Objective 1 - Products

Question 1

Key dimensions of medical benefit plans

Answer 1

1. Definition of covered services and conditions under which those services will be covered
2. Degree to which the individual participates in the cost of those services
3. Breadth of the network and degree to which the provider participates in the risk related to the cost of the services

Skwire Chapter 5, Page 54

Question 2

Services covered by medical policies

Answer 2

1. Facility Services - Acute care hospitals, emergency rooms, outpatient facilities, psychiatric facilities, alcohol and drug treatment programs, skilled nursing facilities, and home health care
2. Professional Services - Surgery, Office Visits, Home Visits, hospital visits, emergency room visits, and preventive care
3. Diagnostic Services
4. X-Ray and Lab Services
5. Prescription Drugs
6. Durable Medical Equipment
7. Ambulance
8. Private Duty Nursing
9. Wellness Benefits
10. Nurse Help Lines
11. Disease Management Benefits

Skwire Chapter 5, Page 56

Question 3

Purposes for having the insured share in the cost of the medical plan

Answer 3

1. Control Utilization - Studies have shown drastic reductions in utilization when a plan is subject to deductibles, copays, and coinsurance
2. Control Costs - Requiring cost sharing lowers the premium and therefore leads to more affordable coverage
3. Control Risk to the Insurer - Requiring cost sharing results in a benefit program that more truly represents an insurable risk

Mnemonic - UCR (Usual, Customary, and Reasonable… helps control costs!)

Skwire Chapter 5, Page 60

Question 4

Types of provider reimbursement

Answer 4

1. Discounts from billed services
2. Fee Schedules and maximums
3. Per Diem reimbursements - a negotiated amount per day of hospital stay. Varies by level of care
4. Hospital Diagnosis Related Group (DRGs) - a set payment based on the patient’s diagnosis, regardless of length of stay or level of services
5. Ambulatory Payment Classification - similar to DRGs, but used for outpatient
6. Case rate or Global Payments - a single reimbursement is negotiated to cover all services associated with a given condition. Commonly used for maternity and transplant cases.
7. Bonus Pools - Pays the provider a bonus if utilization is below target or quality-of-care criteria are met. Funded through withholds.
8. Capitation - the provider performs a defined range of services in return for a monthly payment per enrollee. Variations include global and specialty capitation.
9. Integrated Delivery System - The insurer employs the providers of care (common in Staff Model HMO)

Skwire, Chapter 5, Page 64

Question 5

Provisions included in medical plans

Answer 5

In addition to provisions related to the key dimensions of medical plans (see separate list):

1. Overall exclusions (see separate list)
2. Mandated benefits (due to regulations)
3. Coordination of benefits - to determine the payment when a service is covered under multiple benefit plans
4. Subrogation - Assigns the carrier the right to recovery from any injuring party (commonly used for workers’ comp claims)
5. COBRA continuation - employers with at least 20 employees must offer continued coverage for 18 to 366 months beyond a person’s normal termination date

Skwire, Chapter 5, Page 66

Question 6

Common Exclusions for medical plans

Answer 6

1. Services deemed not to be medically necessary
2. Services deemed to be experimental
3. Services related to cosmetic surgery
4. Other specififed services, such as hearing and vision services
5. Transplants
6. Services for which payment is not otherwise required
7. Services required due to an act of war
8. Services provided as a result of a work-related injury
9. Services provided by a provider related to the patient

Skwire, Chapter 5, Page 67

Question 7

Organizations that sell dental insurance

Answer 7

1. Insurance Companies
2. Dental Service Corporations, such as Delta Dental
3. Blue Cross and Blue Shield Plans
4. Dental HMOs
5. Dental Referral Plans (discount dental plans)
6. Third Party Admins

Mnemonic: Third Insurance For Blue Dentals

Skwire, Chapter 6, Page 74

Question 8

Typical plan design for dental insurance

Answer 8

Typical Plan Design:

1. Benefits are divided into the following classes:
   a) Preventive and Diagnostic (Class I) - oral exams, cleanings, flouride, sealants, x-rays
   b) Basic (Class II) - fillings, extractions, endodontics (root canals), periodontics (gum disease), and oral surgery
   c) Major (Class III) - inlays, onlays, crowns, bridgers, and dentures
   d) Orthodontics (Class IV) - sometimes added to dental plans with a lifetime maximum
2. Reimbursement varies by class, such as 100% for class I, 80% for Class II, 50% for Class III. Less cost sharing is required on preventive services to encourage their use.
3. Calendar year deductible - such as $50 or $100, often waived for Class I services
4. Annual plan benefit maximum - ranges from $1,000 to $2,500 per person
5. No annual out-of-pocket maximum. An exception is that ACA-compliant pediatric dental coverage must have an out-of-pocket maximum.

