Health Insurance Flashcards
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Benefits of Disability Insurance
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Financial security: financial stability, provides a portion of income, ensuring that when one cannot work, they still have money to cover essential expenses such as bills, groceries, and rent.
Focus on recovery: one can focus on getting better without worrying about money, leading to a smoother recovery process and potentially faster healing.
Maintaining lifestyle: helps maintain the standard of living. It ensures that individuals can continue to afford the things they need and avoid major disruptions to their lives.
Reduced reliance on savings: Instead of relying solely on savings to get through a period of incapacity, people can use disability insurance, helping to preserve their savings for the long term.
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total disability benefit
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They must be unable to engage in regular or gainful employment due to their current health conditions. Regular employment refers to whatever job or occupation that the individual had before the disability
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Partial disability benefits
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assistance where an individual has a disability and experiences reduced work capacity due to illness or injury. Under a partial disability provision, an insured person would receive a percentage of their total disability amount instead of a percentage of their pre-injury income if they were unable to perform one or more job responsibilities
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Eligibility for receiving partial disability benefits
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Impaired work capability: It is essential to demonstrate that one’s health condition significantly affects their ability to perform work at full capacity.
Decrease in earnings due to reduced work capacity: The income one earns might need to be reduced due to the impact of one’s health condition. This reduction could be measured as a percentage drop in comparison to what they previously earned.
Certification from the medical practitioner: One must provide substantiating medical evidence confirming that their health condition directly contributes to the decrease in both their work capability and earnings potential.
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A residual benefit
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a component of disability insurance designed to offer financial assistance when a person with partial disability can still work but not as effectively as before. This benefit provides a portion of the policyholder’s benefits, usually on a monthly basis.
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residual benefits should meet the following criteria.
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Partially disability: An individual who does not have complete disability, but their health issue makes it harder for them to do their job as they did before.
Loss of earnings: Individual loss of earnings should usually meet a specific threshold or percentage outlined in their insurance policy.
Doctor’s verification: An individual might need to provide medical proof that their health is causing the income reduction and the difficulty in working.
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recurrent benefit
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refers to a type of benefit that can be claimed multiple times for the same or related events or conditions, as opposed to a one-time benefit. If the insured individual were to experience a disability with the same or similar condition shortly after returning to full-time employment, they would be entitled to recurrent benefits. No additional qualification period or waiting
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government disability benefits
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State Disability Insurance (SDI), Supplemental Security Income (SSI), and Social Security Disability Insurance (SSDI).
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State Disability Insurance (SDI)
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is a program available in a few states such as California, Hawaii, New Jersey, New York, and Rhode Island as they set up their own programs for short-term disability benefits aimed specifically at non-work-related ailments, injuries, and pregnancies
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eligibility criteria for State Disability Insurance (SDI)
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Individuals should be employed and must pay into the SDI program through payroll deductions.
One must have a non-work-related disability that prevents them from working as certified by a medical professional.
Individuals need to meet the state’s minimum earnings requirements.
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Supplemental Security Income (SSI)
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is a federal program that provides financial assistance individuals with disabilities with limited income and resources
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Eligibility criteria for Supplemental Security Income (SSI)
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Individuals must have a disability according to the Social Security Administration’s definition, which usually means being unable to work due to a severe medical condition.
Individuals must have limited income and resources.
They must be a U.S. citizen or meet certain immigration requirements.
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Social Security Disability Insurance (SSDI)
provides disability benefits to individuals facing prolonged disabilities that hinder their ability to hold employment, regardless of the cause of disability. It is applicable across all states and falls under the jurisdiction of the Social Security Administration (SSA).
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eligibility requirements for SSDI
Individuals must have a qualifying disability that prevents substantial work activity.
Individuals should meet the duration and work credit requirements set by the Social Security Administration.
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individual disability insurance
policy where she owns the policy and pays the premiums. One advantage of buying this policy herself is that her policy would continue even if she were to leave her current employer.
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group disability insurance
employer-sponsored coverage for their employees
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Business disability insurance
replaces income when an employee or an owner is no longer able to work because of sickness, or they are hurt.
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overhead expense insurance
which essentially reimburses the company for any operating expenses when the owner is not able to work because they are hurt or sick. Because many businesses cannot continue to operate when the owner becomes disabled, overhead expense insurance helps cover operating expenses. Some types of operating expenses include payroll, rent, utilities, and taxes to name a few.
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disability buy-out
which allows others to buy out the portion that an owner owns if they become totally disabled. It is essentially a buy and sell agreement between the owners of a business. The owners agree to buy the permanently disabled owners interest in the business at a price decided upon before the disability occurs. The other owners will buy the interest with the disability buy-out insurance so that they can continue to still operate the business.
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terms for accidental death and dismemberment
For any accidental deaths, the terms may state that this insurance would pay if a death occurs unexpectedly. This means that to pay the policies face amount, the death is not permitted to be caused by sickness, any type of illness, or for any lack of physical condition. These terms also include death by stroke, heart attack, or any type of ailment. Several of these policies exclude payment for death suicide as well. The accidental death and dismemberment terms will only pay the death benefit if the death occurs within a specific time frame, which is often 90 days from the time of the accident. The death by accident must also be a direct result of the accident.
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limitations for accidental death and dismemberment
Death due to medicines or drugs (overdosing)
Death due to any type of poison
Death by any type of infections
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CHAPTER 5
CHAPTER 5
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Health insurance
is a financial agreement made between an individual or collective and an insurance company that offers monetary support when it comes to medical expenses and essential healthcare services.
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Coinsurance
The proportionate amount an individual is accountable for paying towards the expenses of a particular healthcare service that falls within their coverage. This coinsurance obligation activates solely after one has completely satisfied their annual deductible, which entails having paid out the full 100% amount beforehand
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Fixed Indemnity
This means insurance pays a set amount for certain things, no matter how much the actual cost is
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ways to get access to health insurance
Through a Job: Many jobs offer health insurance as a benefit. The employer and the employee share the costs.
Government Programs: In some countries, the government provides health insurance to citizens, like Medicare or Medicaid in the US.
Private Plans: One can also buy health insurance directly from insurance companies. This is common when the job does not provide it
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different types of health insurance plans
Health Maintenance Organization (HMO): These focus on preventive care and require one to choose a primary doctor. They usually have lower costs but less flexibility in choosing doctors.
Preferred Provider Organization (PPO): Preferred provider organizations let individuals see any doctor they want, even without a referral. They are more flexible but can be costlier.
Individual Health Insurance: It covers individuals, their spouse, their children, and their parents. It helps with medical costs, including hospital stays, surgery, and more.
Family Floater Health Insurance: This insurance plan is good for the whole family. It is cheaper than individual plans.
Senior Citizens Health Insurance: This plan is for individuals above 60. It offers coverage for the cost of medicines, hospitalization arising out of accident or illness, pre- and post-hospitalization, and treatment.
