Chapter 11: Special Savings

Question 1

_____ _____ _____ are a combination of a savings account and high deductible health plan (HDHP). The individual, their spouse, and their dependents may use these funds. Deductibles may be embedded or nonembedded.

Answer 1

Health Savings Accounts HSAs

Question 2

Two types of HSA deductibles?

Answer 2

Embedded
Nonembedded

Question 3

What is an HSA embedded deductible?

Answer 3

An embedded deductible is when an HSA has two deductibles: an individual, and a family deductible. The individual deductible is embedded in the family deductible, permitting each family member the opportunity for the policy to cover his or her medical bills before the total family deductible is met.

Question 4

What is an HSA nonembedded deductible?

Answer 4

An HSA with a non-embedded deductible only has the family deductible. The entire deductible must be met before the plan pays any benefits. The deductible can be satisfied by one family member, or by several family members.

Question 5

3 requirements to be eligible for an HSA?

Answer 5

Cannot have other health insurance coverage (except disability income, long-term care or limited coverage);
Cannot be eligible for Medicare; and
Cannot be a dependent on another person’s tax return.

Question 6

Currently, for HSAs, the minimum deductible for a single individual is ______ and for a family is _____

Answer 6

$1,350
$2,700

Question 7

The maximum out of pocket spending in an HSA is _____ for a single individual and ______ for a family.

Answer 7

$6,650
$13,300

Question 8

TF: Contributions are tax deductible for individuals and are made on a salary-reduction basis. Employermade contributions are not taxable income to the employee.

Answer 8

True

Question 9

TF: For HSAs, If funds are used for non-health purchases, a 20% penalty, plus tax is assessed. The money contributed in an HSA rollover from year to year. Withdrawals made after the age of 65 for non-health purchases are taxed, but not penalized.

Answer 9

True

Question 10

____ ____ ____ are tax-advantaged savings accounts in which funds are used for qualified medical expenses and dependent care.

Answer 10

Flexible Spending Accounts FSAs

Question 11

Two types of FSAs?

Answer 11

Qualified medical expense accounts; and
Dependent care expense accounts.

Question 12

TF: Unused FSA funds rollover to the next year

Answer 12

False! Use it or lose it

Question 13

TF: Flexible Spending Accounts (FSAs) are tax-advantaged savings accounts in which funds are used for qualified medical expenses and dependent care.

Answer 13

True

Question 14

TF: Currently, for FSAs medical spending accounts, the annual limit for qualified medical expense accounts is $2,650, indexed annually. Same amount for individual employees OR employees and dependends/spouse

Answer 14

true

Question 15

TF: The annual limit for FSA dependent care accounts is $5,000 per year.

Answer 15

True

Question 16

TF: For FSAs, Employees contribute a portion of their income earnings to the savings account pre-tax, which lowers their taxable income. In addition, withdrawals may be tax free if you are paying for qualified medical expenses.

Answer 16

True

Question 17

____ _____ _____ are savings accounts with a high deductible health plan established by employers for their employees. The employer sets aside funds for employee’s medical expenses. Employees are reimbursed by their employer for their medical expenses. Contributions are made by the employer, not through employee-elected salary reductions.

Answer 17

Health Reimbursement Accounts (HRAs)

Question 18

TF: Contribution limits for HRAs are the same as FSAs

Answer 18

False - no limit!

Question 19

TF: Employees contribute toward HRAs using salary reduction

Answer 19

False - employees don’t contribute!

Question 20

TF:For HRAs, Employer contributions are tax-deductible as a business expense. Benefits are not taxable to employees. The employer establishes employee eligibility rules and funds rollover.

Answer 20

True

Question 21

_____ ____ ____ ____ combine a savings account with highdeductible coverage and are offered by employers to their employees. The savings account can be an HSA or an HRA. The employee uses the funds in the account to pay for medical expenses.

Answer 21

Consumer Drive Health Plans (CDHPs)

Question 22

CDHPs can be ____ or _____

Answer 22

HSAs or HRAs

Question 23

____ ____ _____ are similar to HSAs. With these, tax-deferred deposits can be made for medical expenses. Withdrawals from these are tax-free if used to pay for qualified medical expenses.

Answer 23

Medical Savings Accounts MSAs

Question 24

TF: The MSA must be combined with a high-deductible health plan (HDHP). Once the plan deductible is met in a given year, the HDHP will pay any remaining covered medical expenses in that year. If there are funds remaining in the MSA at the end of the year, the funds can either roll over for the following year or can be withdrawn as taxable income.

Answer 24

True

Question 25

TF: To be eligible for an MSA, an employee must meet the following requirements:

Employer is a self-employer or an employer with 50 or less employees enrolled in the HDHP.
Cannot have other health insurance coverage (except disability income, long-term care or limited coverage);
Cannot be eligible for Medicare; and
Cannot be a dependent on another person’s tax return.

Answer 25

True

Question 26

MSAs limits annual contributions to no more than _____ of the health plans deductible for individuals and _____ for families.

Answer 26

65%
75%

Question 27

_____ _____ insurance is intended to insure a debt. If a debtor becomes disabled, payments to a creditor are made for the disabled insured until the insured can resume work.

Answer 27

credit Health

Question 28

Under a ____ _____ policy, the expected policy benefit will be equal to the net amount of the loan at the time of death or disability.

