CompuCram Test Questions

Question 1

What statement pertaining to the conversion privilege of group medical insurance is NOT correct?

a. An insured employee has 31 days following termination of employment in which to convert the group insurance.
b. An insured employee must convert to the same type of coverage as was provided under the group plan.
c. Insureds who convert their coverage to individual plans pay a premium rate according to their attained ages.
d. An insured employee may exercise the conversion privilege regardless of insurability.

Answer 1

b. An insured employee must convert to the same type of coverage as was provided under the group plan.

Group medical conversion policies are only required to meet the minimum standards as required by state law. They are specially designed policies and are very expensive.

Question 2

When a party appears to have given up a particular right by action or inaction that another party has relied on, the legal basis for asserting the original right may have been lost. This is known as the legal doctrine of

a. estoppel
b. waiver
c. warranty
d. condition precedent

Answer 2

a. estoppel

A waiver is the act of voluntarily giving up a right. A waiver is legally enforced through the doctrine of estoppel. Accidentally giving up a right, as when issuing a policy where an applicant did not answer a health question and the company did not require that answer, would cause the insurer to “accidentally” give up its right to contest a claim based on that question.

Question 3

The stop loss feature in an individual medical policy refers to the

a. deductible
b. policy owner’s maximum out-of-pocket expense
c. policy owner’s share of the co-insurance
d. policy owner’s deductible combined with his or her share of the co-insurance

Answer 3

c. policy owner’s share of the co-insurance

The stop loss feature in an individual medical policy refers to the policy owner’s share of the co-insurance. A policy owner’s stop loss is a share of the co-insurance. The deductible is NOT included in the stop loss.

Question 4

Kevin applies for insurance as a standard risk on June 1st and provides a check with the application. On June 4th, he takes the physical. The company discovers a health problem and notifies the agent that a counteroffer will be made by June 25th. On June 28th, the agent presents Kevin with the rated policy, and Kevin gives the agent a check. Insurance is in force on what date?

a. June 1st
b. June 4th
c. June 25th
d. June 28th

Answer 4

d. June 28th

A counteroffer makes the original offer VOID. The deal is completed ONLY when Kevin AGREES to the COUNTEROFFER and provides appropriate payment.

Question 5

When premiums on a disability policy are paid directly to the insurance company by the employer as part of an EXECUTIVE BONUS arrangement, and the employee receives the benefits DIRECTLY from the insurance company, what are the tax consequences?

a. The premium is always deductible and the benefits are taxable.
b. The premium is non-deductible to the employee and the benefits are taxed as ordinary income.
c. The premiums are deductible to the employer; the premiums are taxable to the employee, and the benefits are income tax free.
d. The premiums are deductible to the employee.

Answer 5

c. The premiums are deductible to the employer; the premiums are taxable income to the employee, and the benefits are income tax free.

As in any executive bonus arrangement between the employer and the employee, the premiums paid to the insurance company are considered part of the employee’s total compensation for the year; the employee will have to pay taxes on this additional compensation. The employer is able to deduct the premium because it is considered a bonus to the employee and is deductible to the employer. Employee benefits received from this “after taxed” premium are income tax free to the employee.

Question 6

In 2003, Bill bought a disability income policy on Janice, one of his top salespeople, to protect his cash flow is she were to become disabled. Janice left his company in 2006. Bill continued to pay the premiums on the policy without Janice’s permission. He just learned that, last month, Janice was in a serious car wreck and in a rehabilitation facility facing a very long recovery time. Can Bill make a claim on the disability policy?

a. not without Janice’s permission
b. yes
c. The policy is not valid since he did not have Janice’s permission to keep the policy in force after she left the company
d. No, he does not have a valid reason for the policy to be in force since Janice does not work for him and he will profit now if he files a claim

Answer 6

b. yes

The proof of insurable interest and permission obtained from the insured for the third-party ownership has to be given at the time of application, NOT AT THE TIME OF CLAIM. Apparently Bill met these two requirements since the policy was issued. Whatever happened after that does not affect Bill’s policy on Janice, since he has kept it in force continuously. The claim will have to be paid, even if Janice objects.

Question 7

What is the minimum number of employees in a true group?

a. 2
b. 51
c. 10
d. 100

Answer 7

c. 10 - The minimum number of employees in a TRUE GROUP is TEN.

A true group is regarded as ten or more. True group means no medical underwriting is permitted. Most insurers will not go down to ten employees and write group insurance without medical information being provided, due to the risk of adverse selection.

Question 8

Business overhead expense policy premiums are

a. tax deductible
b. not tax deductible
c. deductible by the key employee only
d. not taxable because of the salary to the owner

Answer 8

a. tax deductible - Business overhead expense policy premiums are TAX DEDUCTIBLE

Though the premiums are tax deductible, the benefits are taxable. This does not create a tax problem for the beneficiary of the BOE since the taxable benefits are actually a reimbursement of tax-deductible expenses, so they offset and the bet income is zero.

Question 9

Amos belongs to a dental care corporation (DCC) in which he can choose from a specific group of dentists and have coverage at preset, lower cost rates. He can also go to a dentist NOT in the group, but he will have to pay the cost difference between the DCC rates and whatever the out-of-group dentist usually charges. This process most closely resembles what medical model?

a. HIC staff model
b. PPO
c. HIC clinic model
d. free for service

Answer 9

b. PPO

Just like the Preferred Provider Organization (PPO) of doctors, the plan allows lower treatment costs when care is provided only by the member dentists of the PPO; going outside the group is allowed, but the higher costs of leaving the group are paid out of pocket by the individual.

