Chapter 13 : Health and Accident Insurance

Question 1

Medical expense insurance

Answer 1

Pays benefits for nonsurgical doctors’ fees commonly rendered in the hospital

Question 2

Accidental death and dismemberment insurance

Answer 2

Purest form of accident insurance. Provides the insured with a lump-sum benefit amount in the event of accidental death or dismemberment under accidental circumstances

Question 3

Participating Plan

Answer 3

Policy owner receives shares (dividends) of divisible surplus of the company

Question 4

Patient Protection and Affordable Care Act

Answer 4

AKA Affordable Care Act
Obamacare
Only applies to specific medical coverage

Question 5

Renewability Provisions (5)

Answer 5

1. Cancellable
2. Optional renewable
3. Conditionally renewable
4. Guaranteed renewable
5. Noncancellable

Question 6

Premium factors for health insurance (8)

Answer 6

1. Interest
2. Expense
3. Types of benefits
4. Morbidity
5. Claims experience
6. Age
7. Sex
8. Occupation of the insured

Question 7

Experience-rated plans

Answer 7

Group health plan
Premium reductions retroactive for 12 months

Question 8

Cafeteria Plan

Answer 8

AKA 125 Plan
Employer contributes
Employee chooses benefits
Employee CAN contribute more money to get more benefits, however it is considered taxable as income to the employee

*S-Corp owner with a greater than 2% share

Question 9

Business Overhead Expense Insurance

Answer 9

Reimbursement for business expenses and payroll in case the business owner becomes disabled. May include:
1. Rent
2. Utilities
3. Telephones
4. Leased equipment
5. Employees salaries

Question 10

Disability Buy-Sell Plan

Answer 10

Selling and buying of a partners stock in the event of a disability.
Policy proceeds are normally tax free.

Question 11

Key Person Disability Insurance

Answer 11

1. Benefits are business tax free

Question 12

Contract for Coverage

Answer 12

AKA Certificate of Coverage
Between the insurance company and the employer
Master policy is issued to the employer

Question 13

Small groups vs Large Groups

Answer 13

Small groups : 1-50 employees

Large groups : 51+ employees

Question 14

Typical minimum for a group policy

Answer 14

10-15 people

Question 15

Individual Eligibility Requirements (3)

Answer 15

1. 1-3 months employment service
2. Full-time employment
3. 65+ must be offered the same benefits as younger employees

Question 16

Non-contributory vs Contributory

Answer 16

Non-contributory: employer pays the entire premium
100% participation by eligible members
vs

Contributory: Employees share the cost of the premium
75% participation by eligible members

Question 17

Shared funding arrangement

Answer 17

Employer to self-fund health care expenses up to a limit.

Question 18

Minimum premium agreement

Answer 18

Employer self-insures the normal and expected claims up to a given amount, insurer funds excess.

Question 19

Retrospective premium arrangement

Answer 19

Insurer agrees to collect provisional premiums but may collect additional premium or make a premium refund at the end of the year based on the actual incurred losses

Question 20

Self-funding arrangement

Answer 20

Large employers

Question 21

Small Employer

Answer 21

1-50

Question 22

How long does an employee have to make an application for a converted policy?

Answer 22

Usually 31 days

Question 23

HIPPA Privacy Rule

Answer 23

Provides federal protection for an individual’s health information and gives patients an array of rights with respect to that individually identifiable health information.

20+ employees must allow former employees to continue benefits.

HIPPA rules apply to all types of group health plans except disability income plans

Question 24

COBRA

Answer 24

Requires employers with 20+ employees to continue group medical expense coverage for terminated workers for up to 18 months after termination

Permits the employee to elect to continue within 60 days

18 months after termination
29 if disabled
36 for dependents if employee dies
36 if employee becomes eligible for medicare
36 if employee divorces or legally separates

102% OF PREMIUM

Question 25

Group disability income plan

Answer 25

% of individual’s earnings;
usually 50-100%
13-26 weeks of coverage
Paid weekly

Group long term - 2+ years;
limited to 60% of income

Question 26

HSA

Answer 26

Tax-favored; grows tax free and can be withdrawn tax-free to cover current and future qualified health care costs.

65 and under
55 - 65 can make additional catch-up contributions.
100% of individual’s health plan deductible

Question 27

Qualified Health Care Expenses

Answer 27

1. Doctors fees
2. Prescription and non prescription medicines
3. Necessary hospital services
4. Retiree health insurance premiums
5. Medicare expenses (not medigap)
6. Qualified long-term care services
7. COBRA coverage

Early withdrawal = 20% penalty

Question 28

Accidental results

Answer 28

Less restrictive and stipulate only that the injury must result from an accident that is unintentional.

Question 29

Limited Benefit Policies

Answer 29

1. Provide benefits for expenses incurred for accidental injury only
2. Policies that pay fixed dollar amounts for specified diseases or other specified impairements
3. Policies that provide benefits for specified limited services
4. Indemnity policies and other policies that pay a fixed dollar amount per day

Question 30

Hospital indemnity/income

Answer 30

Provides a flow of income from the first day to the last day in the hospital.
Pay daily, weekly or monthly

Question 31

All plans must include: (10)

Answer 31

1. Ambulatory patient services
2. Emergency services
3. Hospitalization
4. Maternity and newborn care
5. Mental health and substance
6. Prescription drugs
7. Rehab services and devices
8. Lab services
9. Preventative wellness services
10. Pediatric services

Question 32

Medical Loss Ratio (MLR)

Answer 32

Limits the portion of premium dollars health insurers may send on administration marketing and profits.

MLR Individual: 80%
MLR group: 85%