Health Care Plans

Question 1

Medical Expense Terms

Adverse selection

Answer 1

The tendency of persons with a higher than average probability of loss to seek insurance to a greater extent than do “healthy” persons

Question 2

Medical Expense Terms

Any Willing Provider

Answer 2

Managed care plan cost containment limiting the number of contracted providers.

Question 3

Medical Expense Terms

Internal Limits

Answer 3

Cost containment through either exclusion of some treatments or setting of maximum cost payable on other treatments.

Question 4

Medical Expense Terms

Precertification

Answer 4

Requirement stating that plan provider must first approve some treatments prior to the treatment.

Question 5

Medical Expense Terms

Pre-existing Condition

Answer 5

Limitation of coverage for conditions in existence prior to policy inception A means to minimize the risk of adverse selection inception. selection.

Question 6

Major Medical Health Insurance

Comprehensive major medical insurance

Answer 6

Comprehensive major medical insurance
• Medical care coverage
• In and out of the hospital
• High maximum limits
• (Relatively) high deductible
• Greatest amount of insured flexibility and choice
• Higher premiums than managed car

Question 7

Major Medical Health Insurance

Indemnity Plans

Answer 7

• Insurance plans that uses a third party
payor to restore a claimant to their original
financial state prior to medical treatment.

Question 8

Major Medical Health Insurance

Stop Loss Limit

Answer 8

• Amount of covered benefits to which the

coinsurance provision is applied

Question 9

Health Insurance Plan Terminology

Breakpoint
(stop-loss limit
plus deductible)

Answer 9

The point after which the insurer pays 100% of all covered medical
expenses.

Question 10

Health Insurance Plan Terminology

Coinsurance provision

Answer 10

A policy provision requiring the insured to share a given percentage of covered medical expenses up to a maximum amount.

Question 11

Health Insurance Plan Terminology

Covered
Charges

Answer 11

Medical treatment for which a health insurance plan provides benefits

Question 12

Health Insurance Plan Terminology

Deductible

Answer 12

The initial amount of covered expenses that must be paid before reimbursement is received from the insurance policy

Question 13

Health Insurance Plan Terminology

UCR Tables

Answer 13

Detailed charts for usual, customary, and reasonable charges in a given geographic region

Question 14

Family Deductible Notes

Answer 14

It’s really more of a deductible cap
• Each person in the family is responsible for meeting his or her own deductible and paying any related medical costs.
• One person in the family can meet only one
deductible.
• Rather than requiring every family member to meet a deductible, the insurer allows for a family cap.
• Once the cap has been met deductibles for any remaining family members are waived

Question 15

Question 1 - Comprehensive Major Medical Indemnity Policies

Comprehensive major medical policies generally
provide more coverage than other health care
policies for which of the following reasons?
I. they generally have higher coverage limits
II. they provide more freedom of choice
III. they have fewer exclusions
IV. they generally cover fewer types of medical
expenses

Answer 15

a. IV only
b. I and III only
c. II and IV only
d. I, II, and III only
e. I, II, and IV only

Question 16

Managed Care Concepts

Capitation

Answer 16

• Physician is paid by insurer based on the number of subscribers selecting him or her as their primary care physician (PCP), regardless of services performed

Question 17

Managed Care Concepts

Fee-for-Service

Answer 17

• Physician is paid by insurer for medical services
performed. Allows for greater flexibility for patients;
generally costs more.

Question 18

Managed Care Concepts

Managed Care Plans

Answer 18

• HMO – Health Maintenance Organization
• PPO – Preferred Provider Organization
• POS – Point of Service Plan
• EPO – Exclusive Provider Organization

Question 19

Managed Care Plans

• Health Maintenance Organization –

Answer 19

Three types of HMO plans
o Staff model
o Group practice model
o Independent Practice
Association model (IPA)

Question 20

Managed Care Plans

• Preferred Provider Organization –

Answer 20

o PPOs offer the greatest flexibility

Question 21

Managed Care Plans

Point of Service Plan –

Answer 21

o POS pays based on where service is

received

Question 22

Managed Care Plans

• Exclusive Provider Organization
EPO

Answer 22

o technically, an insurance company-run

HMO, but run more like a small PPO

Question 23

Medical Insurance and Managed Care Payments

Out-of-pocket maximum (stop-loss amount

Answer 23

• The most an insured will be required to pay for
covered expenses. Usually includes the deductible
and any coinsurance amounts.
• Generally applies to major medical or indemnity type
policies.