Question 10

When an agent is terminated, or surrenders a license for cause, how long must the agent wait before reapplying for another insurance license?

a. They can never reapply for a license
b. two years
c. five years
d. three years, but the agent will need permission from the Superintended/Director of the state in which the agent was formerly licensed to reapply

Answer 10

c. five years

When an agent’s license is terminated by the Superintendent/Direct, or the agent surrendered the license “for cause,” it means the agent has probably done something criminally wrong, or at least committed a very serious violation of insurance laws. The person will be prohibited from seeking an insurance license anywhere within FIVE years from the date of surrender or termination for cause.

Question 11

A baseball player, Pete, has a permanent injury to his pitching arm. He retired from baseball and opens a new consulting company. Pete purchases an individual major medical policy to cover him in his new consulting business. How will the company most likely deal with his pitching arm injury?

a. Require a written waiver of coverage on this permanent injury.
b. Cover it after 90 days.
c. Cover it if mandated to do so by the Superintendent/Director of Insurance and the baseball commissioner.
d. Allow coverage after twelve months without re-injury

Answer 11

a. Require a written waiver of coverage on this PERMANENT injury.

Because the injury is PERMANENT, the company could choose t EXCLUDE it as preexisting for a year, but MOST LIKELY, this will be a FULL EXCLUSION.

Question 12

A root canal is part of what specialty in dental care?

a. periodontics
b. surgical
c. endodontics
d. prosthodontics

Answer 12

c. endodontics
A root canal is part of ENDODONTICS in dental care.

Root canals are part of endodontics. They take place at the “end” of the tooth.

Question 13

Disability income payments under an individual contract for which the policy owner/insured paid premiums are

a. fully taxable
b. taxable to the extent they exceed premium payments
c. not subject to income tax
d. taxable if the insured also receives Social Security disability payments

Answer 13

c. not subject to income tax
Disability income payments under an individual contract for which the policy owner/insured paid premiums are NOT SUBJECT TO INCOME TAX.

The premiums were paid with AFTER TAX dollars, so the BENEFITS ARE INCOME TAX FREE.

Question 14

If an agent has a license to perform duties of another regulated profession and the regulator of the other profession takes any administrative action against the dual licensed insurance agent, the agent must notify the Superintendent/Director of Insurance within what time frame?

a. immediately upon notification of the administrative action
b. within 30 days of the final disposition of the administrative action
c. within 30 days of receiving notification of the administrative action
d. The DOI doesn’t require notification of administrative actions for other industries.

Answer 14

b. within 30 days of the final disposition of the administrative action

An insurance agent shall provide notice to the Superintendent/Director of Insurance of any administrative action taken against the agent in another jurisdiction or by another governmental agency having professional, occupational, or financial licensing authority within 30 days after the final disposition of the matter. The notice shall include a copy of the order, consent to order, or any other relevant legal document. Also, an insurance agent shall provide notice to the Superintendent/Director of Insurance of any criminal prosecution of the agent by any jurisdiction, other than misdemeanor traffic, within 30 days after the agent’s initial appearance before a judge or magistrate. The notice shall include a certified copy of the charging document. Within 30 days after the disposition of the criminal prosecution, the agent shall provide to the Superintendent/Director of Insurance a certified copy of the court’s entry or order that reflects the final disposition of the prosecution, and any other relevant legal documents.

Question 15

The inability to perform one or more of one’s full-time duties during the brief transition from total disability to full recovery is the definition of _______ disability.

a. total
b. partial
c. continuing
d. presumptive

Answer 15

b. partial

In disability insurance, a partial disability benefit is a transitional benefit for for an insured that has been totally disabled and can now return to work, but may not be able to resume all regular job functions or cannot yet work full time. Typically, the partial benefit is up to 50% of the total benefit, and is usually paid for a maximum of six months. Residual benefits can be more flexible than this arbitrary corridor.

Question 16

Under and accident and health contract, if an insured changes from a more hazardous occupation to a less hazardous one, he will receive a

a. benefit reduction
b. premium reduction
c. benefit increase
d. premium increase

Answer 16

b. premium reduction
Under and accident and health contract, if an insured changes from a more hazardous occupation to a less dangerous occupation, he will receive a PREMIUM REDUCTION.

If the insured changes from a more hazardous occupation to a less hazardous one, the insurance company must reduce the premium to recognize the reduction in the company’s risk factors. It is the policy owner’s obligation to report this change. If the policy owner fails to notify the insurance company and a claim occurs, the company must make the premium reduction effective from the date of the occupation change, but no longer than two years, and give the policy owner a premium refund for the proper amount of time.

Question 17

The Ohio Life and Health Guaranty Association provides what amount of protection to an insured person with an insurance company declared insolvent by the ODI?

a. $300,000
b. $100,000
c. $200,000
d. $500,000

Answer 17

b. $100,000

The Ohio Life and Health Insurance Guaranty Association provides $100,000 of protection for health insurance policies. This is the maximum limit per person, per company, no matter how many different types of policies or number of policies the insured owns.

Question 18

What statement about Medicare is NOT correct?

a. Part A was modeled after Blue Cross coverage.
b. Part B was based on the Blue Shield plan of benefits.
c. The first three pints of blood ARE provided in Part A.
d. Part A assists in providing hospice coverage when medically ordered.

Answer 18

c. The first three pints of blood are provided in part A.