Skwire, Chapter 6, page 74

Question 9

Dental Plan cost containment provisions

Answer 9

These are used to limit antiselection risk resulting from elective nature of dental benefits

1. Frequency limitations - such as two cleanings per year and one set of x-rays per year
2. Pre-existing conditions limitations - prevent the plan from paying for charges incurred prior to the insurance effective date, such as replacement of a missing tooth
3. Least Expensive Alternative Treatment (LEAT) - the insurer reimburses based on the least expensive clinically acceptable alternative plan
4. Waiting periods - must be satisfied before coverage begins. Are generally applied to Class III and Class IV services, and typically range from 3-12 months
5. Exclusions - such as cosmetic services, experimental treatments, and services that are typically covered by a medical plan
6. Benefits after insurance ends - coverage for work started before termination only continues for 31 days

Skwire, Chapter 6, page 76

Question 10

Underwirting and Rating Parameters for Dental

Answer 10

1. Group Size - Minimum Group Size of 5 is usually enforced to avoid antiselection
2. Eligible individuals and groups - plans usually cover active employees and dependents. Some insurers don’t cover groups from certain industries
3. Participation - many plans allow for participation as low as 25% of eligible employees
4. Employer contributions - most non-voluntary plans require a minimum employer contribution of 50% of the single employee premium
5. Other coverage - if dental is packaged with other insurance options it helps to prevent antiselection
6. New business - plans may charge higher rates to groups who are offering dental coverage for the first time, due to pent up demand for dental services by employees in those groups
7. Geographic location - area factors vary by state, service area, or zip code
8. Demographics - claim costs are higher for females and older ages. Common family structures are 2-tier, 3-tier, and 4-tier
9. Waiting and deferral periods - may have a waiting period before a new employee can join the plan
10. Incentive coinsurance - may be used on plans with no prior coverage. Start with low coinsurance for classes II and III and raise the level each year as the individual utilizes preventive services
11. Transferred business - if the plan is a replacement, then it may pay for claims incurred in the prior year

Skwire, Chapter 6, Page 77

Question 11

Dental Reimbursement Models and Delivery Systems

Answer 11

1. Indemnity - traditional FFS reimbursement. Plan members may use any dentist, but the dentist will bill the patient for the balance remaining after the plan makes its maximum payment
2. PPO - a contracted network of dentists agree to discounted FFS reimbursement arrangements. Discounts are only available in network, and in-network providers may not balance bill the patient.
   a) Managed Indemnity plans (passive PPOs)
   b) Exclusive Provider Organization (EPO) plans
3. Dental HMO - uses prepaid or capitated arrangements. Members must use the network
   a) Independent Provider Association (IPA) plans
   b) Staff model dental HMO plans
4. Point of Service (POS) - a hybrid of the indemnity, PPO, and dental HMO concepts
5. Discount dental plans - members receive discounts from preferred providers (this is not insurance)

Skwire, Chapter 6, Page 80

Question 12

Comparison of Dental Reimbursement Models

Answer 12

Premium - HMOs are the least expensive and indemnity plans are the most expensive

Patient Access - any dentist can be used for indemnity plans and PPO plans

Benefit Richness - HMOs typically cover the same benefits as PPOs and indemnity plans but with less out-of-pocket expense

Cost Management - Indemnity plans use some cost controls. PPOs use those controls and a credentialing process to find cost-effective providers. HMOs add a gatekeeper approach

Utilization - PPOs and Indemnity plans may overutilize due to FFS. HMOs may underutilize due to capitation.

Quality Assurance - unlike indemnity plans, PPOs and HMOs have credentialing processes to help assure quality care

Fraud Potential - Detecting fraud will help be based on the insurer’s efforts, rather than the particular plan type.

Provider contracting - PPOs and HMOs have contracts with dentists, who agree to accept discounted charges

Skwire, Chapter 6, Page 82

Question 13

Claim administration procedures used by dental plans

Answer 13

1. Predetermination of benefits - the plan wants members to submit expensive treatment plans for review before services
2. Least Expensive Alternative Treatment (Described earlier)
3. Coordination of benefits - done to avoid paying benefits in excess of charges
4. Dental Review - Difficult claims should be reviewed by a dental consultant
5. Maximum allowable charge (aka UCR) - expenses are limited to the lesser of:
   a) Dentist’s usual fee for procedure
   b) fee level set by plan admin based on charges submitted in the same geographic area
   c) Reasonable fee charged for a service when unusual circumstances or complications exist

Skwire, Chapter 6, Page 85

Question 14

Factors that influence prescription drug costs

Answer 14

1. (Pipeline) - Prescription Drug Pipeline - Manufacturers want to recover their investments in research and development of new drugs
2. (Patents) - Brand Patent Protection - Patents protect a drug’s original manufacturer
3. (Specialty) - Specialty Drugs - Have relatively higher cost than other brand name drugs
4. Biologics - Very expensive ($2,000 - $500,000 per patient per month) and are not easily replicated, so generics will not be produced for most of them
5. (Direct) - Direct to Consumer Advertising - marketing of high cost drugs has been effective, resulting in patients requesting the new drugs
6. (Offsets) - Member cost sharing offsets - Many manufacturers offer to cover member out-of-pocket costs for expensive drugs. This removes the member’s incentive to use preferred products and generics
7. (Approval) - Faster approval process from the FDA has increased the number of high-cost drugs on the market
8. (Aging) Population - Leads to more demand for drug therapies)
9. (Testing) - Increased awareness of and testing for disease often results in drug therapies to avoid acute illnesses
10. (Personalized) Medicine - genetic testing sometimes leads to unecessary medication use

Mnemonic: PAPA STOP BD

Skiwre, Chapter 7, Page 91

Question 15

Entities in the US Pharmacy Benefits System

Answer 15

1. Pharmaceutical Manufacturers - They research, obtain approval for, produce, and distribute prescription drugs. They sell drugs to wholesalers and also directly to pharmacies. They also negotiate with PBMs, offering rebates in exchange for favorable formulary placement
2. Pharmaceutical Wholesalers - They purchase prescription drugs from manufacturers and distribute drugs to pharmacies
3. Pharmacies - They dispense prescription drugs directly to beneficiaries, and purchase drugs either from wholesalers or directly from manufacturers
4. Pharmacy benefit Managers (PBMs) - separate list
5. Third-party payers (insurance companies, employers, or government programs) - they fund the prescription drug benefit and in some instances assume the claims risk
6. Beneficiaries - they are the consumers of prescription drugs
7. Prescribing health care providers - they diagnose beneficiaries and prescribe drugs for them.