Question 24

Medical Insurance and Managed Care Payments

Copayment

Answer 24

• The nominal dollar amount of covered expenses
which the insured will be required to pay in order to
receive medical services. This is not the same as the coinsurance amount

Question 25

Question 2 - Medical Reimbursement Calculation
Richard Weiss is insured through his employer
in a group indemnity health care plan. His
annual deductible is $200, after which Richard
must pay 20% of additional charges, to a stoploss-
limit of $5,000. In his first claim of the year,
Richard has $500 of covered medical
expenses. How much will his insurer pay?

Answer 25

a. $400
b. $300
c. $240
d. $160

Question 26

Question 3 - Managed Care Programs
Which one of the following is not considered to
be a managed care program?

Answer 26

a. Health Maintenance Organizations (HMOs)
b. Preferred Provider Organizations (PPOs)
c. Provider Service Networks (PSNs)
d. Medicaid (CMA)

Question 27

Question 4 - Health Care Plan Costs
Identify the health care plan costs (premiums)
as they would generally would be listed, from
lowest cost to highest cost.

Answer 27

a. HMO, PPO, major medical plan
b. PPO, major medical plan, HMO
c. HMO, major medical plan, PPO
d. major medical, HMO, PPO

Question 28

HIPAA: Health Insurance Portability & Accountability Act of 1996

Major health insurance-related provisions
(to reduce job lock)

Answer 28

• pre-existing conditions: cannot apply coverage
exclusion for more than 12 months
• when moving to a new job: cannot apply coverage exclusion if there is no break in previous coverage of 63 days or less
• pregnancy not a pre-existing condition

Question 29

HIPAA: Health Insurance Portability & Accountability Act of 1996

Only applies to comprehensive
health care

Answer 29

• i.e., not ancillary benefits
such as disability, dental, etc.
• not to managed care plans

Question 30

COBRA (Consolidated Omnibus Budget Reconciliation Act

29
Months

Answer 30

• Extension available
• 11 months (in addition to the original 18 months)
• Available in the event of employee disability

Question 31

COBRA (Consolidated Omnibus Budget Reconciliation Act

18
Months

Answer 31

• 20 employees or more (up to 102% of full premium)
• Laid off (down-sized, right-sized, structural reengineering)
• Fired (except for gross insubordination)
• Moved from full time to part time

Question 32

COBRA (Consolidated Omnibus Budget Reconciliation Act

36
Months

Answer 32

• Loss of dependent status
• Divorce
• Employee dies
• Employee qualifies for Medicare

Question 33

Medicaid

Answer 33

• Medicaid focuses on those lacking financial wherewithal to pay for health care.
• Medicaid is a federally initiated program.
• Administered, and partially funded, at the state level.
• Each state sets its own criteria to qualify for benefits.
• Some who qualify include:
o Recipients of Aid to Families with Dependent Children
(AFDC)
o Children under age 6 with family income at or below
133% of the federal poverty level (FPL).
o Supplemental Security Income (SSI) recipients in most states.

Question 34

Medical Savings Accounts

Health Savings Accounts (HSA)

Answer 34

• Tax deductible contributions
• Tax-deferred growth
• Uses “High deductible Health Plan”
• Contributions only to age 65
• May be used to pay Medicare Part A or Part B premiums

Question 35

Medical Savings Accounts

Archer Medical Savings Account

Answer 35

• Precursor to HSA
• Available only to small businesses
• Limited participation
• Replaced in 2003 by HSAs (existing plans grandfathered)

Question 36

Medical Savings Accounts

Medicare Medical Savings Account

Answer 36

• Offered under Medicare Part C

* Medicare Advantage Plan

Question 37

Health Savings Account (HSA)

Answer 37

• Allows individuals to pay for health care
expenses on a tax-free basis by using money
deposited in the HSA. Requires a highdeductible
health plan (HDHP).
• HDHP Minimum Deductible (2012)
o $1,200/$2,400 (single/family)
• HDHP Maximum Out-Of-Pocket
o $6,050/$12,100 (single/family)
• Maximum Annual Contribution
o $3,100/$6,250 (single/family)