A person can pre-donate, or have family members donate, blood according to hospital policy, BUT THE FIRST THREE PINTS OF BLOOD ARE NOT COVERED IN MEDICARE PART A.

Question 19

Non-occupational group disability income insurance policies are those that provide coverage for

a. on-the-job injuries
b. diseases contracted on the job
c. off-the-job accidents or illnesses
d. spouses of employees

Answer 19

c. off-the-job accidents or illnesses

This is typically the approach used to write group insurance, since Workers’ Comp covers on-the-job illnesses or injuries.

Question 20

Working in Montgomery County, Ohio, Dr. Wilson tells his Medicare patient, Sarah, that the Medicare-approved fee for the office procedure he just completed is $300, but his charge is $375. How is the difference in payments handled?

a. Sarah pays out of pocket.
b. The state Medicare fund reimburses the difference.
c. Dr. Wilson has no recourse to collect the extra charge.
d. Dr. Wilson deducts the difference on his taxes.

Answer 20

c. Dr. Wilson has no recourse to collect the extra charge.

In Ohio, balance billing for Medicare beneficiaries for the excess charge IS PROHIBITED.

Question 21

Benefits paid by business overhead expense policies for employee salaries, office expenses, and the premiums for employee insurance benefits are

a. fully deductible
b. partially deductible
c. taxed as income
d. not taxed

Answer 21

c. taxed as income

The benefits received on a claim under the BOE policy are taxable as ordinary income because the premiums for the BOE policy were deductible for the business owner and the business owner is the beneficiary. However, this does not create a tax problem for the business owner, because the taxable benefit he receives is paid to reimburse him for deductible business expenses. This results in $0 of taxable income after the deductions.

Question 22

An employer offers contributory group long-term disability insurance to its employees and pays 65% of the premium. What statement is true?

a. The employer is not able to deduct the premium, and the benefits paid to the employee are tax free.
b. The employer is able to deduct the 65% portion of the annual premium it pays, but this will generate taxable income each year to the employee equal to the premium paid by the employer.
c. The employer is able to deduct 100% of the portion of the month premium it pays, but the proportional amount of the disability benefit that was generated by the deducted premium will be taxable to the employee.
d. Neither the employer nor employee is able to deduct the premium, but the disability benefit is tax free.

Answer 22

c. The employer is able to deduct 100% of the portion of the monthly premium it pays, but the proportional amount of the disability benefit that was generated by the deducted premium will be taxable to the employee.

An employer is allowed to deduct the portion of the premium it paid for short-term disability or long-term disability insurance policies. The employee cannot deduct the portion of premium he or she pays. The portion of the disability benefit equal to the percentage of premium paid and deducted by the employer will be taxable income to the employee if disability are paid out. In this case, since the employer paid and deducted 65% of the premium, 65% of the disability income benefit payment to the disabled employee will be taxable.

Question 23

A basic surgical expense policy pays what for a covered procedure?

a. scheduled expense after a deductible
b. UCR of the expense after a deductible
c. up to the scheduled expense for this procedure
d. always 100% of the cost of the procedure without a deductible

Answer 23

c. up to the scheduled expense for this procedure

A basic policy has a first dollar benefit, meaning there is no deductible or co-insurance. Each procedure is assigned a maximum benefit according to the schedule. The plan will only pay up to the maximum benefit listed for each procedure in the the policy’s schedule of benefits. These dollar maximums are usually fairly small, comparatively speaking, so any expense over the scheduled payment listed in the policy will not be considered an eligible expense and the policy owner will pay 100% of that excluded expense.

Question 24

Eva discovers she needs a root canal. What coverage in her dental plan will meet this need?

a. prosthodontics
b. endodontics
c. oral surgery
d. periodontics

Answer 24

b. endodontics

Even though this is an invasive procedure, a root canal is NOT oral surgery. Endodontics takes plan at the END OF THE TOOTH (the base of the root).

Question 25

What limited policy pays, on an excess basis directly to the insured, a specific amount per day of the hospitalization?

a. limited sickness and accident policy
b. hospital income policy
c. basic hospital expense policy
d. limited hospital benefit policy

Answer 25

b. hospital income policy

Limited policies restrict benefits to specific illnesses, accidents, or coverage. The hospital income policy pays a daily benefit to the insured for each 24 hour period that the insured is in the hospital. It is sometimes called a hospital indemnity policy.

Question 26

What statement is true regarding business overhead expense (BOE) policies?

a. BOE policies are written on a reimbursement basis.
b. BOE policies provide monthly payments based on estimated expenses incurred by a business
c. BOE policies pay for disability of any key employee
d. BOE premiums are not deductible

Answer 26

a. BOE policies are written on a reimbursement basis

The BOE policies requires proof of expenditures before reimbursement is made. This plan is never written on an indemnity basis. BOE policies are usually written on the owner who is the driving force behind the business. Without this person actively at work, the business cannot operate and generate income, thus the need for a policy to pay the business expenses. BOE premiums are deductible, which will generate a taxable benefit upon disability.

Question 27

All Medicare supplement policies must have a free look period of at least ____ days.

a. 10
b. 20
c. 30
d. 45

Answer 27

c. 30
All Medicare supplement policies must have a free look period of at least 30 days.

All Medicare supplement policies, both newly issued and replacement, must have a free look period of at least 30 days.

Question 28

Disability income benefits for partial disability are typically payable to eligible insureds for a maximum of

a. three months
b. six months
c. one year
d. two years

Answer 28

b. six months
Disability income benefits for PARTIAL DISABILITY are typically payable to eligible insureds for a maximum of SIX MONTHS.