Skwire, Chapter 7, Page 94

Question 16

Functions performed by PBMs

Answer 16

1. Administer prescription drug benefit programs
2. Negotiate rebates with manufacturers
3. Negotiate discounts with pharmacies
4. Manage relationships with third-party payers
5. Performing utlizaiton management
6. Run drug adherence programs
7. Integrate drug benefits with medical
8. Establish a formulary of drugs
9. Build a network of pharmacies

Skwire, Chapter 7, Page 98

Question 17

Types of Drugs

Answer 17

1. Generic - Typically the lowest cost and most commonly dispensed. A generic equivalent drug is a generic version of a brand drug, created once a brand drug’s patent expires.
2. Brand Name - Multi-source brand drugs have a generic equivalent, while single-source do not
3. Specialty - High cost drugs, many of which require special treatment and deliver (i.e. temperature controlled and administered by a health care provider)
4. Biologic - derived from living organisms and are usually very expensive. Generally considered to be specialty drugs.
5. Biosimilars, or follow-on biologic - Subsequent versions of biologic drugs developed by different manufacturers. May not be therapeutically equivalent to biologics.
6. Compound - drugs mixed by a pharmacist. Can deliver a customized strength and dosage to meet a beneficiary’s specific needs.
7. Over-the-Counter (OTC) - Do not require a prescription
8. Supplies - i.e. diabetic test strips and alcohol pads.

Skwire, Chapter 7, Page 100

Question 18

States of teh prescription drug lifecycle

Answer 18

1. Research and development by Manufacturers - includes initial drug discovery, preclinical testing, clinical trials, and review by FDA. Typically lasts 15 years
2. Brand Patent Protection Period - The manufacturer is awarded the exclusive right to produce the drug. Typically lasts 12 years
3. Generic exclusivity period - immediately follows the patent protection period. Only the brand name manufacturer and one additional manufacturer are allowed to sell the generic equivalent. Typically lasts 6 months
4. Generic Drug Lifespan - after the generic exclusivity period, all manufacturers may produce and sell the drug.

Skwire, Chapter 7, Page 101

Question 19

Methods of prescription drug distribution

Answer 19

1. Retail Pharmacies - Physical Locations where beneficiaries can visit to pick up prescription drugs. Typically dispenses one-month supplies
2. Mail Order Pharmacies - they send prescriptions through the mail, typically for a three-month supply of maintenance medications for treating chronic conditions
3. Specialty Pharmacies - They focus on delivering specialty drugs, which often require special storage and administration
4. Health Care Providers
5. LTC Facilities
6. Hospice Facilities
7. Home Health Professionals

Skwire, Chapter 7, Page 102

Question 20

Types of Cost Sharing Plans for Pharmacy Benefits

Answer 20

1. Copay plans - often seen with managed care plans. Copays typically vary by tier.
2. Coinsurance plans - coinsurance will increase by tier. Will typically include a deductible, either integrated with a medical plan or a separate deductible if plan is not integrated.
3. Combination of copay and coinsurance - options include:
   a) Cost sharing equal to the larger of a copay or percentage coinsurance
   b) A coinsurance percentage with a dollar maximum

Skwire, Chapter 7, Page 103

Question 21

Types of Formulary Designs

Answer 21

1. Closed - Only formulary drugs are covered. But plans must have a process to cover non-formulary drugs for individual patients based on medical necessity
2. Open - All eligible drugs are covered, but cost sharing may vary by tier
3. Tiered (Incentive) - separate formulary tiers are established, with copays or coinsurance varying by tier

Skwire, Chapter 7, Page 105

Question 22

Most Common Pharmacy Benefit Tier Designs

Answer 22

1. Two Tier - Generics and Brand Name Drugs
2. Three Tier - Generics, Preferred Brand, Non-Preferred Brand
3. Four Tier - Common to add Specialty drugs to a 3-tier design
4. Five Tier - Start with a four-tier design with specialty as tier 4, and the split one of those tiers:
   a) Split generic tier into preferred and non-preferred (common design for medicare part D)
   b) Split specialty tier into preferred and non-preferred
5. Six Tier - Options include
   a) Generic, Preferred Brand, Non-Preferred Brand, Biosimilars, preferred specialty, and non-preferred specialty
   b) Preferred and non-preferred tiers for each of generic, brand, and specialty

Skwire, Chapter 7, Page 105

Question 23

Factors that determine leverage when negotiating rebates from drug manufacturers

Answer 23

1. Number of lives represented - Successful contracting requires at least 500,000 lives over which a plan can exert formulary control
2. Control of market share - ability to move market share to preferred products
3. Consistency of behavior - the predictability of the plan’s response to a manufacturer’s actions

Skwire, Chapter 7, Page 111

Question 24

Criteria for provincial Medicare plans to qualify for federal contributions

Answer 24

(These are principles from the Canada Health Act)

1. Comprehensiveness - All medically-required hospital and physician services must be covered under the plan
2. Universality - All legal residents of a province must be entitled to the plan’s services on uniform terms and conditions
3. Accessibility - Reasonable access by residents to hospital and physician services must not be impeded by charges made to those residents
4. Portability - the plan may not impose a waiting period in excess of 3 months for new residents, and coverage must be maintained when a resident moves or travels within Canada or is temporarily out of the country
5. Public Administration - Plan must be administered on a non-profit basis by a public authority (Extra billing and user charges are not prohibited. But they will result in reductions in the federal grants to the province)