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Affordable Care Act implemented changes
Young Adult Coverage: The law permitted young adults to remain covered under their parents' health insurance plans until they reached 26 years of age. This provision offered an increased number of coverage options for those who were venturing into their careers or engaged in studying.
Online Marketplaces: Platforms were established on the Internet where individuals could conveniently compare different health insurance plans and ultimately select one that best suited their needs.
Pre-existing Condition Safeguard: Insurance companies were prohibited from excluding coverage or raising premiums based on pre-existing health conditions. Consequently, individuals with prior medical afflictions no longer encountered hurdles when attempting to obtain insurance.
Medicaid Expansion: Medicaid, a program for low-income individuals, was expanded to include more people who fell within certain income levels. This made it easier for individuals with limited financial resources to access healthcare.
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Medicare
federal health insurance for people aged 65 and older. It also covers some younger people with disabilities. It helps with hospital and medical costs
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Medicaid
joint federal and state program providing health coverage for low-income individuals and families. Eligibility varies by state, often including pregnant women, children, elderly individuals, and people with disabilities.
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Center for Medicare & Medicaid Services (CMS)
manage federal insurance programs,
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Healthcare providers
Medical facilities, which provide a wide range of services, from emergency care to specialized treatments.
Medical doctors and other medical professionals who diagnose and treat patients.
Allied Health Professionals like physical and occupational therapists who offer specialized therapies.
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factors influencing the cost of healthcare
Multiple Systems: The U.S. healthcare system is intricate, involving distinct regulations, funding sources, enrollment periods, and personal expenses tied to different types of health insurance. Compared to other advanced countries, healthcare expenses in the United States are notably higher.
Rising Drug Costs: Americans spend nearly double on pharmaceutical drugs compared to individuals in other advanced nations. High drug costs stand out as the primary source of excessive spending in the U.S.
Profit-Driven Hospitals: Hospital care constitutes 31% of the nation's healthcare expenses, with a 4.4% increase in spending totaling $1.3 trillion in 2021. A report from the Health Care Cost Institute in July 2022 highlighted that compared to other countries, prices for inpatient services remain elevated in the United States. Varying healthcare prices is one of the factors
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managed care plan
A managed care plan is a healthcare insurance program designed to efficiently coordinate the funding and provision of healthcare services to its members, with the aim of delivering high-quality care while minimizing costs. They include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans.
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Point of Service
combines features of HMOs and PPOs. Members choose a primary care physician, similar to HMOs, but it can cost more than HMOs. However, patients can also go out of network and still receive partial coverage.
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Health Savings Accounts (HSAs)
HSAs are tax-advantaged savings accounts paired with high-deductible health plans. Contributions are tax-free, and funds can be used for medical expenses. HSAs offer flexibility, as unused funds can be rolled over to future years.
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Indemnity Plans:
Indemnity plans, or fee-for-service plans, provide more freedom to choose healthcare providers. Patients pay for services, and the insurance company reimburses a percentage of the costs.
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Preventive care
usually initiated routinely by clinicians, not based on symptoms, and often has varying insurance coverage
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Acute care
is prompted by patient identification and commonly occurs in a single encounter.
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Chronic care
often involves clinicians with ongoing patient relationships and emphasizes thorough follow-up, contributing to its quality enhancement.
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key factors influence the quality of health care in the U.S.
Provider Network and Access: The adequacy and ease of accessing healthcare providers within insurance networks significantly impact care quality. Limited options or challenges in seeing specialists can hinder timely and comprehensive treatment.
Coverage Limitations and Benefit Design: The extent of covered services, prescription drugs, and preventive care directly shapes care quality. Incomplete coverage may lead to delayed or insufficient treatments.
Healthcare Coordination: Effective coordination among primary care, specialists, and hospitals enhances care quality. Poor communication and fragmented care can lead to medical errors and suboptimal outcomes.
Preventive Services and Wellness Programs: Insurance plans prioritizing preventive services and wellness programs contribute to improved health outcomes and early disease detection.
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The impact of the ACA on the Healthcare Sector includes
Expanded Coverage: The ACA significantly reduced the number of uninsured Americans by expanding Medicaid and establishing health insurance marketplaces, providing coverage to millions.
Consumer Protections: It introduced critical consumer protections, including coverage for pre-existing conditions and the end of lifetime and annual benefit limits.
Essential Benefits: Mandated insurance plans to cover essential health benefits, ensuring standardized coverage.
Medicare Improvements: Improved Medicare with prescription drug coverage and value-based care initiatives.
Preventive Care: Emphasized preventive services with no cost-sharing to promote early detection and wellness.
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CDHP (consumer directed health plan)
high deductible insurance plan that is linked to a health savings account or some other similar product. A health savings account is a savings and spending account that is tax-exempt and can be used to pay for certain medical expenses. There are specific requirements that you have to meet in order to be eligible for the HSA.
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Staff Model HMO
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The staff model HMO consists of doctors and other medical professionals that are direct employees of the HMO. This means that physicians and doctors have offices in the HMO buildings and get paid salaries by the HMO. The staff model is considered a closed-panel HMO because the doctors can only offer services to patients within the HMO.
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group model HMO
the organization does not have to directly employ physicians. Instead, the HMO contracts services with a professional medical group. The group practice, like a hospital or regional physician group, directly employs the doctors.
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network model HMO
can contract with any number of agencies and any combination of independent groups. This is the most common HMO model today. The HMO can contract with groups and individual physicians as part of their network package. This gives customers a variety of choices when deciding on HMO membership.
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Independent Practice Associations
are organizations made up of independent physicians who are not part of another organized group or HMO network. IPAs are mostly general practice groups but can offer other services as well. HMOs can contract IPAs and include them in their in-network providers.
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Advantages of a PPO
Flexibility in choosing healthcare providers, especially if the preferred provider network is large; costs are less for in-network providers
Insured may see providers outside the the PPO network
Reduced risk of high, unmanageable costs, because most PPOs require the insured to pay fees for non-routine care until a set amount, known as the deductible, is reached
PPO plan may not require a referral from a primary care physician (PCP) to see a specialist
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Disadvantages of a PPO
Insured needs to research the PPO network providers to see if their existing providers are in-network
Using out-of-network providers is more expensive
Keeping track of deductible amounts and coinsurance payments can be confusing
Less flexibility if the PPO requires the insured to see a primary care physician (PCP) before seeing a specialist
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Characteristics of a PPO
Usually have large groups of in-network providers
Insured can visit out-of-network providers (at higher cost)
Insured can select a primary care provider (PCP) to deliver routine, preventive healthcare, but can see a specialist without a referral
Requires a small copay for visits and charges a deductible amount and coinsurance payments
More choice and flexibility, higher monthly premium
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Characteristics of an HMO
Tend to have smaller groups of in-network providers
Insured cannot visit out-of-network providers except in exceptional circumstances
Insured is required to select a primary care provider (PCP), who approves ALL healthcare
May not have copay, does not have deductible or coinsurance payments
Lower monthly premium, less choice and flexibility
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cafeteria plan
gives employees the option to pick which benefits they'd like to receive. The perk of this approach is that employees aren't forced to pay for benefits they don't want, or expect to use, in the near future
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flexible spending accounts
benefits programs that allow employees to legally avoid paying taxes on money used for medical expenses or to have their children cared for so they can work
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Affordable Care Act's major reforms
Everyone who applied for a healthcare plan after the ACA was guaranteed affordable healthcare coverage for all necessary healthcare.