Partial disability coverage is a provision designed to bridge the gap between total disability and the return to full-time employment. It is the time period when the insured is not yet able to perform all duties, or cannot work the regular number of hours for the job, resulting in a loss of earnings. The payment of a partial benefit encourages the insured to return to work as much as possible without the potential of suffering a large loss of benefit or income. Partial benefits are usually up to 50% of the total disability benefit and are usually paid for a maximum of six months.

Question 29

Struck with a rare case of polio, Bob, age 51, now has a condition that is life-long and does NOT allow him to do any substantial work. At what point could he qualify for Medicare benefits?

a. five months after his condition began
b. after receiving Social Security disability insurance payments for a 24-month period
c. at age 60
d. at age 62, with reduced benefits

Answer 29

b. after receiving Social Security disability insurance payments for a 24-month period

Bob meets the definition for Social Security disability, so he will have to be on the Social Security claim for 24 months before he can qualify for Medicare, regardless of age.

Question 30

An HIC “open enrollment” period required an HIC to accept (up to its capacity) all applicants for how many days per year?

a. 10
b. 15
c. 30
d. 31

Answer 30

c. 30

All Ohio HICs that have been in operation for two years or longer are required to hold an open enrollment for 30 days each year, unless they have already met their open enrollment requirement, or the open enrollment would jeopardize the HIC’s solvency.

Question 31

Sara uses a health plan that gives her HIC benefits if she goes to a network provider, but DOES allow her to use non-network providers as well. This describes a(n)

a. HIC
b. PPO
c. POS
d. EPO

Answer 31

c. POS

A POS is the HIC’s answer for subscribers who insist on being able to use non-network providers. As long as they stay in network, the subscriber will have HIC benefits, but they will also have non-network benefits similar to the PPO if they use a non-network provider.

Question 32

Betty has a long-term care insurance policy, a Medicare supplement, a critical illness policy, and a personal disability policy. If the agent replaces all of these with new policies from his new insurance company, what policy replacement will require a completed Notice of Replacement?

a. long-term care insurance and Medicare supplement
b. long-term care insurance
c. Medicare supplement
d. Medicare supplement and personal disability insurance policy

Answer 32

c. Medicare supplement

The only accident and health insurance product that has a required replacement form is a Medicare Supplement policy. You should be careful in making any accident and health replacement.

Question 33

When must the Buyer’s Guide and the Outline of Coverage be given to a prospective Medicare supplement client?

a. at the time of delivery
b. at the time of delivery if there is a free look period
c. whenever the agent gives the applicant any company sales literature
d. prior to taking the application

Answer 33

d. prior to taking the application

The regulations for delivering the Buyer’s Guide and Outline of Coverage follow the logic that the Buyer’s Guide is to help the prospect make an informed decision, so it must be given before the application is taken. The applicant must sign a receipt that verifies delivery of these two items before the application is received.

Question 34

Sidney has a disability policy with a monthly benefit of $2500 for total disability. The policy also includes payment for residual disability payments. If Sidney has qualified for total benefits for the last five months, and this month he tries to return to work but still suffers a loss of 40% of his pre-disability income, how much will his disability policy pay?

a. $2500
b. $1500
c. $1000
d. $0

Answer 34

c. $1000

Sidney would be eligible for a payment of 40% of the benefit received while he was totally disabled, or $1000 ($2500 benefit x 40% = $1000). The residual benefit will have to be recalculated each month if Sidney tries to work, but suffers a loss of some of his earnings.

Question 35

A policy owner has a major medical policy with a $1000 deductible and 80/20 co-insurance with a stop loss of $2000. The insured incurs a claim of $9500. How much of this claim will the policy owner be required to pay?

a. $3000
b. $1700
c. $2000
d. $2700

Answer 35

d. $2700

To calculate the policy owner’s share of expenses, begin by subtracting the deductible from the total expense: $9500 - $1000 = $8500. Then, apply the 20% to the entire amount left over after the deductible has been paid, since we don’t know the co-insurance limit: $8500 x 20% (0.20) = $1700. Since $1700 is below the policy owner’s maximum exposure of $2000, this is the proper share of the co-insurance for the policy owner to pay. It may be tempting to select B at this point; however, the deductible of $1000 is also part of the policy owner’s expense and needs to be added to the $1700, bringing the policy owner’s total expense to $2700.

Question 36

Billy, a typical employee, has paid part of the medical premium for his employer’s medical plan, but was unable to deduct it. He had covered medical expenses during the year that exceeded the deductible and stop loss, as well as some dental expenses, eye exams, and eyeglasses expenses. What statement accurately reflects Billy’s tax situation?

a. Billy will not be able to deduct any of his extra expenses
b. Billy will be able to deduct all of his extra expenses, including his non-deductible medical insurance premium, which exceeded 5% of his adjusted gross income
c. Billy will be able to deduct all of his extra expenses, including his non-deductible medical insurance premium, which exceeded 7.5% of his adjusted gross income
d. Billy will be able to deduct the amount of his expenses that equal the share of premium he paid for the medical insurance

Answer 36

c. Billy will be able to deduct all of his extra expenses, including his non-deductible medical insurance premium, which exceeded 7.5% of his adjusted gross income.

Under federal tax laws, a person who itemizes expenses on his or her tax return is able to total all of the non-deducted premiums for medical insurance, long-term care insurance (up to the amount allowed for his or her age), unreimbursed medical expenses (deductibles, co-insurance, and excess charges over the covered amount), and even expenses that the medical plan would not normally cover (such as dental and normal expenses related to eye exams and eyeglasses). This total is compared to the adjusted gross income of the taxpayer, and the portion of 7.5% is deductible.