Mnemonic: Canadians Universally Appreciate Public Plans

Skwire, Chapter 10, Page 152

Question 25

Benefits covered by most Canadian provincial Medicare plans

Answer 25

1. [H]ospital Services - Room and board in a public ward, as well as physician’s services, diagnostics, anesthesia, nursing care, drugs, and supplies
2. [P]hysician services - includes services of a general practitioner, specialist, psychiatrist, and others
3. Services of [o]ther professionals, such as optometrists, chiropractors, osteopaths, and podiatrists
4. Services of a [p]hysiotherapist if in a hospital facility
5. (Rx) Prescription drugs for social assistance recipients and residents over age 65 in most provinces
6. [P]rostheses and therapeutic equipment
7. Other diagnostic services, such as [L]aboratory tests and x-rays performed outside a hospital
8. [D]ental Care - medically-required oral and dental surgery performed in a hospital
9. [O]ut-of-Province Coverage - includes expenses incurred in other provinces and outside Canada

Mnemonic: H PROD P O L (Hospital PRODucts Plus Osteopath and Lab)

Skwire, Chapter 10, Page 154

Question 26

Concerns about the Canadian Medicare System from recent reports

Answer 26

1. Waiting for months to see a specialist is common
2. Shortages of equipment, specialists, and technicians cause waiting for diagnostic procedures
3. Waiting for elective and non-emergency surgery is common, due to a lack of operating room time and a shortage of hospital beds
4. Emergency rooms are overcrowded, due in part to unavailability of after-hours clinics
5. People who need LTC tend to wait in hospitals because off a shortage of beds in LTC facilities
6. Technology-intensive services are not available everywhere
7. The demand for services exceeds the supply, resulting in rationing
8. Some essential services (such as prescription drugs for chronic illnesses) are not covered by Medicare

Skwire, Chapter 10, Page 156

Question 27

Categories of expenses commonly covered by private (supplemental) medical plans in Canada

Answer 27

1. Hospital Charges - plans usually pay charges for room and board, up to the amount needed to upgrade to a semi-private or private room
2. Prescription drugs - these represent approximately 70-75% of the cost of private medical plans. Various plan designs exist, but they generally cover all drugs prescribed by a physician
3. Health professional practitioners - eligible expenses are usually subject to inside limits (such as one treatment per day and a maximum number of treatments per year)
4. Miscellaneous expenses - these are usually eligible only if prescribed by a physician and include almost any insurable expense not otherwise covered, such as ambulance, x-rays, and prostheses
5. Vision care - eye examinations by an optometrist are usually included in the medical plan, while glasses or contract lenses may be included in either the medical plan or on a stand-alone basis
6. Out-of-Canada coverage - the most common coverage is for emergency care for short trips outside Canada

Mnemonic: Private Health May Pay Only Vision

Skwire, Chapter 10, Page 162

Question 28

Types of Group Life Insurance Benefits

Answer 28

1. Basic group Term Life (Most common) - provides employees a common level of basic insurance protection (see separate lists of plan designs and disability provisions)
2. Group supplemental (or optional) life - Provides additional insurance beyond basic group term life. Typically employee-pay-all with unisex rates in 5-year age brackets
3. Group accidental death and dismemberment (AD&D) - typically offered as a companion to group term life and with the same face amount. 100% of the face amount is paid upon death or loss of more than one member (hand, foot, sight). 50% is paid upon loss of only one member
4. Dependent group life - multiple coverage options are usually provided, offering coverage of up to $100k on the spouse and $10k on each child
5. Survivor income benefits - provides a monthly payment in lieu of a lump sum death benefit. Benefit is typically a percentage of monthly earnings, such as 25% for a spouse and 15% for a child
6. Group permanent life - plan types are single-premium group paid-up life, group ordinary life, and group term and paid-up
7. Group Universal Life (GUL) - consists of a term life component and a side fund that accumulates with interest to provide tax-favored savings and long-term insurance protection
8. Group Variable Universal Life - same as GUL except several investment options (including equities) are available
9. Living Benefits (separate list in Skwire Ch. 24)

Skwire, Chapter 11, Page 171

Question 29

Typical Bais Group Term Life Plan Designs

Answer 29

To minimize adverse selection, none of these designs allow individual selection of insured amounts

1. Flat dollar plans - such as $10,000 for all employees
2. Multiple of Earnings (most common) - such as 1 or 2 times earnings
3. Salary Bracket Plans - Salary ranges are established and benefits vary by range
4. Position plans - benefits vary based on the employee’s position in the company (e.g., hourly vs. non-officer management vs. officers)

Skwire, Chapter 11, Page 171

Question 30

Group term life disability provisions

Answer 30

Most plans contain one of the following:

1. Waiver of premium - coverage continues without premium when an employee becomes totally disabled, as long as he or she is less than a certain age (60 or 65)
2. Total and permanent disability - a monthly benefit is paid when an insured becomes totally and permanently disabled. On death, the original death benefit is reduced by any disability payments made.
3. Extended death benefit - pays the death benefit if the insured’s coverage terminates upon total disability prior to age 60 and the insured remains disabled and dies within one year

Skwire, Chapter 11, Page 173

Question 31

Formula for group term life imputed income

Answer 31

Employees are taxed on the values of employer-provided group term life insurance in excess of $50k

