Chapter 11: Major Medical

Question 1

_____ _____ policies were introduced in the 1950s by stock and mutual insurers as a response to the shortcomings of the base plans.

Answer 1

Major Medical

Question 2

TF: Compared to the basic plans, major medical plans provide higher limits for catastrophic coverage and broader coverage for medical expenses.

Answer 2

True

Question 3

TF: Essentially, after the insured pays the deductible, the policy will cover the remainder of medical expenses up to a stated maximum. Most major medical plans are offered as individual and group plans.

Answer 3

True

Question 4

Two types of Major Medical plans?

Answer 4

Supplemental plan
Comprehensive stand-alone plan

Question 5

_____ _____ ____ plans cover expenses not included under basic medical plans.

Answer 5

Supplementary Major Medical

Question 6

______ ____ ____ plans cover almost all medical expenses under one policy. The base plan in this plan includes medical, hospital, and surgical coverage.

Answer 6

Comprehensive Major Medical

Question 7

In contrast to basic plans, major medical plans utilize a ______ that must be paid before the policy will begin paying benefits. They are the amount of a claim the insured must pay before the policy begins to pay. It can range in amount from $500 to $5,000, depending on the policy.

Answer 7

Deductible

Question 8

TF: Deductibles = Risk Retention

Answer 8

True

Question 9

Three types of deductibles?

Answer 9

flat, corridor, and integrated

Question 10

The ____ ____ deductible is the stated dollar amount the insured must pay. This deductible must be paid before the policy will pay benefits.

Answer 10

flat dollar

Question 11

A family deductible is typically ______ times the amount of the individual deductible.

Answer 11

three

Question 12

______ deductibles are often used for supplementary major medical plans. This deductible coordinates with the basic medical plan.

This is how it works:

The basic plan pays medical expenses the insured incurs.
Once the base plan benefits are exhausted, the insured will pay the full deductible.
After that, major medical benefits kick in.

Answer 12

Corridor

Question 13

Example: Assume Marge has a supplementary major medical plan. Her corridor deductible is $400. The base plan portion is $3,000 and her total bill is $10,000.

How is the bill split up?

The $400 corridor deductible will apply after $3,000 of basic medical expense benefits, and before the major medical portion of the policy kicks in. The policy will cover the first $3,000 of the $10,000 bill. This leaves $7,000, of which Marge must pay the next $400. This leaves $6,600, which will be used to establish the coinsurance (you will learn about coinsurance later in this module).

Answer 13

True

Question 14

Some supplementary major medical plans have an _______ deductible instead of a corridor deductible. This deductible is incorporated into the basic plan’s coverage.

For example, if the supplementary plan has a $600 deductible and the insured incurs a loss of $1,000 under the basic plan, the deductible is fulfilled.

Answer 14

Integrated

Question 15

Two ways to determine deductibles?

Answer 15

Calendar Year Deductible
Per Case Deductible

Question 16

For the ___ ___ deductible, the deductible amount applies once per calendar year. After this deductible is met, all other claims in that calendar year will not have a deductible applied.

Answer 16

Calendar Year

Question 17

If the major medical plan has a ___ ____ deductible, a separate deductible applies for each separate accident or illness.

Answer 17

Per Cause

Question 18

________is the percentage amount, such as 80/20 that states how much the insured pays and how much the insurance company pays. After the deductible is paid, this applies. The policy specifies what percentage of the medical expense the insurer and insured are responsible for paying.

Answer 18

Coinsurance

Question 19

What is the purpose of coinsurance?

Answer 19

The purpose of coinsurance is to prevent insureds from over-utilizing the policy.

Question 20

TF: Coinsurance = Percentage
Deductible = Dollar Amount

Answer 20

True

Question 21

After coinsurance is paid, most major medical policies incorporate a ___ ___ feature, also referred to as an out-of-pocket limit, which prevents the insured from incurring catastrophic loss.

Answer 21

Stop Loss

Question 22

Example: Assume Jake has a major medical policy with a $200 deductible and 80/20 coinsurance that applies for the next $5,000 of expenses. After that point, the insurer will cover the remaining eligible expenses.