Question 37

What rider may NOT be added to a DI policy by the policy owner?

a. Social Security rider
b. payor benefit
c. cost of living adjustment
d. future increase option

Answer 37

b. payor benefit
The PAYOR BENEFIT may NOT be added to a DISABILITY INCOME policy by the policy owner.

The payor benefit rider is usually attached to a LIFE INSURANCE policy written on the life of a child.

Question 38

What is NOT excluded from coverage under a Medicare supplement (Medi-gap) policy?

a. dental care
b. daily co-insurances for Medicare Part A and the 20% co-insurance for Medicare Part B
c. eye examinations
d. mental or emotional disorders

Answer 38

b. daily co-insurances for Medicare Part A and the 20% co-insurance for Medicare Part B

All Medicare supplement plans (Medi-gap) must include certain “core benefits” that include the daily co-insurance features of Part A for hospitalization and skilled nursing facility care, and the 20% co-insurance requirement of Part B.

Question 39

The primary purpose of the co-insurance clause appearing in major medical policies is to

a. encourage the insured to pay premiums on time
b. help an insurer avoid paying catastrophic losses
c. persuade an insured to minimize unnecessary care
d. persuade an insured to purchase a higher deductible

Answer 39

c. persuade an insured to minimize unnecessary care

Co-insurance, sometimes referred to as percentage participation, is the share of covered medical expenses the insured must pay after a deductible is met. An insured will be less likely to utilize unnecessary treatment if he or she must pay a part of the fee. Also, the insured may be more careful because of the out of pocket expenses. This is an example of trying to minimize the “morale” hazard.

Question 40

Janet bought a long-term care policy. She has an elimination period, which is met when she had paid for 90 dats of care in a nursing home. What definition for meeting the elimination is included in Janet’s policy?

a. calendar days
b. service days
c. diagnosed days
d. confinement days

Answer 40

b. service days

A definition of service days means the elimination period must be met by days of service for which the insured is paying for care. Some policies include a calendar days definition, which means the insured is unable to do the ADLs for enough days to satisfy the elimination period, whether or not not they are paying for care.

Question 41

An agent who wishes to sell viatical settlements

a. must be licensed as a viatical broker
b. must be licensed as a broker for securities
c. must be licensed as a life and health insurance agent
d. requires no special license

Answer 41

a. must be licensed as a viatical broker

An agent/broker who wishes to operate in the state of Ohio as a viatical settlement provider or viatical settlement broker must have a license from the Superintendent/Director of Insurance.

Question 42

What individual would NOT have an option on whether to be covered by Workers’ Comp?

a. sole proprietor
b. partner in a company with 25 employees
c. employee who works fewer than 25 hours a week
d. owner/officer of a corporation who works more than 40 hours per week

Answer 42

c. employee who works fewer than 25 hours per week

The state of Ohio allows individuals who are sole proprietors, partners, or active owners in a corporation to include or exclude themselves from Workers’ Comp. All other employees of a business must be covered by Workers’ Comp.

Question 43

A woman, age 43, who has been diagnosed with an increased risk of breast cancer, must be provided a mammogram by her major medical plan or HIC once every

a. year
b. six months
c. other year
d. quarter

Answer 43

a. year

Ohio’s mammography requirements are: 1) if a woman is at least 35, but under 40 years of age, one screening mammography; 2) if a woman is at least 40, but under 50 years of age, either one screening mammography every two years, or it a licensed physician has determined the woman has risk factors to breast cancer, one screening mammography every year; or 3) if a woman is at least 50, but under 65 years of age, one screening mammography every year.

Question 44

Cal’s agent applied to reinstate Cal’s health insurance 45 days ago, and the company has NOT responded to the request. Cal is injured in a skiing accident on the 49th day after his application. His medical bills total $2500. On the 51st day, Cal learns his application has been denied. What does he get from the insurer on this claim?

a. $0, because of the denial
b. $2500 minus any standard deductibles and co-insurance or copayments
c. prorated benefits dating from day 45
d. nothing, because of the probationary period

Answer 44

b. $2500 minus any standard deductibles and co-insurance or copayments

Cal was automatically reinstated after the 45th day, but the probationary period DOES NOT APPLY TO ACCIDENTS, so he receives standard coverage. The company denial is TOO LATE to affect this claim.

Question 45

Non-occupational means

a. you have no job
b. the life insurance does not cover any occupational related illnesses or injuries
c. the employee’s current occupation is an excluded occupation
d. the employee has chosen to waive coverage

Answer 45

b. the insurance does not cover any occupational-related illnesses or injuries

The employer is required to provide Workers’ Comp for occupational injuries or sicknesses. There is no need to duplicate the benefits under the group accident and health programs, so most group plans are issued on a non-occupational basis, which means the group insurance programs cover the employee only for injuries or illnesses NOT related to the job.

Question 46

Major medical expense contracts are NOT characterized by what element?

a. deductible
b. schedule of benefits
c. high maximum limits
d. co-insurance or percentage participation

Answer 46

b. schedule of benefits
Major medical expense contracts are NOT characterized by the element of a SCHEDULE OF BENEFITS.

Major medical expense insurance is a health policy designed to reimburse the policy owner for medical expenses incurred by the insured. Generally, major medical insurance provides benefit payments for 80% of all reasonable and customary medical expenses that exceed the deductible (generally in the $500 to $5000 range), up to the maximum limit of liability and within the time period provided by the policy.