An individual mandate required all qualifying individuals in the United States to carry health insurance coverage or pay a tax penalty for noncoverage. The tax penalty was repealed in 2019.
The ''Consumer Choices and Insurance Competition Through Health Benefit Exchanges'' provision of the ACA required every state to set up a healthcare exchange marketplace by January 01, 2014, where individuals may purchase individual health insurance coverage for themselves or their families.
The ''Premium Tax Credits and Cost-sharing Reductions'' provision of the ACA required the federal government to provide subsidies towards the monthly premiums of individual plans to those who earn between 100% and 400% of the federal poverty line
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provisions of the ACA that affected all healthcare markets include:
The ''Individual Shared Responsibility Provision'' of the ACA required every health insurance plan to provide minimum essential coverage, as defined by federal law. This provision was effectively a mandate that compelled insurers to include essential, necessary health benefits in all their plans. Some examples of essential health benefits include doctor visits, hospitalizations, mental health care, maternity care, emergency services, laboratory services, and prescription drug coverage.
The employer mandate required any businesses with at least 50 full-time employees, defined as 30 hours per week or more, to affordably insure 95% or more of their full-time workforce or pay a tax penalty for noncompliance.
Income limits to qualify for the Medicaid program were expanded to 138% of the federal poverty line, although not all states opted in to expand their Medicaid program.
Dependent coverage for young adults under a parent or guardian's healthcare plan was extended to age 26.
Payments from the federal government for Medicare and Medicaid recipients were changed from fee-for-service to bundled payments, which are episode-based prepayments based on expected costs for a particular condition over a specific period of time.
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Additional protections for consumers under the ACA
The ''Health Insurance Market Reforms'' provision barred insurance companies from denying applicants based on preexisting conditions or any other health-related factor, like gender or genetic test results.
Insurance companies were barred from charging a higher premium or denying specific types of coverage to individuals with preexisting conditions. However, higher premiums can still be charged based on certain factors like location, age, and tobacco use.
Health insurance companies were barred from disenrolling individuals who already had health coverage after they became ill, which was a common practice before the ACA. For instance, a person with no preexisting conditions who rarely went to the doctor and consistently paid their healthcare premiums for five years could be disenrolled from their healthcare plan if they unexpectedly developed cancer before the legislation enacted by the ACA.
Insurance companies were barred from setting maximum yearly limits or maximum lifetime limits on healthcare coverage for essential healthcare services.
Obamacare also focuses on preventive care services. Some examples of preventative care include screening for cancer, colonoscopies, mammograms, high cholesterol, and diabetes. Vaccinations, wellness visits for babies and infants, and counseling services for smoking, weight loss, excessive alcohol use, pregnancy, contraception, pre-exposure prophylaxis for HIV, and depression are also covered under the ACA.
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ndividual health insurance pros
Choice of health insurance company
Choice of health plans
Always covered when plan is active
Choice of doctors
Can change plans any time
Can purchase coverage for anybody
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Group health insurance pros
Employer pays a portion of monthly premiums
Your premium portion is tax-deductible
Premiums are automatically taken from your paycheck
Eligible dependents may also be covered
Employer chooses your plan for you
Handles your health insurance paperwork
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Consolidated Omnibus Budget Reconciliation Act (COBRA)
requires continuation coverage to be offered to covered employees, their spouses, their former spouses and their dependent children when group health coverage would otherwise be lost due to certain specific events. COBRA coverage for beneficiaries must be the same as offered to similarly situated, active employees. Coverage lasts between 18 and 36 months, depending on the circumstances. Beneficiaries may have to pay the complete cost of the premium for health coverage in addition to an administrative fee.
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Long Term Care
assistance for individual's who are not able to complete activities of daily living (ADL). Activities of daily living are basic daily tasks such as dressing, walking short distances, getting in and out of bed or a shower, eating and bathing.
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exceptions for Long Term Care
individuals who have pre-existing conditions that indicate they may need long-term care in the future may not qualify for coverage.
individual with a degenerative disease such as a heart disease or multiple sclerosis, the individual may not qualify for LTCI.
individuals with mental disorders are likely to be disqualified for LTCI.
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LTCI provides coverage for
nursing home facilities if a person needs twenty-four-hour care
assisted living, which is like an apartment community for individuals who need personal care periodically
adult day care services
home health care (like visiting or live-in nurses)
modifications of a person's home to ensure the house is more accessible (like adding a ramp)
therapy
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hospital indemnity insurance.
This additional insurance will pay her directly when she needs to be hospitalized. This payment can help her pay for her out-of-pocket expenses resulting from the hospital stay. For example, this insurance may pay her $2,000 for a five-day hospital stay.
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Supplemental health insurance
augments existing government-provided coverage and you can purchase it from a private insurance company or from your employer if they offer it.
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supplemental health insurance
Critical illness
Employer-sponsored
Cancer
Short-term medical
Accident
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critical illness policy
provides a lump-sum payment if the insured develops a serious medical issue such as cancer, heart attack, or stroke and he/she survives the survival period--the minimum amount of time that a person must live after the diagnosis
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short-term medical
supplementary health insurance policy provides coverage when an individual is between jobs or is just out of college and doesn't have coverage yet, when an individual turns 26 and is no longer covered by his/her parent's plan, or in a situation where an individual needs temporary health insurance coverage,
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accident supplementary health insurance
supplemental policy will pay a policyholder the amount stated in his/her policy if he/she has an accident, such as a fall.
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Chapter 6
Chapter 6
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ACA cost-sharing tiers:
Bronze: insurance pays 60 percent of medical costs
Silver: insurance pays 70 percent of medical costs
Gold: insurance pays 80 percent of medical costs
Platinum: insurance pays 90 percent of medical costs
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ACA required services
Ambulance services
Emergency services
Hospital services
Maternity and newborn care services
Mental health services
Behavioral health services
Prescription drugs
Rehabilitation services
Lab services
Preventive services
Pediatric services that include vision and dental care
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notice of claim provision
requires the individual who is insured by the policy to provide the insurance company with written notification of a loss. Then company will then cover the loss within a certain number of days after the loss occurred. it is usually under 30 days.
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claim form provision
states that your insurance company has 15 days to provide you with the proper claim form to document your loss.
While each insurance company has its own claim form, there is some information common to all of them, such as:
Policyholder information
Information on coordination of benefits
Information about whom the claim is for
Details about the nature and cost of the claim
Declaration
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payment of claims provision
outlines how and to whom the insurance company will make payment. Most often the insurance company will make payment to the policyholder, but if the claim is for an accident and the policyholder is deceased, the insurance company will pay his/her beneficiary, who is the individual the policyholder designated to receive benefits after
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time of payment of claims provision
states the number of days that the insurance company has to pay or deny a submitted claim
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entire contract provision
states that the health insurance policy is a contract between the insurance company and the purchaser.