This Value is determined from Table I (rates vary by age)

Monthly imputed income = (Table I Rate * (Coverage Amount - $50k) / $1k ) - Employee contributions

Skwire, Chapter 11, Page 175

Question 32

Benefit Provisions for group disability income

Answer 32

1. Definition of Disability (see separate list)
2. Elimination Period - The period of time the employee must be disabled before collecting disability benefits. Commonly 3 months or 6 months for LTD. For STD, commonly 8 days and may be shorter for accidents than for sicknesses
3. Benefit Period - Commonly 2 years, 5 years, or to age 65 for LTD. For STD, typically 13 or 26 weeks to coordinate with the LTD elimination period.
4. Benefit Amounts - Benefits paid monthly for LTD and weekly for STD. Replaces a % of pre-disability earnings (such as 60% for LTD and less for STD). A maximum benefit amount may further limit payments
5. Benefit offsets - Benefits are reduced by income from other sources, such as Social Security, retirement benefits, worker’s compensation, and part-time work
6. Limitations and exclusions - benefits for mental illness and substance abuse are usually limited to the first 2 years of disability. Disabilities resulting from injury are usually excluded
7. Optional benefits (see separate list)

Mnemonic - P O DEAL O (Pay Out - DEAL with Offsets)

Skwire, Chapter 12, Page 189 and 195

Question 33

Typical Definitions of disability for group disability income

Answer 33

1. LTD - as a result of sickness or accidental injury, the employee is unable to perform some or all of the material and substantial duties of an occupation, and has a loss of a percentage of pre-disability earnings:
   a) During the first 24 months after the elimination period, the occupational duties are based on the employee’s own occupation, and the loss of income % if 20%
   b) After the first 24 months, the occupational duties are based on any gainful occupation for which the employee is reasonably suited by education, training, and experience, and the loss of income percentage is 40%
2. STD - the employee is unable to perform all the duties of his or her own occupation. Coverage is typically for only non-occupational (occurring outside of the workplace) accidents or sicknesses to avoid overlap with workers’ compensation)

Skwire, Chapter 12, Page 189 and 195

Question 34

Methods for Reducing Benefits for income earned during a disability

Answer 34

1. Proportionate loss formula - calculates the percentage of lost earnings due to disability and applies it to the benefit otherwise payable
2. 50% offset - reduces the benefit by $1 for every $2 of work earnings
3. Work incentive benefit - ignores all earnings during an initial period (such as 12 months), except benefits are capped so that work earnings plus benefits do not exceed pre-disability earnings. After the initial period, either the proportionate loss formula or 50% offset is used

Skwire, Chapter 12, Page 193

Question 35

Optional Benefits That may be added to group disability contracts

Answer 35

1. COLA - Cost-of-living adjustment to provide inflation protection for benefits
2. Survivor benefit - lump sum benefit payable to the insureds survivors upon the death of the insured
3. Expense reimbursement for day care expenses
4. Pension benefit - an additional benefit payable to replace lost contributions to retirement plans
5. Portability - allows an insured who leaves the group to continue group coverage
6. Conversion option - insureds who lose coverage can convert to either group or individual disability coverage
7. Spousal benefits - disability protection for spouses of employees
8. Catastrophic Benefits - additional amounts for more serious disabilities, such as those resulting in total paralysis

For STD:

1. 24-Hour Coverage - To those both on-job and off-job disabilities
2. First day hospital coverage - elimination period is waived if the insured is confined in the hospital due to a disability
3. Survivor Benefit (Same as LTD)

Mnemonic - SPECS C PC (SPECS of the ltd program Change the PriCe)

Skwire, Chapter 12, Page 194-197

Question 36

Types of LTC Insurance Plans

Answer 36

These are different approaches for paying benefits:

1. Service Reimbursement Model - Pays the cost of LTC services, subject to fixed limits that vary by type of service (e.g. $150 per day for nursing home, $90 per day for assisted living facility)
2. Service Indemnity Model - A fixed benefit is paid for any day or week that formal LTC services are received, regardless of the actual
3. Disability or Cash Model - a fixed benefit is paid for each day an insured is eligible for benefits, whether or not services are actually received

Skwire, Chapter 13, Page 202

Question 37

Plan Provisions on LTC Insurance Policies

Answer 37

1. Benefit [t]riggers (see separate list in Leida Ch. 2)
2. [E]limination or waiting period - a time period during which the insured must remain disabled and benefit eligible before benefits are paid (commonly 90 days)
3. [C]overed services (see separate list of benefits covered in Leida Ch. 2)
4. [A]lternative Plan of care - allows the insurer to pay benefits (at its discretion) of services not explicitly covered by the contract
5. Benefit [L]imits - enrollees select a daily benefit maximum for institutional care. Other benefits are tied to this daily benefit. Lifetime maximum is administered as a pot of dollars = daily amount * 365 days * years of benefit purchased
6. [I]nflation protection - increases the benefit limits as LTC costs increase over time (see separate list in Leida, Ch. 2)
7. [N]on-forfeiture Benefits - Sold as an optional benefit. Provides a reduced, paid-up benefit to insureds who lapse coverage (see separate list of types of non-forfeiture benefits)
8. [S]pousal riders and discounts - some plans offer a premium discount for individuals who are married
9. [R]estoration of benefits - many plans restore the lifetime maximum benefit if an insured recovers before exhausting the plan’s benefits
10. [I]nternational coverage - some plans provide limited benefits for care received abroad
11. [S]hared lifetime maximum benefit pools - Some plans allow an insured who uses all of his or her benefits to tap into any remaining benefits of a spouse’s policy.
12. Plan [e]xclusions - examples include pre-existing conditions or diseases, alcoholism and drug addiction, and treatment covered by other policies or Medicare