Question 47

A PDPO requires the subscriber to use a ________ for initial treatment.

a. capitation
b. gatekeeper
c. specialist
d. provider

Answer 47

b. gatekeeper

A gatekeeper is the primary care dentist in a PDPO, who decides if a subscriber needs to see a specialist.

Question 48

“Replacement” does NOT pertain to what transaction?

a. A policy owner borrows 10% of the cash value of an existing policy and later purchases another policy.
b. An insured surrenders an existing policy for cash in order to purchase another policy recommended by an agent.
c. At the suggestion of an agent, a policy owner places an existing policy on reduced paid-up insurance so as to have premium money to buy another policy.
d. A policy owner reduces the face amount of an existing policy and uses the difference in premium to purchase another policy

Answer 48

a. A policy owner borrows 10% of the cash value of an existing policy and later purchases another policy.

Replacement is defined as: an existing policy being lapsed, forfeited, surrendered, or canceled; continuation of a policy under one of the nonforfeiture options; a reduction in the policy’s face amount amount; an existing policy being used as collateral for a loan or series of loans totaling 25% or more of its cash value. These provisions apply to most life insurance policies and annuities. They do not apply to credit life insurance, group life insurance, or life insurance in a qualified plan.

Question 49

What defines “subrogation?”

a. The insurance company gives up its right to sue a negligent person who caused an injury to the insured client to the insured client, so the client can be the first to benefit from the lawsuit.
b. The insured client gives up the right to sue the negligent person who caused the injury until the insurance company has sued the negligent person and recovered any expenses paid on behalf of the insured, injured client.
c. The insurance company has the right to be the first to sue the negligent person, since it already has a staff of lawyers, and then the company will split any judgements with the insured client.
d. The insurance company allows the insured person to sue the negligent person first because the negligent person usually does not have many assets and the courts say the insured person should be able to collect whatever he can from the negligent party, since the insured, injured person is the party with the pain and suffering.

Answer 49

b. The insured client gives up the right to sue the negligent person who caused the injury until the insurance company has sued the negligent person and recovered any expenses paid on behalf of the insured, injured client.

“Subrogation” means the insured client subrogates its rights to the insurance company to allow it to have the first shot at a lawsuit against the negligent person to recover any expenses incurred on the insured’s behalf due to the negligent act. Remember, there are two ways to transfer risk: buy insurance or sue the negligent party. In this situation, an insured person has been injured by the negligent act of another. The insured client’s insurance company has already paid all medical bills. Technically then, the insurance company should be first in line to collect from the negligent party since it has paid the medical expenses, not the insured, injured client. After the insurance company has recovered its expenses and settled the lawsuit, then the injured, insured client may sue the negligent person for any other damages.

Question 50

Mary has purchased an individual disability income policy with an “own occupation” definition of disability. On the assumption that Mary is disabled for a period of time in excess of the waiting period under her policy, she will receive monthly disability benefits if she is unable to perform

a. any of the duties of her own occupation
b. the duties of any occupation for which she is reasonably suited by education, training, or experience
c. the substantial and materials duties of her own occupation at the time the disability began
d. the duties of any gainful employment, and if the disability is expected to last at least 12 months or result in earlier death

Answer 50

c. the substantial and material duties of her own occupation at the time the disability began

Answer A would fail to meet ANY definitely of total disability, since it is too broad in scope. Answer B firsts the “any occupation” definition. Answer C is the correct definition of an own occupation definition policy. Answer D is the definition used by Social Security.

Question 51

Being defined as a “true group” means

a. the employer may buy any group plan from any company selling insurance in Ohio
b. the employees who enroll in the insurance plan do not have to answer any medical questions
c. only the employees over age 65 have to supply answers to medical questions
d. all groups that qualify as true groups must include medical in their benefits to employees

Answer 51

b. the employees who enroll in the insurance plan do not have to answer any medical questions

Under federal law, a “true group” means no medical underwriting may be required and this is available only to an employer with 10 employees or more. Insurance companies are not required to offer “true group” to any employers at all. Most insurance companies offer true group plans only to employers with more than 50 employees, in order to avoid adverse selection.

Question 52

What is NOT a source of information used in underwriting applicants for individual life insurance policies?

a. Commissioners’ Standard Ordinary Mortality Table
b. insurance application
c. medical examination
d. inspection report or credit report

Answer 52

a. Commissioners’ Standard Ordinary Mortality Table

The insurance company uses many sources of information in underwriting an applicant: the application, attending physician statements, examinations, consumer reports, medical questionnaires, and the MIB. The Commissioners’ Stand Ordinary Mortality Table is used in calculating the PREMIUMS an insurance company charges its policy owners.

Question 53

Fay and her employer split the cost of her group disability insurance with each paying 50% of the premium. Fay has a 30-day elimination period and her monthly benefit is $5,000. She was recently disabled for three months. What are the implications of this event?

a. Fay receives a benefit of $15,000, which is 100% taxable.
b. Fay’s benefit of $15,000 is partly taxable and partly tax free.
c. Fay will receive a benefit of $10,000, of which $5,000 is income taxable, and $5,000 is income tax free.
d. Fay gets a deduction for all benefits over 7.5% of her AGI.

Answer 53

c. Fay will receive a benefit of $10,000, of which $5,000 is income taxable, and $5,000 is income tax free.

Fay receives NO benefit for the first thirty days due to the elimination period.