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contestability period
(usually two years) during which the insurer could deny claims submitted by the policyholder because of misrepresentation on the application. However, if the policyholder has a pre-existing condition, the insurance company cannot deny a claim until after the incontestable period expires. if the policy contains a guaranteed renewable clause, which means that the insurance company has to renew it even if they discover that the policyholder submitted fraudulent information.
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grace period provision
means that we have some extra time to pay it before the insurance company cancels our coverage. The grace period varies but can be up to 90 days after the premium was due
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proof of loss provision
states that a policyholder has 90 days to tell the insurance company and provide documentation about a loss and provide information about the extent of it.
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legal actions clause
states the period of time that the policyholder can take legal action against the insurance company after providing proof of loss. 60 days after she submitted proof of loss to begin any legal action. there's a maximum time limit as well, usually three to five years.
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guaranteed renewable clause
Policies will be renewed even if the policyholder submitted fraudulent application information.
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physical exam and autopsy provision
allows an insurance company to request regular physical exams or an autopsy.
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change of beneficiary provision
gives the policyholder freedom to change his or her beneficiary on the health insurance policy. Revocable beneficiaries can be changed without the beneficiary's signature. Changing an irrevocable beneficiary requires the signature of that person.
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change of occupation optional provision
allows an insurance company to increase the policy premium or the amount an insured would pay for the policy if the insured changes to a more risky occupation.
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illegal occupation provision
an insurance company will not pay any benefits to a policyholder if the loss occurred when the policyholder was committing a felony, or if they have an illegal occupation.
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misstatement of age or sex,
the benefits that the insurance company will pay will be consistent with the policyholder's correct age and sex.
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relation of earnings to insurance provision
a policyholder cannot claim benefits that are greater than his/her monthly income at the time he/she became disabled or his/her average monthly earnings for the previous two years. Under this provision, the insurance company is required to pay only a proportionate amount of benefits to the policyholder.
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The insurance clause
specifies how much it will cover or pay the hospital charges and other benefits. It also explains the kind of loss the insurance company is willing to cover under their policy.
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Probationary Period
It dictates the period of time that the insurance company will not pay a policyholder for an illness from which they suffer. This usually happens between the time of approving the insurance application and the specific date mentioned for it to start covering the person. This period does not exceed 90 days,
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consideration clause
insurance specifies the amount of premium payment that should be paid to the insurance company, and when that premium should be paid. Generally, these clauses help to create value that is exchanged in a bargaining process, meaning each party is given consideration.
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free look period
s the period in which a person can terminate the policy without getting charges or receiving penalties like surrender charges. This period should be at least 10 days, but it can last longer depending on the insurer.
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waiting or elimination period
in health insurance is when a person cannot request or claim any benefit from a registered insurance company under the designated health insurance plans. This means that one has to wait a specified period before deciding to make a claim. Besides, it stipulates that the policyholder caters to all costs related to the illness or injury during this period. It is different from the probationary period,
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Alternative Medicine -
This exclusion means that an insured will not be covered if using medical options such as acupuncture, acupressure, massage therapy, and even chiropractic care. This can be a restriction or an outright exclusion, depending on the insurance company.
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Cosmetic
This exclusion denies insurance benefits for cosmetic procedures, such as liposuction or breast enhancements. However, breast reductions can be paid for if they are proven to be medically necessary. Tummy tucks have also been known to be paid for if the skin is causing a medical issue. This exclusion also restricts insurance payouts for gender reassignment surgery.
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Weight Loss
This is another exclusion that keeps an insured from receiving reimbursement for liposuction, but it can also stop a bariatric surgery from being covered, unless it is required to save the insured's life due to another life-threatening health concern, such as a heart condition.
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Infertility Treatments
This keeps the insured from receiving money to pay for treatments for infertility, even if the infertility is due to a medical issue. This exclusion is not as popular now, though, and some insurance companies have been known to cover these treatments
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Dental and Vision
Regular medical coverage will not pay for most dental or vision needs, such as cleanings or vision tests. However, if a dental or vision need crosses over to the medical realm, such as a jaw issue that is causing severe migraines and blindness, medical insurance can be convinced to pay for this. Medical coverage generally does not include dental and vision benefits due to the fact that there are separate, individual policies that cover these.
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Experimental
Medical treatments that are considered risky and experimental may not be covered under an insurance plan. New treatments for cancer or medical testing could be denied.
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War Injuries
These are injuries that happened during war, whether to a soldier or civilian.
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Self-inflicted Injuries
These can include suicide attempts, self-scarring, or even bulimia or anorexia. The exclusion for suicide is less likely now, however, if it can be proven that the insured had a mental-health issue that caused the suicide or attempted suicide.
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Injuries Suffered While Committing a Criminal Act
This refers to a criminal who is in the midst of a criminal act and is hurt. For example, someone who breaks your house window, climbs in to to steal your things, and cuts themselves on the broken glass would not be able to have the injury covered by insurance.
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Maternity
nsurance companies will currently pay for a woman to have a baby in a hospital, though previously, this was not a complete guarantee. Additionally, insureds will not likely be covered for the use of homeopathic doctors or at-home medical care if the insured chooses those services.
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International Travel or Stay
If an insured is traveling overseas and is sick or hurt, insurance companies may have restrictions that keep the insured from being covered for certain expenses, such as medical evacuation.' Usually, Medicare will not cover health issues overseas; there are only a few rare exceptions.
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Mental Health
Many insurance companies now cover mental-health visits and assistance for inpatient and outpatient issues. However, there are a few things that insurance companies still will not cover, like assistance for issues that are likely untreatable, obesity assistance, and nicotine assistance.
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flexible spending account
program, which allows employees to optionally place a portion of their income into a special account that can be used to pay for eligible healthcare expenses. In exchange for restricting this money to eligible expenses, the funds are no longer taxed by the federal government and many state governments. The employees' savings are the taxes they don't have to pay on this income.
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flexible spending account rules
funds totaling $3,050 can be placed into a flex account each year. For a married couple, each spouse may have his or her own flex account and make these contributions. Employers may contribute a portion of this money, but typically, most of the amount is deducted from the employee's paycheck.
Generally, any money placed in a flex account must be spent by the end of the calendar year, or it is lost. However, an employer may choose to pay for one of two options to help: employees may be able to carry over $500 of unused funds to the next year or have an additional grace period of
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Pre-authorizations
are reviews completed by an insurance company to ensure that the treatment plan or drug prescribed to a patient is medically necessary in the circumstances.
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Usual charges
are those that are consistent with the fee the physician or dentist usually charges for a particular procedure.
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Customary charges
are those that are within a range that most doctors or dentists in a certain area charge patients for a particular procedure. Customary charges are sometimes calculated using a percentile of all fees submitted by policyholders for a particular procedure for a town or city.
