Chapter 14

Question 1

how does the length of the grace period included in individual health insurance policies vary (compared to individual life insurance)

Answer 1

it varies depending on how frequently renewal premiums are paid.
- usually 30-31 days

Question 2

how is the incontestability provision included in most individidual medical expense policies?

Answer 2

states after the policy has been in force for a stated period of time (2-3 yrs) the insurer can not use a material representation unless the misrepresentation is fraudulent.

Question 3

what is special about the US once an individual medical expense insurance policy is in force?

Answer 3

insurers are prohibited from denying any claim on basis of material misrepresentation unless the misrepresentation if fraudulent.

Question 4

does the incontestability provision included in the individual disability income policies include a reference to fraudulent misrepresentation?

Answer 4

no

Question 5

what is the incontestability proivision included in LTC policies?

Answer 5

states an insurer’s right to avoid the insuance contract on the basis of material representation in the application typically varies depending on the length of time the policy has been in force.

Question 6

if the individual long-term are policy has been in force for 6mo-2yrs, can the insurer use material representation in the application to contest the policy or deny a claim?

Answer 6

no, unless the misrepresentation pertains to the condition for which the benefits are sought.

Question 7

what is the claim provisions associated to individual health insurance policies.

Answer 7

define both the insured’s obligations to provide timely notifications of loss of the insurer and the insurer’s obligations to male prompt benefit payments to the insured.

Question 8

Individual health insurance policies typically include a legal actions provision. What is it:?

Answer 8

limits the time during which a claimant who disagrees with the insurer’s claim decision has the right to sue the insurer to collect the amount the claimant believes she is owed under the policy.

Question 9

To prevent insured from profiting form an illness or injury, many individual health insurance policies contain an overinsurance provision. what does it stare?

Answer 9

the benefits payable under the policy will be re5duced if the insured is overisnure5d.

Question 10

what is an overinsured person?

Answer 10

one who is entitled to receive either 1) more in medical expense benefits than the actual costs incurred for tx; or 2) a greater income amount during disability than the amount that would have been earned from working.

Question 11

when does the overinsurance provision take effect?

Answer 11

only if the insurer was not notified of the other existing coverage at the time of application.
- the amount of the benefit is reduced and premiums are refunded for the excess coverage;.

Question 12

what is a physical examination provision?

Answer 12

state that the insurer has the right to have an insured who has submitted a claim examined by a physician of the insurer’s choice at the insurer’s expense.

• allows for validity of the disability income claims
• also verifies that the insured is still disabled.

Question 13

What are the 7 primary factors that affect the degree of morbidity risk a proposed insured presents?

Answer 13

1. age
2. health
3. sex
4. occupation
5. avocation
6. work history
7. habits and lifestyle.

Question 14

what are 4 differences between life insurance and health insurance in terms of financial design?

Answer 14

1. amount payable. life= definate, health= less so.
2. claims. health= many, life= one death claim
3. inflation, health=affected, life= less so.
4. geographical areas. health= medical cost around the country different, life= death benefit doesn’t vary

Question 15

how does an insurance company create the financial design of a health insurance product?

Answer 15

calculates the product’s claim costs.- the cost the insurer pre5dicts that it will incur to provide the policy benefits promised.
- estimates the claim cost for each type of benefit provided.

Question 16

what is the premium the customer pays for a health insurance policy based on?

Answer 16

choices the applicant makes concerning the coverage the policy provides.

• the amount of the policies deductible,
• possible elimination periods
• maximum benefit peri8ods

Question 17

a number of jurisdictions require an insurer’s loss ratio to be at least a minimum stated percentage. What is a loss ratio?

Answer 17

stated as the % of premium paid out in benefits for a block of policies.
- calculated by dividing the total amount the insurer paid out in the policy benefits for a block of policies by the total premiums the insurer received for that block of policies.

Question 18

What type of health insurance policy is typically issued by commercial insurers?

Answer 18

Group health policies. which is a contract between an insurer and the group policy holder that purchased the group insurance coverage

Question 19

what goes each insured group member receive from a group health insurance, instead of a contract copy?

Answer 19

certificate of insurance/ benefit booklet

-explains terms and rights of the policy

Question 20

can a group policy holder choose to purchase various types of health insurance coverage from multiple providers?

Answer 20

yes

Question 21

what does the group medical expense insurance policy specify ?

