savings Accounts or Flexible Spending Accounts

Answer 16

are tax-advantaged accounts that can be set up through a cafeteria plan of an employer. An FSA allows an employee to set aside a portion of earnings to pay for qualified medical expenses (such as prescription medication) as established in the cafeteria plan.

Question 17

Hospital Indemnity Policies

Answer 17

are forms of health insurance providing a stipulated daily, weekly, or monthly indemnity during hospital confinement; payable on all unallocated basis without regard to actual hospital expense.

Question 18

Limited Benefit Policies

Answer 18

restrict benefits to specified accidents or diseases, such as travel policies, dread policies, ticket policies, and so forth

Question 19

Limited Risk (dread disease) policies

Answer 19

provide a variety of benefits for a specific disease such as cancer or heart disease. Benefits are usually paid as a scheduled, fixed-dollar amount for specified perils or medical procedures such as hospital confinement or chemotherapy

Question 20

critical illness policies

Answer 20

are an insurance product in which the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy.

Question 21

Hospital expense policies

Answer 21

cover hospital room and board, miscellaneous hospital expenses (such as lab and x-ray charges), medicines, use of operating room, and supplies. these expenses are covered while the insured is confined in a hospital. There is no deductible and the limits on room and board are set at a specified dollar amount per day up to a max number of days.

Question 22

Hospital room and board benefits

Answer 22

cover expenses for occupancy of the room and bed, general nursing care, food and beverages, and personal hygiene items. These limits may not provide for the full amount of hospital room and board charges incurred by the insured. For example, if the hospital expense benefit was under $200 per day and the hospital actually charged $400 per day, the insured would be responsible for the additional $200/day

Question 23

Surgical expense policies

Answer 23

are commonly written in conjunction with hospital expense policies. These policies pay for the costs of surgeons’ services, whether the surgery is performed in or out of the hospital. Coverage includes surgeon’s fees, anesthesiologist, and the operating room.

Question 24

under the surgical schedule approach…

Answer 24

every surgical procedure is assigned a dollar amount by the insurer

Question 25

The relative value approach

Answer 25

is similar to the surgical schedule method. the difference is that instead of a flat dollar amount being assigned to every surgical procedure, a specified set of units is assigned. The policy will carry a stated dollar-per-units amount (known as the conversion factor) to determine the benefit.

Question 26

under the usual, customary, and reasonable approach (UCR)

Answer 26

the surgical expense is compared to what is deemed reasonable and customary for the geographical part of the country where the surgery was performed. The usual, customary, and reasonable approach is the maximum amount an insurer will consider eligible for reimbursement under a health insurance plan.

Question 27

N has a amjor medical policy that only pays a portion of N’s medical expenses. N is responsible for paying the remaining balance. This provision is known as…

Answer 27

Coinsurance

Question 28

What best describes the intent of a coinsurance clause in a major medial policy?

Answer 28

Discourages over-utilization of insurance coverage

Question 29

Major medical policies typically…

Answer 29

contain a deductible and coinsurance

Question 30

Which policy features allows an insured to defer current health charges to the following year’s deductible instead of the current year’s deductible?

Answer 30

Carryover provision

Question 31

deductible are used in health policies to lower

Answer 31

overuse of medical services

Question 32

the first portion of a covered major medical insurance expense that the insured is required to pay is called

Answer 32

the initial deductible

Question 33

in major medical expense policies, what is the intent of a stop loss provision?

Answer 33

limits an insured’s out of pocket medical expenses

Question 34

some characters of HRAs

Answer 34

• employer funded
  -tax-advantaged
  -offered in addition to other health plans
  allows reimbursement of eligible medical expenses
  -if the employee paid for qualified medical expenses, the reimbursements may be tax-free

Question 35

what best describes dental care indemnity?

Answer 35

Services are reimbursed after the insurer receives the invoice