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Reasonable charges
are fees that are usual and customary or those charges that are consistent with the fee that would be charged for a policyholder experiencing a similar condition.
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factors can influence a policyholder's policy and coverage
Geographic region
Network provider
Out-of-network provider
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Influence of Geographic Region
If a healthcare provider charges a higher amount than the insurance company determines to be usual, customary and reasonable for that procedure in the community, the policyholder will pay the amount that is greater than the usual, customary and reasonable charges.
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Example of Influence of Geographic Region
Let's assume that Maxine incurs $700 of costs for a procedure in her hometown and her insurer pays 75% of the usual, customary and reasonable charges. Her insurance company determines that the usual, customary and reasonable cost of this procedure in her community is $450. Maxine would be responsible for paying $112.50 (25% x $450) for the amount of usual, customary and reasonable charges that her insurer doesn't pay plus $250 ($700 - $450), as the insurance company would base its reimbursement on $450. In total, Maxine would pay $362.50 for this procedure.
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Influence of Network Provider
Many care programs have agreements with doctor networks who agree to be reimbursed for particular procedures at pre-determined rates. Therefore, usual, customary and reasonable charges don't normally apply if you visit a healthcare provider who is in your network.
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Influence of Out-of-Network Provider
If a policyholder visits a healthcare provider outside of his/her network, then he/she may have to pay some or all of the costs relating to that visit. Some plans cover out-of-network services and others don't. Even if your plan covers out-of-network providers, there could be a limit as to how much your insurance company will reimburse you as the usual, customary and reasonable charges apply.
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Maximum benefit limits
are the highest possible amounts that a health insurance policy pays for specific covered services of an insured individual over a specified period. These limits may be expressed as a fixed dollar amount, a percentage of the covered expense, or a combined total of benefits for all covered services.
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lifetime maximum benefit
is the highest dollar amount that a health plan will provide to an insured person in benefits throughout that person's lifetime. In other words, a lifetime limit is the highest amount of money an insurance company pays for coverage as long as an individual is a member of the plan.
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Lifetime benefit limits for essential health benefits
eliminated by the ACA, Affordable Care Act or "Obamacare." The ACA is a federal law established in 2010 to reform health care services in the United States. The Act states that after September 23, 2010, for new or renewed policies, no limits can be imposed on any essential health benefits.
dental and vision care may have maximum annual and lifetime benefits. They are considered essential for children only.
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annual maximum benefit
is the most an insurance company will pay out in benefits during a single year. This limit may be set on a per-person basis or a per-policy basis. Insurance companies usually set annual maximum benefits to protect themselves from having to pay out too much money in benefits in a single year.
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per-cause maximum limit
is the most amount an insurance company will pay for a single covered event. This means that if the cost of the event exceeds the limit, the policyholder will be responsible for paying the difference. Per-cause benefits are all the medical expenses an insurance company will pay for an insured individual from a specific illness or injury.
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Renewability provisions
within a healthcare policy provide the guidelines about who can end, or terminate, the policy (either the insured or the insurer) if the cost of the policy goes up and down, and any reasons for terminating the policy.
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optionally renewable provision
allows the insurance company the option to renew or cancel a policy on the policy anniversary date. The policy anniversary date is the anniversary of the policy's effective date and is often used as the policy renewal date.
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Conditionally renewable provisions
within a healthcare policy differ from optionally renewable provisions by listing specific reasons for non-renewal or cancellation, and these reasons CANNOT be related in any way to the health or medical condition of the policyholder.
The insurance company can only cancel the policy for reasons specified in the policy contract. (Non-payment of premium is a common conditionally renewable provision. Another common conditionally renewable provision often found in disability policies is job change;
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cancellable provisions
policies that can be canceled by the insurance company at any given time and for any reason. If the company cancels the policy, even with cancellable provisions, the company must still provide a written explanation of its intent to cancel the policy (usually giving 45 days' notice) and the insurance company MUST return any premiums paid to the policyholder that have not been used, i.e. policyholder pays annually and is only six months into the policy, the insurance company must refund the unused six months of premium to the policyholder. (
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non-cancellable provision
These provisions are very specific: the benefits provided by the policy are a fixed amount and cannot change, the policyholder cannot cancel the policy, nor can the insurance company. Furthermore, the insurance company cannot increase the amount of premium that the policyholder pays.
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Guaranteed renewable provisions
as long as a policyholder pays the agreed-upon premium payments and is under the age limits of the contract, the insurance company cannot cancel the policy. Any changes must be agreed upon between the insurance company and the policyholder. However, the insurance company can adjust premium rates as the contract and insured age. This provision works the same when found within a guaranteed renewable disability insurance policy.
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CHAPTER 7
CHAPTER 7
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Social insurance
a set of government-provided programs meant to shield people from financial struggles which may occur due to unforeseen or unavoidable situations, such as loss of employment, physical disability, or reduced earnings due to retirement.
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Features of Social Insurance
Social insurance requires setting up a common fund from which all forms of benefits, monetary or otherwise, are paid. This common fund is contributed to by all employers, workers, and the state.
Worker contribution is kept at a minimum to ensure it does not exceed their capacity to pay. On the other hand, the state and the employers contribute a significant share of the funds. Consequently, the workers' contribution and their benefits are not in correspondence.
The benefits are provided to all workers as part of their rights.
Social insurance is a mandate to be provided on a compulsory basis, meaning the benefits should ideally go to all the needy people with the cover.
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Need for Social Insurance
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Asymmetric information is a significant challenge in most markets. A simple example is a patient with less than enough information about their illness compared to the doctor. Therefore, the doctor may charge far more than is required due to the patient's ignorance. Social insurance solves this asymmetry problem since it provides a range of costs for every issue a patient may report.
Social insurance is a form of income redistribution from the high earners to the lower earners. Most of the programs in social insurance seek to reduce poverty and inequality. Therefore, providing these programs will need redistribution and alleviate the poverty of those who may not afford essential services such as healthcare.
Externalities are the unintended positive or negative consequences of economic, social, or political activity on third parties. Social insurance looks to cover people for externalities they face due to any activity going on in the economy.
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Social insurance programs
government offered social insurance packages formulated to serve various vulnerable individuals. According to President Franklin Roosevelt, the primary purpose of these programs was to protect people against life vicissitudes. These unforeseen circumstances include old age, physical disability, or loss of employment, among other problems in life.
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different categories of social insurance programs
Education and Workforce Development is a program that ranges from early childhood education to college level and workforce development programs. The popular funding here is the student loan program that most college students use.
Health programs are the most popular social insurance program in the United States. The program includes Medicare, Medicaid, and other programs under the Affordable Care Act.
Income Support programs help with income through transfers, tax reductions for retired people, and refundable credits. Some examples of this program include Social Security and Temporary Assistance for Needy Families (TANF).
Nutrition aims to promote healthy eating habits, especially among school-going children. They have SNAP, the school lunch, and other child nutrition programs.