Question 54

Veterinarian Vera qualifies for a disability benefit after being severely injured by a horse she was treating. She has a 5% compound interest COLA rider on the disability income policy she bought five years ago, which promised a $10,000 monthly benefit. Total inflation since she bought the policy has been 10%. What will her first monthly benefit be?

a. $11,000
b. $10,000m plus 10% to reflect the inflation increases since she bought the policy
c. the company will calculate her starting benefit as $10,000, plus a maximum of increase equal to the CPI increases since she bought her policy
d. $10,000

Answer 54

d. $10,000

It is important to note that the COLA only benefits Vera AFTER SHE BEGINS A CLAIM. The first COLA adjustment in disability policies will be made in the 13th month of benefit payments, not the 13th month of the policy. She would have needed to increase her coverage over time, perhaps with the GIR, to be sure that today’s benefit keeps pace with increased income.

Question 55

Under the federal law known as CORA, employees and dependents whose eligibility for group health care coverage terminates must be given the opportunity to take over the premium payments and continue to participate in the group plan for a period of time. Continuation does NOT need to be offered in what situation?

a. loss of dependent coverage due to death of the employee
b. loss of coverage for a spouse because of divorce
c. termination of eligibility because of a reduction in work hours
d. termination of eligibility because of coverage under another group plan

Answer 55

d. termination of eligibility because of coverage under another group plan

When a person leaves an employer, but is covered under another group plan as an employee or a dependent under a spouse’s employer’s plan, she is no longer eligible for COBRA.

Question 56

An agent who offers the son of a business owner a job with an exorbitant salary for doing almost nothing, if the business owner will only buy the company’s insurance programs through the agent, is guilty of

a. rebating
b. illegal inducement
c. discrimination
d. unlawful temptation

Answer 56

b. illegal inducement

Rebating is offering part of the premium or commission for the agreement to purchase. In offering an illegal inducement, the agent may not offer a “rebate,” but instead offer other special favors ont offered to all of the public.

Question 57

What statement is NOT true concerning Medicaid (Title 19)?

a. Medicaid will pay for what Medicare does not pay if the insured is entitled to both programs.
b. Medicaid is an assistance program, rather than an insurance program.
c. All individuals can use Medicaid as a substitute for a long-term care policy.
d. Medicaid is administered by state and local governments.

Answer 57

c. All individuals can use Medicaid as a substitute for a long-term care policy.

Medicaid is for indigent individuals. People wanting to select their own level of care or to protect their estates from shrinking due to long-term care costs would buy their own policies.

Question 58

What term is defined as “the materials describing the coverage and exclusions under an HIC?”

a. evidence of coverage
b. certificate of coverage
c. plan description
d. benefits outline

Answer 58

a. evidence of coverage

The evidence of coverage is an information form that describes the benefits limits, co-payments and exclusions. It must be approved by the Superintendent/Director of Insurance before it may be used.

Question 59

Roger is having difficulty with bleeding gums. He goes to a specialist who assists him in treating this gum condition and improving his dental care. What are of dental coverage is this?

a. endodontics
b. orthodontics
c. oral surgery
d. periodontics

Answer 59

d. periodontics

Special gum-related ailments are treated through periodontics.

Question 60

What describes the fact that a policy must be in force on the date of the claim, the claim must be communicated to the company properly, and then the company must pay a valid claim promptly?

a. policy provisions
b. contract of adhesion
c. conditional contract
d. unilateral contract

Answer 60

c. conditional contract

An insurance contract is conditional. Certain conditions must be met before a claim is considered valid and then there are conditions placed on the company regarding the payment of the claim.

Question 61

In a group long-term disability program where the employee pays 30% of the premium, what are the tax consequences when that employee is disabled and receive monthly disability benefits directly from the company?

a. 70% of the benefits will be tax free
b. 30% of the benefits will be taxable
c. 100% of the benefits will be tax free
d. 70% of the benefits will be taxable

Answer 61

d. 70% of the benefits will be taxable

In a group disability policy in which the employer and employee share the cost of the premium, only the income benefit attributable to the employer’s share of the premium will be taxable. Since the employee is paying 30% of the premium for this benefit and is unable to deduct it from taxes, this means the employer is paying 70% of the premier, 70% of the benefit is taxable. The 30% of the benefit attributable to the employee’s non-deducted premium will be received as income tax free.

Question 62

How is Medicare Part B financed?

a. with federal monies exclusively
b. FICA HI contributions during working years
c. with deductions from beneficiaries’ Social Security checks
d. using some federal monies, plus premium deductions from beneficiaries’ Social Security checks

Answer 62

d. using some federal monies, plus premium deductions from beneficiaries’ Social Security checks

75% of Medicare Part B cost is financed by the federal government from our income taxes, and the other 25% is paid for by beneficiaries paying premium, which is deducted from their Social Security check each month.

Question 63

A third-party administrator (TPA) is an

a. outside consultant who evaluates the quality of group health and welfare benefits
b. outside organization that manages an employers’ self-insured group program
c. insurance company that makes group insurance available to small employers
d. arbitrator who works to settle high-value insurance claims

Answer 63

b. outside organization that manages an employers’ self-insured group program

A third-party organization handles the various phases of plan administration, including payment of claims for self-insured group plans.

Question 64

As a fringe benefit to valued employees, Company C pays the full cost of Ben’s HIC health coverage. How do taxes work in this situation?

a. The company deducts the premium, and Ben pays on benefits.
b. The company deducts the premium, and Ben’s benefits are tax free.
c. The company pays the premium with after-tax dollars, but Ben gets tax-free benefits.
d. The company and Ben both pay taxes on the premium.

