Chapter 9 - Health Insurance Basics

Question 1

What is accidental bodily injury?

Answer 1

An unforeseen and unintended injury that resulted from an accident rather than a sickness.

Question 2

What does the dental insurance category of routing and major restorative care cover the cost of? (4)

How is it covered?

Answer 2

Dental work such as

• Oral surgeries
• Bridges
• Dentures
• Cavity Treatment

Covered up to a specific maximum, subject to an annual deductible per insured family member and a coinsurance.

Question 3

Describe Routine and preventative maintenance dental coverage (2)

Answer 3

• Usually includes routing examinations and teeth cleaning once a year, and perhaps full-mouth X-ray once every 3 years.
• Covered up to an annual maximum without deductible or copayment (intended to encourage preventative maintenance)

Question 4

What is the term used for an applicant’s written request to an insurer for the company to issue a contract, based on the information provided?

Answer 4

An Application

Question 5

What is a Limited Policy Notice? (3)

Answer 5

• Required by law
• Must be printed on the first page of insurance policies
• Statement reads “this is a limited policy” which means that the benefits offered by the policy are limited.

Question 6

At what point must an Outline of Coverage be delivered?

Answer 6

At the time of application or upon delivery of the policy

Question 7

What parts constitute the Entire Contract? (4)

Answer 7

• The policy
• The application
• Any riders
• Amendments

Question 8

What type of policy is a limited policy that is written to specifically cover cancer expenses?

Answer 8

Dread Disease Policy

Question 9

Health insurance, as a generic term, encompassing several types of insurance contracts, which provide coverage for expenses related to what? (3)

Answer 9

• Health Care
• Loss of Income
• Disability Income

Question 10

What options are available to change an application?

Answer 10

1st and Best - Start over with a fresh application
2nd - If not practical, draw a line through the incorrect answer and insert the correct one. The applicant must initial the correct answer.

Question 11

What type of hospital policy pays a fixed amount each day that the insured is in a hospital?

Answer 11

A Hospital Indemnity Policy

Question 12

When the policy premium wasn’t submitted with the application, what should an agent obtain from the insured upon policy delivery?

Answer 12

A statement of good health - signed by the insured testifying to the continued good health.

Question 13

What does NAIC stand for?

Answer 13

National Association of Insurance Commissioners

Question 14

What does the NAIC do?

Answer 14

They are an organization of insurance commissioners from all 50 states, DC, and the 4 US territories, formed to resolve insurance regulatory issues.

Question 15

What are the three major types of health insurance policies?

Answer 15

• Disability Income Insurance
• Medical Expense contracts
• Long-Term Care Policies

Question 16

Define Sickness

Answer 16

An illness, which first manifests itself while the policy is in force. The majority of health insurance claims result from sickness rather than accidental injury.

Question 17

What is an emergency medical condition?

Answer 17

One which is so severe in pain or symptoms that if not treated quickly and properly could cause serious bodily harm, or possibly death.

Question 18

What does a LTC policy not cover?

Answer 18

The cost of care received in an acute care unit of a hospital.

Question 19

What are the characteristics of Individual Health Insurance Policies?

Answer 19

1. Underwritten to cover the applicant, their spouse, and family
2. Multiple claims per insured (unlike life insurance) making underwriting and classification of risk extremely important.

Question 20

The three most important underwriting factors considered in accepting or classifying health insurance applicants are:

Answer 20

1. Physical condition of the applicant and other insured
2. Moral and morale hazards, and
3. Occupation

Question 21

What would a comprehensive health insurance plan cover?

Answer 21

All sickness or accidents that are not specifically excluded.

Question 22

What would a limited health insurance plan cover?

Answer 22

Only specific accidents or diseases.

Question 23

Benefits on limited policies may be paid on an __________ basis or _________ basis

Answer 23

Benefits on limited policies may be paid on an EXPENSE-PAID (REIMBURSEMENT) basis or INDEMNITY basis.

Question 24

What does an Accident-only policy provide coverage for?

Answer 24

Death, dismemberment, disability, or hospital and medical care resulting from an accident.

Question 25

How is orthodontic care coverage different than other dental coverage?

Answer 25

If this coverage is included, it will have a separate maximum and a separate deductible, which may differ from the deductible for restorative care.

Question 26

How does the Affordable Care Act affect vision coverage?

Answer 26

It makes pediatric vision benefits mandatory.

Question 27

What does vision insurance most commonly cover?

Answer 27

Most vision expense insurance plans restrict coverage to one exam and one pair of eyeglasses in any 12-month period.