Mnemonic - LTC I RINSE A E (LTC If RINSE And Eliminate)

Skwire, Chapter 13, Page 204

Question 38

Types of Nonforfeiture benefits on LTC insurance policies

Answer 38

1. Shortened Benefit Period - the minimum standard for tax-qualified plans. Pays the benefit amount and frequency in effect at the time of lapse. But lifetime maximum is reduced to the sum of premiums paid minus benefits.
2. Reduced paid-up - daily and lifetime maximums are reduced and coverage is extended for the life of the insured
3. Extended term - benefit maximums do not change, but only disabilities that commence within a limited time period are covered
4. Contingent non forfeiture benefit - often provided to those who lapse due to a substantial premium increase and had not purchased a non forfeiture benefit. Uses the shortened benefit period approach.

Skwire, Chapter 13, Page 208

Question 39

Types of Health insurers and MCOs

Answer 39

1. Indemnity - indemnifies the beneficiary from the financial cost of health care. There are few controls for managing cost.
2. Service Plans - similar to indemnity, but adds contracting with providers as a way to manage costs
3. Managed indemnity - overlays some managed care features onto indemnity plans (separate list)
4. PPOs - contract with a network of participating providers who agree to accept the PPO’s payment structure and levels. Members who see PPO providers have higher levels of coverage (lower cost sharing).
5. Exclusive provider Organization (EPO) - similar to PPOs, but care received by nonparticipating providers is not covered (except for urgent or emergency care)
6. POS Plans - combine an HMO with indemnity-type coverage for care received outside the HMO. Members decide at the point of service whether to use the HMO or go out of network.
7. HMOs - provide basic and supplemental health services in the manner prescribed by the HMO Act (see separate list for types of HMOs)
8. CDHPs - combine a high-deductible health plan with some form of individual pretax savings account (HRA or HSA)
9. Third-party administrators (TPAs) administer benefits for self-funded employer groups, but do not assume risk
10. Consumer operated and oriented plans (CO-OPs) - member-run health insurers created to offer coverage to small groups and individuals through the ACA exchanges

Kongstvedt, Chapter 2, Page 28

Question 40

Common types of managed care overlays

Answer 40

1. General utilization management (UM) - offering a menu of UM activities that can be selected by employers and insurers
2. Large case management - includes identifying catastrophic cases, notifying re-insurers, monitoring the treatment, and negotiating payments for high-cost cases
3. Specialty UM - focuses on utilizing review for specialty services, such as behavioral health care
4. Disease Management (DM) - focuses on common chronic diseases, such as diabetes
5. Rental networks - networks of contracted providers within individual markets
6. Workers’ compensation UM - addresses standard UM and some unique aspects involved with workers’ compensation benefits

Kongstvedt, Chapter 2, Page 28

Question 41

Features that differentiate HMOs from Health Insurers

Answer 41

1. [L]icensed under different laws than health insurers
2. Must provide adequate [a]ccess to providers within their service areas
3. Must require “no [b]alance billing” clauses in all provider contracts that are stronger than those found in non-HMOs
4. Must allow [d]irect access to primary care physicians (PCPs) and ob/gyn physicians
5. Must have written [p]olicies and procedures for physician credentialing, utilization management, and quality management
6. Must maintain defined minimum levels of capital [r]eserves
7. Usually share some financial risk with physicians
8. Most require members to see a PCP for routine services and to access specialty care
9. Most are accredited by an accrediting organization

Mnemonic - LAB R D P (LAB Receive Different Pay)

Kongstvedt, Chapter 2, Page 31

Question 42

Types of HMOs

Answer 42

1. Open Panel - HMO contracts with private physicians who agree to its terms and conditions and who meet its credentialing criteria
   a) Independent practice association (IPA) model - the HMO contracts with an IPA. Physicians are not employees of the HMO or the IPA, and they continue to see their non-HMO patients
   b) Direct contract model - the HMO contracts directly with independent physicians or medical groups
2. Closed Panel - Most of the care is provided through either a single medical group associated with the HMO or through physicians employed by the HMO. Closed to private physicians.
   a) Group Model - the HMO contracts with a multi-specialty medical group practice to provide all physician services to the HMO’s members. The physicians are employed by the group practice.
   b) Staff Model - physicians are employed by the HMO and are paid by salary plus bonus or incentives
3. True Network Model - the HMO contracts with more than one large medical group or physician organization
4. Mixed Model HMOs - most commonly occurs when a closed-panel HMO adds open panel components
5. Open-access HMO - the member selects a PCP and gets the most benefits by using the HMO system. Can bypass the PCP to get in-network specialty care directly, but with less coverage. Only services provided in network are covered.