Shelter is a necessary program in the United States considering the millions of homeless people. Some examples under this program include the housing choice voucher program to aid those in the low-income bracket to afford shelter. On the other hand, some programs also target those in the middle-to-upper income bracket to help ease the ownership burden.
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Consequences of Social Insurance Programs
Moral Hazard occurs in any insurance program when one party in a transaction takes up much more risk that might affect the other parties involved. Social insurance programs provide this opportunity when people take advantage of the government's opportunities to slack around and not contribute to the programs through their earnings. The people contributing also bear the burden of those unemployed for long periods.
Intergenerational acceptance and desirability are a product of intergenerational equity. While most people will assert that this equity is admirable, it is unrealistic for the most part. For example, with most social insurance programs, such as retirement benefits, the costs over time turn out to be more or different from what was initially projected. This strains the contributions, even though the majority has already accepted the process.
Social insurance affects labor supply on different margins. For instance, the literature states that labor supply works with the number of hours worked, while the benefits received from insurance programs will influence the need for an individual to put in any hours at all. Consequently, there is an artificial shortage of labor created.
Welfare is a consequence of social insurance programs. While most of these programs require contributions from workers, the beneficiaries are usually people that are not in a position to contribute. These include the people with disability, the retired, and even the unemployed. So, it causes a lot of the compensations to turn into welfare.
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Parts of Medicare
Part A - Part A covers a person's stay in a hospital for inpatient procedures, such as surgeries. It also covers stays in nursing homes, home care, and lab tests. In many ways, Part A is the most important part of Medicare because it covers treatments that are extremely expensive in the long run. This is especially true for elderly people who must spend their final years in a nursing home or similar long-term care facility.
Part B - Part B covers outpatient services. This can include things such as x-rays, colonoscopies, ultrasounds, ambulance care, medical equipment, and mental health.
Part C - Part C allows patients to buy supplemental private coverage via a health insurance company approved by the federal government to provide Medicare services. This gives people on Medicare access to higher-quality services that many not be provided under Parts A and B. Many of the services provided by Part C involve copays. Many people choose not to enroll in Part C. Parts A and B are mandatory; Part C is not.
Part D - Part D covers prescription drugs. Part D is the newest part of Medicare. It was only created in 2003 after years of intense lobbying. Prescriptions drugs were becoming so costly that it was becoming a major burden on seniors to pay for their much-needed medications. As a result, a prescription drug component was added to Medicare.
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Who Qualifies for Medicaid?
In order to qualify for Medicaid, a person must be under the age of 65. (This is because those over the age of 65 receive Medicare.) Additionally, for an adult to qualify for Medicaid, their income must be equal to or under 133% of the federal poverty level. (Some states may use a figure of 138%.) The exact salary ranges that qualify a person vary from one year to another. As of 2022, a person would need to make $18,075 per year or less in order to qualify for Medicaid. With regard to families, this amount changes depending on the size of the family. For instance, a family of two would need to have a combined income of $24,352 or less, while a family of eight would have to have a combined income of $62,018 or less.
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Medigap
coverage is private insurance that can be purchased to help pay for what Medicare does not.
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Social Security Act of 1935
established a program of federal social insurance benefits to older adults, those with disabilities, the unemployed, and their dependents. The program is funded by mandatory contributions from working adults and employers. If you have a paycheck coming in, you can look at the line items under taxes and deductions and will see an amount designated for Social Security, or the term FICA used as a label.
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CHAPTER 8
CHAPTER 8
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HEALTH INSURANCE contingent beneficiary
receives the assets if the primary beneficiary is unable to due to death, missing status, or refusal of the assets. The contingent beneficiary may also receive the assets due to certain conditions, such as:
Age requirements
Disability
Achieving specific goals (goal-oriented)
On a needs-basis
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coordination of benefits
provision to determine which plan will pay the claim first. It is not possible for insured to receive more than 100% of the claim amount but individuals that are covered under more than one plan are reimbursed for more of his/her out-of-pocket health and dental costs.
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primary carrier
is the insurance company that has you covered as the primary individual.
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excess carrier
or the second plan to which she would submit claims.
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birthday rule
which specifies that the children's primary carrier is the parent whose birthdate is earlier in the year. For example, if Janet's birthday is in April and her husband's birthday is in September, Janet's plan would be the primary carrier for her children and she would submit their claims to her plan first.
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How Does Coordination of Benefits Work
Let's assume that Janet's plan covers 75% of her eligible health and dental costs and her husband's plan covers 80%. Janet's expense at the dentist was $200. She would submit to her plan first since it is the primary carrier, and she would receive $150 (75% x $200) from her insurance company. Since her policy has a coordination of benefits clause, she could also submit the claim to her husband's insurance company.
When she submits the claim to her husband's insurance company, she would receive $50 ($200 - $150) which represents the difference between the cost of the expense and what her insurance company paid. In total, the two insurance companies would reimburse Janet for all of her $200 expense.
She would not receive 80% of the eligible expense or $160 (80% x $200) from her husband's plan as it isn't possible for an insurance company to reimburse Janet more than she paid for the expense in the first place.
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non-duplication of benefits clause
a clause stating that if the primary carrier paid the same amount or a higher amount than the secondary carrier would have paid, then the secondary carrier would not pay anything for the eligible expense.
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managed care
is a healthcare delivery structure arranged to guide the quality, cost, and implementation of healthcare. What managed care is can best be described as health insurance arranged to reduce member services costs through contracts with specific medical providers, hospitals, and medical labs for members in specific geographic locations. Collectively, these providers are called a network.
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In-network
providers serve members at lower costs, with a more significant percentage of the cost being paid by their healthcare plan. Seeing a doctor who is not in their plan's network may be more expensive or may not be covered at all.
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Objectives of Managed Care
that may be excessive or too expensive.
Preventive care incentives: Many preventive services like yearly check-ups, routine screenings, and most vaccines are covered at no out-of-pocket cost. Regular visits to the doctor can help identify health problems before they become major and expensive. These incentives encourage members to stay in good health.
Affordable healthcare is necessary because everyone's income levels are different, and people need healthcare plans that fit their budgets.
Available healthcare should be found in locations that are accessible to patients because geography and distance can either assist or prevent people from seeking medical care when they need it.
Appropriate healthcare is an objective because everyone's healthcare needs are different and unique to the individual. People need access to the kind of providers that are trained to address their specific healthcare issues.
Enhancement of healthcare efficiency benefits patients, doctors, and insurance companies by ensuring that measures are taken to address the needs of all three parties in a timely and affordable manner.
Better healthcare quality is a key objective of managed care. Members need competent providers to diagnose and treat their medical conditions effectively to be healthy.
Improved healthcare results are a major factor in managed care because good health improves the quality of the member's life and increases insurance approval for treatments, medications, and provider visits.
Promotion of the benefits of preventative medications and wellness educates people about good health and their options to achieve it.