Question 38

Medicare Coverage: Part A

Answer 38

Covers inpatient hospital expenses
• some home health services
• hospice care
• skilled nursing care
• very limited long-term care
Medicare Part A premium
• 40 quarters contribution to OASDHI - $0
• 30 to 39 quarters - $248/mo.
• less than 30 quarters - $451/mo.
Medicare Part A deductible/coverage
• $1 156 per spell of illness (60 day period
1,156 between hospitalization—new spell of illness)
• after deductible; $0 for days 1–60
• days 61–90; $289 coinsurance per day
• after 90 days; 60 lifetime reserve days, $512
coinsurance per day

Question 39

Medicare Coverage: Part B

Answer 39

Covers physician’s and outpatient expenses
• ambulance
• supplies (e.g., diabetic, glasses, medical equipment)
• lab services and screenings
• physical therapy
• blood
Medicare Part B premium
• income $85,000 ($170,000-MFJ); $99.90/mo.
• indexed to $213,000; $319.10/mo.
Medicare Part B deductible/coinsurance
• $140 per year
• 20% of all subsequent covered charge

Question 40

Medicare Coverage: Part D

Answer 40

• Prescription Drug Benefit
• Usually pay a monthly premium
• Late enrollees may pay a penalty
• Coverage example
o pay $320 deductible
o then 25% copayment of next $2,610 covered expenses
o Doughnut Hole:
next $3,727.50 out-of-pocket
(no insurance benefit)
o then pay a (5%) coinsurance
amount for remaining expenses
o Total out-of-pocket: $4,700
(deductible + copayment + doughnut hole)

Question 41

Medicare Coverage: Part C Medicare Advantage

Answer 41

• Combine coverage for Parts A, B, and D
• Provide additional benefits not included in
original Medicare program
• MAY provide better coverage at lower cost than a
combination of traditional Parts A, B, D plus a supplement
• Problem: programs not always available in a
given geographic area

Question 42

Part C: Medicare Advantage Plans Available

Answer 42

• Medicare HMOs
• Medicare PPOs
• Private Fee-for-Service plans (PFFS)
• Special Needs Plans
• Medicare Medical Savings Account (MMSA)

Question 43

Medicare Supplement Insurance

Answer 43

Medigap plans
• A–J, plus K–N
o no new Plans E, H, I, J
• coordinate with Medicare to fill-in the deductible
and co-pay gaps
• do not generally add substantially to Medicare
benefits
• do not provide any appreciable LTC benefit

Question 44

Patient Protection and Affordable Care Act (PPACA 2010)

Expands Coverage

Answer 44

• Provided immediate coverage for an additional 15 million.
• Establishes health insurance exchanges and subsidies.
• Extends coverage for dependent children up to age 26

Question 45

Patient Protection and Affordable Care Act (PPACA 2010)

Eliminates Policy Maximums

Answer 45

• Insurers must accept all applicants
• No limit on coverage for preexisting medical conditions
• No premium change due to differences in enrollees’ health

Question 46

Patient Protection and Affordable Care Act (PPACA 2010)

Extremely Controversial

Answer 46

• Purported to be a “budget buster.”

* Requires mandatory health insurance for all U.S. residents.

Question 47

Question 5 - Patient Protection and Affordable Care Act
Under the new Patient Protection and
Affordable Care Act of 2010 (PPACA 10), which
of the following have been eliminated for
comprehensive major medical indemnity plans?

Answer 47

a. copayments
b. maximum policy limits
c. coinsurance amounts below 80/20
d. deductible amounts above $1,000

Question 48

Question 6 - State Child Health Insurance Program
Which of the following is not true regarding the
State Child Health Insurance Program
(SCHIP)?

Answer 48

a. It was implemented to provide health care
for poor children who qualify for Medicaid.
b. Each state’s plan for coverage must meet a
“benchmark plan.”
c. States may not alter Medicaid rules to
lighten their burdens in meeting the
program’s stipulations.
d. The initial intent of the program was to
spend nearly $50 billion over a 10-year
period for health care for poor children.

Question 49

Question 7 - HIPAA
The portability/preexisting conditions provisions
of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) apply to

Answer 49

a. disability income insurance.
b. comprehensive health care plans.
c. workers’ compensation insurance.
d. long-term care insurance.