If Jake incurs $30,000 medical expenses, how will the bill be split up?

The total bill is $30,000. First, Jake must pay the $200 deductible. This leaves a balance of $29,800. Coinsurance will apply on the next $5,000 of the bill.

This means Jake will pay $1,000 of coinsurance (20% of $5,000 is $1,000). This leaves a balance of $28,800, which the insurer will pay. This means Jake’s total out-of-pocket expenses on the medical bill are limited to $1,200.

Answer 22

True

Question 23

____ ____ are limits placed on certain medical coverages within a policy, such as a dollar limit for room and board, or a dollar limit for X-rays.

Answer 23

Inside Limits

Question 24

The ______ ______ benefit is the total amount an insurer will pay on a policy for any one insured individual. Most major medical policies have these types of benefits of $1 million.

Answer 24

Maximum Lifetime

Question 25

Major medical expense plans typically have ______ or limitations for the following:

Pre-existing conditions
Self-inflicted injuries
Suicide
War or acts of war
Experimental procedures
Organ transplants
Injuries incurred while committing a felony
Cosmetic surgery*
Infertility services
Skilled nursing care and rehabilitation
Home health care
Occupational injuries or sicknesses covered by Workers’ Compensation
Care received in government medical facilities
Routine physical exams
Dental care
Eyeglasses and contact lenses
Hearing aids
Custodial Care

Answer 25

Exclusions

Question 26

Some major medical policies include a feature called the _____ of _____. This allows the maximum lifetime benefit to be restored to its original amount after a large portion of the benefits has been used.

Answer 26

Restoration of Benefits

Question 27

Example: Tom’s major medical policy with the restoration of benefits feature has a maximum lifetime benefit of $300,000. Tom has cancer using up $250,000 of his policy’s total benefits. The policy will restore to the $300,000.

Answer 27

True

Question 28

Compared to basic medical expense plans, major medical policies have:
Select one:
a. No catastrophic coverage
b. The same limits for catastrophic coverage
c. Lower limits for catastrophic coverage
d. Higher limits for catastrophic coverage

Answer 28

D

Question 29

What is the purpose of coinsurance in major medical policies?
Select one:
a. For risk selection
b. For rating risks
c. To prevent overutilization
d. To exclude certain medical conditions

Answer 29

C

Question 30

Which of the following terms is an amount of the claim the insured must pay before the health insurance policy will pay benefits?
Select one:
a. Deductible
b. Coinsurance
c. Copayment
d. Inside limit

Answer 30

A

Question 31

What term best describes a dollar limit placed on the room and board of a major medical policy?
Select one:
a. Exclusion
b. Optional benefit
c. Corridor deductible
d. Inside limit

Answer 31

D

Question 32

Frank has a major medical policy with a $300 deductible and 80/20 coinsurance. The policy has $10,000 stop-loss coverage. How much is paid by the policy on a covered loss of $7,500?
Select one:
a. $2,160
b. $5,760
c. $6,000
d. $7,500

Answer 32

B

Question 33

Which is not an eligible expense under a major medical policy?
Select one:
a. Prosthetics
b. Custodial care
c. Physical therapy
d. Durable medical equipment

Answer 33

B

Question 34

Which policy combines a base plan with major medical coverage?
Select one:
a. Comprehensive major medical
b. AD&D
c. Basic hospital
d. All of the above

Answer 34

A

Question 35

What policy feature in major medical policies allows the maximum lifetime benefit to be restored to its original amount after a large portion of the benefits have been used?
Select one:
a. Out-of-pocket limit
b. Stop-loss
c. Deductible
d. Restoration of benefits

Answer 35

D

Question 36

Steven has a major medical policy with a $350 flat deductible and 80/20 coinsurance. If the covered loss is $5,500, how much will the insurer pay?
Select one:
a. $1,030
b. $1,100
c. $4,120
d. $4,400

Answer 36

C

Question 37

Gerald has a major medical policy with a $500 deductible and 80/20 coinsurance. He incurs a $20,000 covered loss. How much does Gerald pay on the claim?
Select one:
a. $500
b. $4,400
c. $16,100
d. $19,500

Answer 37

B