Patients becoming better healthcare customers involves ensuring people know which kind of insurance best suits their needs and budgets. In turn, people end up paying for insurance they need and not services
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The first managed care organization in the United States
was the Western Clinic in Tacoma, Washington, which was founded in 1910. The concept for the first Health Maintenance Organization (HMO) originated there
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A managed care model consists of several components.
Strategy for care delivery
Promotion of the participation in and prevention of healthcare needs and issues
Social and health care system
Healthcare providers
At-risk patients
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each healthcare model creates its own features, including:
Cost-sharing: The money that is paid out-of-pocket for co-payments, deductibles, and coinsurance.
Primary care providers: The doctors who participate in the insurance company's network.
Pre-certification: Also known as pre-authorization or prior authorization, this is the decision of the health insurance company whether to cover the cost of a specific treatment, medication, or medical equipment.
Prescription coverage: Medications (either generic or brand-name) are covered and what, if any, the co-payment is for each.
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managed care organization (MCO)
is either a healthcare company or plan that emphasizes managed care as a model to limit costs while maintaining a high quality of care. They work to ensure that healthcare organizations and plans operate at reasonable costs and provide proper care to members.
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Managed care organization examples
Independent Physician or Practice Associations
Integrated Delivery Organizations
Physician Practice Management Companies
Group Purchasing Organizations
Accountable Care Organizations
Integrated Delivery Systems
Physician-Hospital Organizations
Management Services Organizations
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Workers' compensation
is a system designed to help people who are hurt or fall ill during their work should that injury or illness keep them from working, whose purpose of workers' comp is to be a temporary replacement of income should an employee suffer an injury or illness that would them from earning a salary.
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To receive workers' compensation
the affected employee must meet eligibility requirements. The two main requirements for an injury or illness to qualify for workers' compensation are:
The incident must have occurred as a result of work being performed.
The incident happened during work hours doing the tasks attributed to that work.
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Personal risks
are factors that the employee may experience that have nothing to do with their job tasks or requirements. These risks will automatically preclude any workers' comp claims. An example would be if someone is experiencing drug-induced impairment and hurts themselves. The impairment is a personal risk and therefore does not allow for a workers' comp claim.
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Employee Activity.
These are work-related activities. If an employee is injured or falls ill during their regular employment activity, it would be considered an employee activity and qualify for a claim. A worker needing to be out of work for a period due to a back injury caused by a fall while they were performing their work duties would be considered employee activity.
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Neutral Risk
These risks depend on where an employee lives and what their workers' comp laws may include as valid. Heath issues that arise from working conditions but are not a direct cause may be eligible in some places and disqualifying in others. Firefighting is a dangerous profession involving exposure to many health hazards. A firefighter being diagnosed with cancer could be attributed to workplace exposure, but some states may not recognize it as a direct effect of performing work
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Indemnity
benefits cover periods of disability. A worker confined to bed for a week to recover would receive temporary total disability for the time they are out of work. Suffering a cut at work that needs a bandaid would not be covered by workers' comp because it does not result in lost time or income.
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Occupational insurance
is the insurance coverage that covers employees who sustain injuries or lose their lives while on the job. This means that an employer covers the financial costs when an employee is injured or loses their life on the job. Occupational insurance could be classified as own-occupation and any-occupation insurance. Own-occupation insurance refers to the coverage that applies when a worker is disabled, becoming qualified for benefits if they are unable to perform their duties effectively as they would before an injury. In contrast, any-occupation insurance refers to the policy where an individual is not deemed fit for benefits if they can still work in their area of specialization by training, education, and experience, even if it's not the specific tasks they would
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Non-occupational insurance
is the policy that asserts that an employer does not cover the financial costs and does not provide benefits for an employee if they get injured outside their place of work. The workers' compensation policy deals with coverage for such cases. Take, for example, an individual who gets injured while playing football in a community fun program. The injury sustained may be a barrier to performing job duties, but it is not an injury sustained at the place of work. Therefore, that type of injury is deemed non-occupational.
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Occupational accident insurance coverage
based on several factors determining the kind of occupational insurance to select. Some of the factors to consider when selecting the kind of occupational accident insurance are:
How much disability to carry. This is the level at which an injury from an accident can be covered.
The amount of death benefits to be provided. This is the amount that the family of an individual who loses their life at work receives as benefits.
The limit of liability for each accident. This is the highest amount of compensation that the employer grants the employee when an accident occurs.
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risk management
which is the process of identifying, assessing and mitigating risks.
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law of large numbers
his statistical law states that as the number of exposures increase:
The more accurate the prediction of the exposure happening in the future will be
There will be less of a deviation from the actual losses incurred and the expected losses
The credibility of the prediction increases
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principle of indemnity
holds that an insured party is entitled to receive a payment from the insurance company no greater than the value of the loss incurred.
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subrogation
which permits an insurance company to sue in the insured party's name in an attempt to recover the loss from the party responsible for the loss. The insurance company keeps any recovery because the insured party has already been compensated by it for the loss.
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Chapater 9
chapter 9
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underwriting
defined as determining the amount of coverage a policyholder should have, the rate that they should pay for it, and even ultimately to decide if the policyholder is worth the risk of having a policy at all. This step includes reviewing information regarding your medical history as well as your family's medical history.
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various factors that underwriting reviews
Overall health
Smoker vs non smoker
Height and weight
Body mass index
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Disclosures
at the point of sale for insurances may include important health-related items such as HIPPA and HIV consent disclosures. The warranties and representations coverage is designed to protect against inaccurate representations of an insurance company by allowing a policyholder to seek recovery from any damages.
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Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act,
or USA Patriot Act, was passed by President Bush in October of 2001, shortly after the terrorist attack on the World Trade Center. The purpose of this act is to promote cooperation among law enforcement officials and to expand their investigative powers in pursuing and capturing terrorists.
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Title III of the USA Patriot Act
is known as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, and it is dedicated to preventing and uncovering the illegal money laundering activity that terrorists often use to finance their endeavors
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Bank Secrecy Act (BSA)
also known as the Currency and Foreign Transactions Reporting Act, is legislation that requires U.S. banks and financial institutions to work with the government when cases of money laundering are suspected. Any large (more than $10,000) transactions enacted by a single person must be reported to the government. This law does not only govern banks, but also casinos and dealers in gold and gems.
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Money Laundering Control Act of 1986
was written to make money laundering a federal crime. It also made violating or not meeting the requirements of the Bank Secrecy Act punishable by criminal and civil penalties, including imprisonment for up to 20 years.
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anti-money laundering programs basic features
Designated Compliance Officer - The financial institution must appoint a person or committee to manage the anti-money laundering compliance program and make certain that all of its components are operational.
Continuing Training -The employees of the financial institution must be provided with continuing education regarding prevention of money laundering, reporting of suspicious activity, and regulations and updates.
Auditing - The financial institution must audit its anti-money laundering program to see if it's working. This does not have to be done by an external firm and can be done internally.
Customer Identification - This may be one of the most important requirements. All financial institution personnel are to get identification from every customer who does business with them and compare this to lists and databases that give information about known or suspected terrorists. Any suspicious activity must be reported.