Answer 28

Credit Health

Question 29

______ ____ and ___ policies provide pure accident coverage and are not considered health policies. A lump sum benefit is paid if the insured dies in an accident or loses limbs, eyesight, or hearing in an accident.

Answer 29

Accidental Death and Dismemberment

Question 30

The ____ _____ is the face amount of the coverage and is paid out if the insured loses two limbs, two hands, or two feet, vision in both eyes, or dies as a result of an accident.

Answer 30

Principal Sum

Question 31

The ____ _____ is a percentage (usually half) of the principal sum, and is paid out for loss of one limb, primary body part, or eye.Death must usually occur within 90 days of the accident in order for the policy benefits to pay.

Answer 31

Capital Sum

Question 32

TF: 90 Days = Days for AD&D Policy to Pay

Answer 32

True

Question 33

TF: Some AD&D policies may pay double, triple or quadruple the principal sum if the insured dies under specific circumstances.

These are termed:

Double indemnity,
Triple indemnity, or
Quadruple indemnity.

Answer 33

True

Question 34

_____ policies are restricted by the amount of coverage they provide, the perils they cover or a combination of both.

_____ (same) policies must contain a required notice on the policy face page stating the following:

“THIS IS A ____(same) POLICY.”

Answer 34

Limited

Question 35

Another type of accident-only policy is ___ _____-, which covers death or injury to a fare-paying passenger on a regularly scheduled commercial carrier such as an airplane. The insured is required to name a beneficiary. Coverage is valid for the duration of the flight.

Answer 35

Travel Accident

Question 36

___ ____ /_____ ____policies pay a flat dollar benefit for each day the insured is confined to a hospital. The dollar benefit varies by policy and may range from $50 to $200 per day. The income benefit may be paid daily, weekly, or monthly. The amount is not based on the insured’s income earnings.

Answer 36

Hospital Income/Hospital Indemnity

Question 37

TF: Hospital indemnity policies are often sold as riders to disability income policies, but may also be sold as standalone policies.

Answer 37

True

Question 38

____ ____also known as critical illness and specified disease policies, cover specific diseases.

Answer 38

Dread Disease

Question 39

TF: Dread disease policies can offer relatively inexpensive coverage compared to full coverage medical expense plans, which may exclude coverage for dread disease, regardless.

Answer 39

True

Question 40

Most prescription drug plans pay benefits on a _______ basis or issue drug cards for insureds to use. When the insured uses the drug card, the insured pays the deductible and the pharmacy bills the insurer for the balance. Prescription plans may have a dispensing limit, or a limit on how much of a prescription an insured can purchase at a time. Prescription plans may exclude coverage for fertility drugs, experimental drugs, or vitamins.

Answer 40

Reimbursement

Question 41

TF: The nursing home benefit pays a dollar amount for each day the insured is confined to a nursing home or convalescent care center. The benefit period may range from 30 days to 365 days.

Answer 41

true

Question 42

TF: Dental benefits are typically not included in traditional medical expense plans. Dental benefits are more frequently sold as specialized medical expense plans on a group basis and rarely as individual policies.

Answer 42

True

Question 43

Vision plans cover all of the following, EXCEPT:
Select one:
a. Annual eye exams
b. Eyeglasses
c. Contact lenses
d. Eye surgery

Answer 43

D

Question 44

Which medical savings plan is a combination of a savings account and a high deductible, where contributions are made by the plan participants and funds from the prior year may be rolled over into the following year?
Select one:
a. HRA
b. FSA
c. HSA
d. All of the above

Answer 44

C

Question 45

The two types of flexible spending accounts are:
Select one:
a. MSAs and HSAs
b. HRAs and HSAs
c. Qualified medical expense account and dependent care expense account
d. None of the above

Answer 45

C

Question 46

Which peril is covered by AD&D policies?
Select one:
a. Premature death
b. Accident
c. Sickness
d. Accident and sickness

Answer 46

B

Question 47

Which special savings medical plan combines high-deductible coverage with a savings account in which contributions are made by the plan participant, and funds roll over from year to year?
Select one:
a. HRA
b. Group health insurance
c. FSA
d. HSA

Answer 47

D

Question 48

Which of the following is not characteristic of hospital indemnity coverages?
Select one:
a. The coverage pays a stated amount per day the insured is confined to the hospital.
b. Premiums are low.
c. Benefits can be used for non-medical purposes.
d. The benefit amount is based on the insured’s income earnings.

Answer 48

D

Question 49

In what plan arrangement(s) can Consumer Driven Health Plans (CDHPs) be offered?

Select one:
a. FSA or HSA
b. HRA or HSA
c. HSA only
d. HRA only

Answer 49

B

Question 50

Which of the following is false regarding flexible spending accounts?
Select one:
a. Withdrawals from a flexible spending account can be made through a flexible spending account debit card.
b. Flexible spending account funds are not subject to the use-it or lose-it rule.
c. Flexible spending accounts are tax-advantaged savings accounts in which funds are used for qualified medical expenses and dependent care.
d. Flexible spending accounts can be offered with an employer cafeteria plan.

Answer 50

B

Question 51

Which health insurance contract pays a death benefit?
Select one:
a. Long-term care
b. Medigap
c. AD&D
d. Hospital income

Answer 51

C

Question 52

All of the following policies must have a prominent notice “THIS IS A LIMITED POLICY” printed on the policy face, EXCEPT:
Select one:
a. Blanket
b. AD&D
c. Vision
d. HMO

Answer 52

D