Answer 21

the types of medical expenses they cover, the max benefit, and the deductible amount and the coinsurance features

Question 22

what does the group LTC policies specify?

Answer 22

the types of care covered, the benefit triggers, the daily benefit amount, the length of the max benefit period and the length of the elimination period.

Question 23

do group disability income policies provide coverage for dependents of group members?

Answer 23

no

Question 24

do both individual disability income policies and group disability income policies include a physical examination provision.

Answer 24

yes

Question 25

why was the coordination of benefits provision created?

Answer 25

it was desgined to prevent a group insured who is covered under more than one group medical expense policy from receiving benefits amount that are greater than the amount of medical expenses the insured actually incurred.

Question 26

what is an allowable expense, in terms of determining the amount of payable benefits using COB provision?

Answer 26

Are the reasonable and customary expenses that the insured incurred and that are covered under the insures group medical expenses plans. `

Question 27

another type of coordination of benefits provision is ca nonduplication of benefits provision. Define this.

Answer 27

its a COB provision that, if included in a secondary providers plan, limits the amount payable by the secondary plan to the difference between the amount paid by the primary plan and the amount that would have been payable by the secondary plan had the plan been the primary.

Question 28

how do you determine which plan is the primary provider of benefits?

Answer 28

1. most stat that when an insured also is covered by a plan that does not include COPD, the one without COB is the premary.
2. if they both have COB the primary plan is defined as the plan covered by employer over individual

Question 29

what is a common rule for determining a primary provider when an individual is covered as a dependent under more than one group plan (think couples)

Answer 29

birthday rule.
- employees who’s birthday falls earlier in the calendar year will be considedred the primary provided of benefits for a dependant.

Question 30

what does the conversion provision do?

Answer 30

give an insured group member who is leaving the coup a limited right to purchase an individual medical expense policy without presenting evidence of insurability.

Question 31

a person who elects to continue group medical expense coverage typically pays what?

Answer 31

the full cost of continuation coverage, including any portion of premiums that the employer had paid.

Question 32

what is funding mechanism?

Answer 32

the way in which group insurance plan’s claim costs and administrative expenses are paid

Question 33

there are two extremes to the funding mechanism. Fully insured plan and fully self-insured plan. Define these

Answer 33

1. fully- group policyholder makes periodic premium payments to an insurance company and the company bears the responsibility for all claim payments.
2. self- the group policyholder (employer) takes complete responsibility for all claim payments and related expenses.

Question 34

are most group long-term disability income and group LTC insurance plans fully insured or self-insured?

Answer 34

fully insured.

Question 35

many employes use what kind of contribution plan to cover most fully self-insured short-term disability income coverage ?

Answer 35

a salary continuation plan, which provides 100% of the insured employee’s salary, beginning on the first day of the employee’s absence resulting from illness or injury and continuing for a special period.

Question 36

are most group medical expense insurance plans full or self-insured plans?

Answer 36

they are partially self-insured.
- employer is responsible for paying certain level of claims, and the extra is transferred to traditional health insurance provider.

Question 37

what is stop-loss insurance.

Answer 37

associated to employers that purchase self-insurance, it enables employers to place a max dollar limit on their liability for paying health insurance claims.

Question 38

what is the stop-loss satement under individual stop loss coverage?

Answer 38

the insurer reimburses the employer for all claims paid for any individual that exceeds a stated amount in a stated period of time.

Question 39

what is individual deductible?

Answer 39

the dollar amount of claims that an employer must pay for any individual in a stated period of time before the stop-loss insurer reimburses the employer for any excess amount.

Question 40

what is stated under the aggregate stop-loss coverage?

Answer 40

this is where the insurer begins to reimburse the employer for claims when the employer’s total claims exceeds a stated dollar amount within a stated period of time.

Question 41

What is an attachment point (AKA aggregate deductible)

Answer 41

its the total dollar amount of claims that the employer must pay within a stated period of time before the stop-loss insurer begins to reimburse the employer.

Question 42

can an employer purchase both individual and aggregated stop-loss coverage?

Answer 42

yes

Question 43

What is a TPA (third-party administrator_

Answer 43

organization other than an insurance company that provides administrative services to the sponsors of group benefits plans. Under an ASO (administrative service only) contract, the employer pays a fee in exchange for the administrative services provided by the insurer or TPA.