Answer 64

b. The company deducts the premium, and Ben’s benefits are tax free.

Health insurance is one of the special situations where the employer gets to deduct the part of the group health premium it pays, and the employee will receive income tax-free medical benefit payments.

Question 65

What is NOT allowed to be part of a High Deductible Health Plan (HDHP)?

a. coverage for cosmetic surgery
b. co-payments for prescription drugs
c. co-insurance for expenses
d. reimbursement for eligible dental expenses

Answer 65

b. co-payments for prescription drugs

A High Deductible Health Plan may include co-insurance requirements, but it may not include co-payments for any services, including prescription drugs.

Question 66

What statement is TRUE regarding Medicare?

a. Benefits under Medicare may not continue beyond the hospitalization period.
b. Payments are generally made directly to the hospital that has provided service, rather than to the insured.
c. Medicare Part A requires a monthly premium to be paid.
d. Part B has a lifetime limit of $5,000,000.

Answer 66

b. Payments are generally made directly to the hospital that has provided service, rather than to the insured.

All doctors/hospitals in Ohio who treat Medicare beneficiaries must accept assignment of Medicare benefits. This means the doctor/hospital cannot bill the patient for any charges over the Medicare approved amount, and the provider must also submit the claim and accept payment from the insurance company paying claims for Medicare in that region.

Question 67

Sylvia buys her own DI policy to protect her in her consulting business and does NOT insure any of her employees. What is the tax situation?

a. The premiums are deducted by Sylvia.
b. The premiums are deducted only if she operates as a sole proprietor.
c. The premiums are not deductible to Sylvia.
d. The premiums are deductible subject the the 7.5% AGI rule.

Answer 67

c. The premiums are not deductible to Sylvia.

The purchase of the individual DI policy in this situation is not a deductible business expense (even under the 7.5% rule). The benefits received would be income tax free.

Question 68

The factors considered in health underwriting do NOT include

a. sex
b. age
c. personal habits
d. location of US residence

Answer 68

d. location of US residence

The location of a policy owner’s residence has no bearing on the insured’s insurability as long as the insurance company is authorized to write insurance in the policy owner’s state of residence. There are restrictions on writing health policies for insureds that live outside of the country. The location of the residence could have an impact of the premium because the company bases its premiums, in part, on the charges by local providers, so some sections of a state may be more expensive than other sections.

Question 69

The provision in a health policy that defines the amount of time the policy owner has to submit claim forms to the insurance company is referred to as the

a. grace period
b. probationary period
c. notice of claim
d. proof of loss

Answer 69

d. proof of loss

Proof of loss is a uniform mandatory provision in all health policies. It requires the policy owners to submit the proof of loss to the insurance company within 90 days of the loss, unless they are physically or mentally incapable of submitting the forms within that time frame. Notice of claim requires the insured to notify the company of a claim so it can begin to set aside enough reserves to pay it. It also requires the company to send the proper claim forms to the insured.

Question 70

“Capital sum” refers to the

a. amount of capital required for a fraternal benefit society to sell insurance to its members
b. death benefit paid under an accident policy
c. dismemberment benefit paid under an accidental death and dismemberment policy
d. capital death benefit paid under the common carrier provision

Answer 70

c. dismemberment benefit paid under an accidental death and dismemberment policy

Capital sum, in an accidental death and dismemberment policy, is the dollar amount provided of a primary body part (hand or foot) or loss of sight in one eye or hearing in one ear. The capital sum is usually 50% of the principal sum.

Question 71

A person who does NOT have to pay a premium for Medicare Part A is called a

a. fully insured person
b. currently insured person
c. federal beneficiary
d. federally qualified beneficiary

Answer 71

d. federally qualified beneficiary

Most workers qualify for Medicare by having fully insured status under Social Security, which males them federally qualified beneficiaries. If the person is not a federally qualified beneficiary, he may purchase Part A benefits. The premium is rather high and can be adjusted based on how many credits the person has earned over a lifetime under FICA (Social Security).

Question 72

Limited benefit policies could be defined by all EXCEPT type of

a. accident
b. sickness
c. expenses
d. reimbursement

Answer 72

d. reimbursement

Limited policies are special policies in health insurance that restrict benefits to specified accidents, diseases, or expenses. Examples of limited policies are travel accident, dread disease, prescription plans, or AD&D policies.

Question 73

The most common way to define benefits under basic surgical expense coverage is the

a. schedule of maximum coverage limits
b. schedule of actual costs
c. basic hospital expense schedule
d. major medical costs schedule

Answer 73

a. schedule of maximum coverage limits

The basic surgical policy pays benefits for surgeries on a first dollar basis, but no deductible or co-insurance. The policy is a limited benefit policy, which is characterized by a schedule of operations that has a listed maximum amount payable for a given procedure. The maximum listed amount for a procedure is intended to cover the charges of the surgeon, assistant surgeon, anesthesiologist, and the expenses for the operating room.

Question 74

When money was removed from an MSA before age ______ for an ineligible expense, the penalty was ______.

a. 59 1/2; 15%
b. 59 1.2; 10%
c. 65; 10%
d. 65; 15%

Answer 74

d. 65; 15%

Tax deductible contributions to an MSA were allowed to grow tax-deferred and could be taken out income tax-free for eligible expenses. If money was removed from an MSA for an ineligible expense, the entire amount removed was taxable as ordinary income and, if the owner of the account was under the age of 65, there was an additional penalty tax of 15%.