Question 28

What losses are typically not covered in individual or group medical expense policies? (8)

Answer 28

1. War or act of war injuries or sicknesses; active military duty may also be excluded from coverage
2. Intentionally self-inflicted injuries
3. Elective cosmetic surgery (may be covered if treatment is required to correct a condition due to an accident or a birth defect, or is medically necessary)
4. Experimental/investigation procedures
5. Conditions covered by workers’ compensation if they are covered under workers’ compensation laws or other legislation.
6. Government plans - health insurance policies exclude expenses either paid or eligible for payment under Medicare or other federal, state, or local medical expense program
7. Participation in a criminal activity
8. Injuries resulting from drug or alcohol intoxication (unless administered by a physician)

Question 29

Advertising rules apply to any accident and sickness advertisement intended for what? (4)

Answer 29

• Presentation
• Distribution,
• dissemination
• Or other advertising use when used or made either directly or indirectly on behalf of the insurance company.

Question 30

The term advertisement includes what? (4)

Answer 30

• Printed or published material
• Descriptive literature and sales aids
• Prepared sales talks and presentations
• and Material included with a policy

Question 31

What are sales materials?

Answer 31

Any and all promotional materials, policy applications, replacement forms, outline of coverage, and any other forms or information used in connection with solicitation or sale of accident and health insurance.

Question 32

What is the Outline of Coverage

Answer 32

• In NY it is referred to as a Disclosure Form

- Basically summarizes the policy’s coverage and exclusions

Question 33

What is a hospital indemnity policy? 93)

Answer 33

• Provides a specific amount on a daily, weekly, or monthly basis while the insured is confined to a hospital.
• Payment under this type of policy is unrelated to the medical expense incurred but based only on the number of days confined in a hospital.
• Can also be called a hospital fixed-rate policy.

Question 34

Under the terms of the insurability conditional receipt, the insurance coverage becomes effective as of when?

Answer 34

The date of the receipt provided the application is approved. The receipt is generally provided to the applicant when the initial premium is paid at the time of the application.

Question 35

Who must sign a health insurance policy? (3)

Answer 35

• Proposed Insured
• Policy owner (if not the insured)
• Agent who solicits the insurance

Question 36

When does the free-look period begin?

Answer 36

Once the delivery of the policy is made

Question 37

What does an agent need to do when they attempt to replace an insured’s current health insurance policy with a new one? (3)

Answer 37

1. The agent needs to be careful not to mislead the insured or provide coverage that is to the insured’s detriment
2. They must carefully compare the benefits, limitations, and exclusions found in the current and the proposed replacement policy
3. Must make sure that a current policy is not canceled before the new policy is issued.

Question 38

What is Community Rating?

Answer 38

A rating methodology in which the premium for all persons covered by a policy or contract form is the same, based on the experience of the entire pool of risks covered by that policy or contract regardless of age, sex, health status or occupation.
-All individual and small group health policies in NY must be community-rated and underwritten to involve no more than pre-existing condition limitation.

Question 39

What are premium rate structures used for with Community Rating?

Answer 39

To establish different premium rates for individuals as opposed to family units or separate community rates for individuals as opposed to small groups.

Question 40

What are the types of limited policies? (8)

Answer 40

1. Accident
2. Dread Disease Policy
3. Critical Illness - pays a lump sum to the insured upon diagnosis and survival or a critical illness
4. Hospital Indemnity
5. Dental Plans
6. Vision/hearing plans
7. Credit disability - covers payments on loans if the insured becomes disabled.
8. Prescription drugs

Question 41

What are the steps in the underwriting process? (4)

Answer 41

1. Field underwriting - by agent
2. Company underwriting
3. Premium determination
4. Policy delivery

Question 42

What are the sources of insurability information? (5)

Answer 42

1. Application
2. Producers/agent’s report
3. Attending Physician Report
4. Investigative Consumer Report
5. MIB Report

Question 43

Smoking and alcholoism are considered __________ while sickness and accidents are considered __________.

Answer 43

Smoking and alcoholism are considered HAZARDS while sickness and accidents are considered PERILS.

Question 44

Health insurance becomes effective when?

Answer 44

When the first premium has been paid, coverage becomes effective when the company underwriter approves the application.

Question 45

What is the Required Notice to Insured for limited policies?

Answer 45

To make sure the insured is aware that the policy’s benefits are limited, the insurance company must, by law, plainly state the limited policy notice on the first page of the policy, “THIS IS A LIMITED POLICY”.