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The Financial Crimes Enforcement Network, or FinCEN
is a government agency run by the Department of the Treasury whose goal is to prosecute criminals involved in illegal financial activity and to prevent money laundering. Under the Patriot Act, FinCEN can request records and account information from financial institutions if terrorist activity is suspected, and the institutions must comply.
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Suspicious Activity Report, or SAR
must be filed when a financial institution believes there has been a violation of any of the anti-money laundering laws or regulations. This is filed with FinCEN, and must be filed within 30 days if there is a specific suspect involved, and within 60 days if there is no such suspect. Financial institutions must keep records of any SAR's they have filed for at least five years.
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insurability conditional receipt
Conditional means the insurance coverage is dependent upon Jason's condition at the time of the application or the results of a medical exam. With a conditional receipt, Jason will be covered on the application date as long as he passes the underwriting requirements.
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binding receipt
confirms that the policy is effective on the day the initial premium is received.
This is different from a conditional receipt because if Jason were to die before the application could be fully processed, the insurance company would pay out benefits up to a certain amount in that period even if he would have been denied. The guaranteed amount is not necessarily the same amount as the coverage applied for. There is typically an upper limit of $100,000 in unconditional, guaranteed death benefits for applicants who pass away prior to issuing the policy.
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Policy delivery
involves delivering the policy to the applicant and collecting any outstanding premium. Policies are usually delivered by an agent in person, but insurance companies may also permit delivery by registered mail or courier.
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The policy delivery process typically includes
Delivering the policy
Collecting any outstanding premium
Explaining the policy's provisions, riders or added benefits or those that the insurance company has taken away from the original contract and rating
Verifying the insured's medical condition
Obtaining a signed delivery receipt
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policy delivery receipt
provides an insurance company with written evidence that the insured received his/her insurance policy and has physical possession of it. Policy delivery also starts the insured's free look period, which is a 10-day period where the insured can decide if she wants to keep the policy. If the insured decides to cancel the policy, she can do so during the free look period without incurring any surrender charges.
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insurance underwriting process
Application Review and Evaluation
Understanding Risk Selection
Risk Classification
Making a Decision
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Application review and evaluation
is the first step of the underwriting process. After the client applies for a policy, the underwriter must review the application to determine the risk factors involved. Some of the factors they consider for various types of policies include:
The applicant's medical information
The applicant's lifestyle, including drug, alcohol, or substance use
The current condition of property
Driving record
Age of the applicant, especially in the case of life insurance
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To understand the risk involved
underwriters use tools such as:
Physician statements
Blood tests
Paramedical examinations
Mature focus interviews (MAFI)
Medical Information Bureau (MIB)
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The primary risk classifications are:
Preferred
Approved standard
Approved substandard (rated)
Declined
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Role of an Insurance Underwriter
facilitates the underwriting process. Unlike an insurance agent or broker who sells the policy, the underwriter decides whether the insurance company should offer the coverage.
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specific duties in the underwriting process
Collecting and reviewing insurance applications
Obtaining relevant information concerning the applicant to review and determine coverage terms
Assessing the level of risk associated with the coverage
Offering recommendations regarding whether to accept or deny the application
Calculating premium costs
Evaluating insurance claims to determine truthfulness and coverage amount
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stranger-owned life insurance (STOLI)
This is when a person's life insurance policy benefits a stranger, someone the insured person may not know. For example, Ben, a senior who doesn't necessarily need life insurance at the moment, enters into a STOLI transaction because the third party is offering to give him an upfront payment and to pay for the life insurance premiums just for Ben giving up his life insurance benefits.
This practice of selling life insurance policies to strangers has been made illegal in certain states. For example, the Viatical Settlement Act made it illegal for anybody to enter into a STOLI transaction in Illinois beginning July 1, 2010.
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Investor-owned life insurance (IOLI)
a type of life insurance where an investor pays a person to take out a large life insurance policy for the person. The investor pays the person's premiums in exchange for the person's life insurance benefits. An IOLI transcation is very similar to a STOLI transaction, the only difference being that an IOLI is always initiated by an investor.
There are investor companies that perform IOLI transactions as their main source of income. These companies will call people like Ben and offer him free life insurance for a period of time and a payout in exchange for their life insurance benefits. Then these companies simply wait for Ben and other customers to die and then they'll collect the benefits.
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insurability sources:
Medical Information Bureau (MIB)
Consumer reports
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The Medical Information Bureau
is an organization of life insurance companies that exchange information about individuals who have applied for life insurance. Before it can make a request to the MIB, Sam must provide his written approval to the insurance company.
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Health Insurance Portability and Accountability Act HIPAA
is a federal law that the government put in place to protect health information and an individual's medical records. An insurance company must protect the health information of an individual if that information identifies the individual. For example, when Sam applies for insurance, the insurance company must ensure that the health information contained in his file stays safe and is not shared with anyone outside of the organization without Sam's knowledge and approval.
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The Fair Credit Reporting Act
Act is a federal act which ensures that information with the consumer reporting agencies is fair, accurate, and kept private. An individual has a number of rights under this act such as:
the right to know what is in his/her file
the right to know the name of the organization who provided information that an insurance company used to deny an application
the right to question information that is inaccurate or incorrect with an assurance that the agency will remove inaccurate information within 30 days of notification
the information in an individual's file must be accessed on a need-to-know basis
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Consumer Reports
Insurance companies use consumer reports or information obtained from family and friends to assess the potential risk of an applicant.
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CHAPTER 10
CHAPTER 10
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contract
refers to a two-party agreement, either given verbally or in writing, that provides a product or service to an individual or business. Consideration between the parties must be exchanged for the contract to be lawful and enforceable.
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Some types of terms required to make a contract legal:
Offer-
The specifics of the services or goods to be provided
Acceptance-
Agreement of the offer by both parties
Consideration-
Something of value such as money, property, or services that will be traded between the two parties
Intent-
The act of agreeing, by both parties, to carrying out the offer outlined in the contract
Object of the Contract-
Terms and conditions outlined in the offer that will be legally enforceable in a court of law
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illusory promise
is a type of term used to describe an agreement that is unclear and lacks mutuality.
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Types of contracts are
Express
Implied In-Fact
Implied In-Law
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Express contracts
clearly state any necessary terms and conditions by both parties. These types of contracts are the most common and are used daily in business law. Lease agreements, car buying agreements, and a contract to purchase a home are examples of express contracts used in business law. These contracts explicitly state the length of the contract, the amount owed, and the amount to be paid. They also state the consequences of breaching the contract. A breach of contract occurs when one party breaks or breaches the terms of the contract.
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Implied in-fact
contracts contain no expressed terms and conditions to the agreement. The facts are implied and do not have to be explicitly stated. For example, when ordering at a restaurant, it is implied that the food will be cooked properly and that the patron will pay for the meal. This type of contract shows mutuality between the parties because services were rendered and paid for.