Kongstvedt, Chapter 2, Page 31

Question 43

Advantages and Disadvantages of open-panel HMOs

Answer 43

Advantages:

1. More easily marketed and sold due to large panel of private physicians
2. Easier for members to find a participating physician that is conveniently located
3. In IPA models, routine medical management functions may be delegated to the IPA
4. Easier and less costly to set up and maintain

Disadvantages:

1. Because the HMO is not providing medical care itself, it has little ability to manage care
2. Premiums are often higher than those of close panels

Kongstvedt, Chapter 2, Page 34

Question 44

Advantages and Disadvantages of closed-panel HMOs

Answer 44

Advantages:

1. Ability to more closely manage care
2. Delegation of many routine medical management functions to the group
3. Convenience for members of having lots of services available in one location

Disadvantages:

1. Not as easily marketed to new members who would have to change doctors
2. Locations of medical offices may not be convenient for all members
3. Only feasible in medium to large cities
4. More complex and costly to set up and maintain

Kongstvedt, Chapter 2, Page 34

Question 45

Types of Integrated Health Care Delivery Systems (IDSs)

Answer 45

In IDSs, providers unite to manage health care and contract with health plans

1. IPAs
2. Physician practice management companies - these companies purchased physician practcies. Most failed because once physicians sold their practices there was no longer sufficient incentive for them to be productive
3. Group Practice Without Walls - formed as a vehicle for physicians to organize without being dependent on a hospital for services or support
4. Physician-hospital organizations - an entity through which a hospital and its physicians negotiate with payers
5. Management services organizations - provides a vehicle for negotiating with payers and also provides services (such as billing and administrative support) to support physicians’ practices
6. Foundational Model - a hospital creates a non-for-profit foundation which purchases physicians practices. Usually done when there is a legal barrier to a hospital employing physicians directly.
7. Provider-sponsored organizations - groups of providers who contract directly with Medicare on an at-risk basis for all medical services. They failed because they did not properly spread risk, they attracted too many bad risks, and they did not typically conduct utilization management and disease management.
8. Hospitals with employed physicians - the hospital employs PCPs and specialists. This substantially increases the hospital’s negotiating leverage.

Kongstvedt, Chapter 2, Page 37

Question 46

Structural requirements of Accountable Care Organizations (ACOs)

Answer 46

The ACA created ACOs for use in the Medicare program. They help achieve more integrated and efficient care by fostering local organizational accountability for quailty and costs.

1. Those eligible to form an ACO include group practices, networks of individual practices, hospitals, rural health clinics, and federally-qualified health centers
2. Must be a legal entity that is authorized to conduct business in each state in which it operates
3. Must be formed for the purposes of:
   a) Receiving and distributing shared savings
   b) Repaying shared losses or other monies owed to CMS
   c) Establishing, reporting, and ensuring provider compliance with health care quality criteria
4. At least 75% of the ACO’s board seats must be held by ACO participants
5. Management structure must be similar to what is found in a nonprofit health plan
6. Participants must have a sufficient investment such that ACO losses would be a significant motivator

Kongstvedt, Chapter 2, Page 42

Question 47

Key Characteristics of Patient-Centered Medical Homes

Answer 47

1. Patients have an ongoing relationship with a personal physician
2. Patients receive care from a team of individuals led by the personal physician
3. Personal physicians take responsibility for providing or arranging all of the care fo the patient
4. The patient’s care is coordinated or integrated across all elements of the health care continuum
5. Quality and safety are key parts, enhanced by evidence-based medicine
6. Patients have enhanced access to care through open scheduling and expanded hours
7. Payment should appropriately recognize the added value provided to patients

Kongstvedt, Chapter 2, Page 42

Question 48

Type of Individual Health Insurance

Answer 48

1. Major Medical
2. Limited Benefit Medical - Don’t cover enough services to meet the definition of major medical (see lit of types of limited benefit plans)
3. Group Conversions - Policies offered (on a guaranteed issue basis) to individuals leaving group coverage. State laws typically require this coverage to be offered.
4. Medicare Supplement and Medicare Select - Supplement Medicare coverage by filling in the gaps in that coverage
5. Medicare Advantage and Part D - Private managed care plans that provide benefits to Medicare beneficiaries
6. Disability Income - Covers income lost due to an illness or injury
7. Business protection coverage - Disability coverage that protects business against the impact of an employee becoming disabled
8. LTC - Covers services for individuals who need assistance performing basic ADLs (defined in separate list) or who are cognitively impaired
9. Dental - not usually sold in the individual market due to antiselection concerns

Leida, Chapter 2, Page 39

Question 49

Types of Limited Benefit Medical Insurance

Answer 49

1. Hospital Indemnity - Pays a flat amount per day of inpatient hospitalization. Often limited to a certain number of days, and may have an elimination period.
2. Other scheduled Benefits - limited coverage for one or more indemnity-type benefits (e.g., $250 per ICU day or $20 per x-ray)
3. Dread Disease - Provides coverage only for a specified list of medical conditions (such as cancer)
4. Critical Illness - provides a lump sum benefit in the case of a heart attack, stroke, hearth surgery, cancer (except skin cancer), or diagnosis of specified conditions.

Leida, Chapter 2, Page 47

Question 50

Enrollment Requirements for Medicare Advantage and Part D Plans

Answer 50

MA Plans are guaranteed issue for any beneficiary who meets the following requirements:

1. Is enrolled in Medicare Parts A and B
2. Does not have end stage renal disease (ESRD)
3. Applies during a valid enrollment period, such as:
   a) Initial Enrollment Period - when beneficiaries first become eligible for Medicare
   b) Annual Open Enrollment Period - Between Oct 15 and Dec 7 of each year, beneficiaries can enroll or change their MA or Part D coverage
   c) Special Enrollment Periods - these exist for various reasons, such as a change in residence or loss of current coverage
4. Resides in the plan’s service area
5. Abides by the terms of the insurance contract

Part D plans have similar guaranteed issue requirements except that:

1. Beneficiaries are eligible as long as they are enrolled in Part A, B, or C
2. Beneficiaries with ESRD are eligible

Leida, Chapter 2, Page 57

Question 51

Steps in the Medicare Advantage and Part D bid submission process

Answer 51

1. [A]dvance notice of payment policies and draft call letter - CMS publishes these early in the year, outlining proposed changes for the next year
2. [A]nnouncement of MA capitation rates and the final call letter - CMS publishes this in early spring
3. Submission of [i]nitial bid - the plan sponsor submits a bid for each plan by no later than the first Monday in June. This bid projects the expected cost of providing benefits and is certified by a qualified actuary.
4. [D]esk Review - the bids are reviewed by CMS and third-party actuaries contracted by CMS. This review is usually completed by late July
5. Rebate [r]eallocation process - Part D bids must be adjusted once the final national average bid amounts and member premiums are known. Plan sponsors do this in early August
6. Finalize the bid, including a second actuarial [c]ertification
7. Bid or financial audit - after bids are [a]pproved, the plan may be seclected for this more detailed review

Mnemonic - A A I D, R C A (Advantage Arrangement is Discussed, Rebates Can Appear

Leida, Chapter 2, Page 60

Question 52

Methods used by disability income policies to adjust for the cost of living

Answer 52

1. (G) Guaranteed insurability - automatically offering increased coverage to active insureds, at specified intervals
2. (A) Automatic increases - adjust insured amounts over time, without action by the insured
3. (P) Increase benefit payments over time for those on disability (may apply in addition to one of the previous two methods)

Menomic - GAP - Guaranteed Automatic Payments

Leida, Chatper 2, Page 67

Question 53

Major Types of Business Protection Coverage

Answer 53

1. Keyperson Coverage - Sold to businesses to protect them from the risk of key individuals becoming disabled. Benefits last one or two years, to provide time for the key employee to be replaced.
2. Disability buyout coverage - provides the funds needed (generally lump sum) for a totally disabled partner or owner of business to be bought out by the remaining partner or owners
3. Business overhead expense - pays for business overhead expenses in the event of the owner’s disability. Coverage periods are typically fairly short, to provide for short-term needs only.

Leida, Chapter 2, Page 69

Question 54

Benefit Triggers for LTC Insurance Policies

Answer 54

The insured must be able to satisfy the benefit trigger to become eligible for benefits. For tax-qualified policies, the trigger must be:

1. The inability to perform (without substantial assistance) at least two activities of daily living (ADLs) (see separate list of ADLs), or
2. A cognitive impairment that requires subsantial supervision to protect the health and safety of the insured. Behaviors that indicate cognitive impairment are:
   a) Wandering and getting lost
   b) Combativeness
   c) Inability to dress appropriately for the weather
   d) Poor judgment in emergency situations

Leida, Chapter 2, Page 71

Question 55

The ADLs allowed by HIPAA, and typical definitions

Answer 55

1. Bathing - washing oneself by sponge bath or in either a tub or shower, including the task of getting into or out of the tub or shower
2. Continence - the ability to maintain control of bowel and bladder function, or if unable to do so, the ability to perform associated personal hygiene, including caring for a catheter or colostomy bag
3. Dressing - putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs
4. Eating - Feeding onself from a receptacle (plate, cup, etc.) or by a feeding tube or intravenously
5. Toileting - getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene
6. Transferring - moving into or out of a bed, chair, or wheelchair

Leida, Chapter 2, page 72

Question 56

Benefits tha may be covered by LTC Policies

Answer 56

1. (N)ursing Home Care - Care provided in a facility that provides skilled, intermediate, or custodial care, and is either Medicare approved or state-licensed to provide this care
2. (A)ssisted living facility (ALF) care - care provided in a facility that is state-licensed as an ALF
3. (H)ome and community-based care - LTC services provided in a person’s home or in a communited-based facility (like an adult day care center)
4. (H)ospice care - care provided through a facility or program designed to serve the terminally ill
5. (R)espite care - formal, paid care provided to relieve an informal care provider
6. Home modifications and equipment (referred to as (I)ndependence support services in Skwire Chapter 13) - services that allow an individual to remain at home, rather than have to be institutionalized (such as emergency alert systems and wheelchair ramps)
7. (C)are management services - services provided to develop a plan of care, identify providers, and coordinate care
8. Bed reservation benefit - continues to reimburse the insured for institutional care even if he or she needs to temporarily transfer to an acute care facility due to a medical condition (for up to 21 days per year)
9. (C)aregiver training - provides training and education to help informal caregivers obtain state licensure as a home health provider
10. Death benefit - typically pays a percentage of all premiums paid minus any benefits paid
11. Cash alternative benefit (from Skwire chapter 13) - some plans give the option of receiving claim payments for home and community-based care as a cash benefit, rather than as a reimbursement benefit

Mnemonic for Covered Services - NH CC HAIR (Nursing Home Can Cut HAIR)

Mnemonic for Rest: Bed, Cash, or Death! (BCD!)

Leida, Chapter 2, Page 74

Question 57

Methods of providing inflation protection on LTC policies

Answer 57

1. Automatic inflation protection - Benefit limits increase automatically each year by a preset percentage (required to be at least 5%) on a compound basis
2. Simple inflation protection - like automatic inflation, but using simple interest instead of compound interest
3. Periodic increase offers - the insured is periodically (usually every 3-5 years) given the opportunity to purchase additional coverage on a guaranteed issue basis
4. Coinsurance (rarely offered) - the insurer covers a specified percentage of actual or reasonable charges, and does not include a maximum indemnity limit

Leida, Chapter 2, Page 76