Topic 1 - Plan Provisions

Question 1

Key Dimensions of Medical Benefit Plans

Answer 1

Any Medical Plan can be defined by its position on these dimensions:

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 the service
3. Breadth of the network and the degree to which the provider participates in the risk related to the cost of the service

Think - Plan Benefits, Cost Sharing, Network

Skwire Chapter 5, Page 54

Question 2

Services Covered by Medical Policies

Answer 2

1. Facility Services - Acute Care Hospital, ER, Outpatient facilities, psychiatric facilities, alcohol and drug treatment programs, skilled nursing facilities, Home health care
2. Professional Services - Surgeries, Office Visits, Home Visits, Hospital Visits, Emergency Room Visits, Preventive Care, etc
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

Think - Facility, Prof, Diag/Lab, Rx, Other (mnemonic maybe)

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 reduction in utilization when a plan is subject to deductibles, copays, or 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 (Think UCR, Usual, Customary, and Reasonable)

Skwire Chapter 5, Page 60

Question 4

Types of Provider Reimbursement

Answer 4

1. (D)iscount from billed charge - No incentive for utilization modifications
2. Fee (S)chedules and maximums - Fails to affect utilization and simply reduces costs
3. Per (D)iem reimbursements - negotiated amount per day of hospital stay, varies by level of care
4. Hospital (D)iagnosis Related Groups, DRGs - Set payment based on the patient’s diagnosis, regardless of length of stay or level of service
5. (A)mbulatory Payment Classifications - Similar to DRGs. Used for Outpatient charges
6. Case Rate or (G)lobal Payments - Single reimbursement is negotiated to cover all services associated with a given condition. Commonly used for maternity and transplant cases
7. Bonus (P)ools - Pays the provider a bonus if utilization is below target or quality-of-care criteria are met. Funded through witholds
8. (C)apitation - Provider performs defined range of services in return for a monthly payment per enrollee
9. (I)ntegrated Delivery System - Insurer employs the providers of care (Common in Staff Model HMOs)

Mn: PCS DIG DA D
(Provider Cost Sharing - Dig ‘Da Discounts

Think - You should be able to remember this one

Skwire Chapter 5, Page 64

Question 5

Provisions Included in Medical Plans

Answer 5

1. Overall Exclusions (Another List)
2. Mandated Benefits - Due to regulations
3. Coordination of Benefits - determine the payment when a service is covered under multiple benefit plans
4. Subrogation - assigns the carrier the right to recovery from any injurying party (common in worker’s comp claims)
5. COBRA Continuation - Employers with at least 20 employees must offer continued coverage for 18 to 36 months beyond a person’s normal termination date

Might need a mnemonic

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. Serviced related to cosmetic surgery
4. Other services, such as hearing and vision
5. Transplants
6. Services for which payment not required
7. Serviced required due to an act of war
8. Services required 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

Criteria for Provincial Medicare plans to Quality for Federal Contributions (Canada)

Answer 7

Must meet the principles of the Canada Health Act:
1. (C)omprehensiveness - All medically-required hospitals and physician services must be covered under the plan
2. (U)niversality - All legal residents of a province must be entitled to the plan’s services on uniform terms and conditions
3. (A)ccessibility - Reasonable access by residents to hospital and physician services must not be impeded by charges made to those residents
4. (P)ortability - 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. (P)ublic Administration - Plan must be administered on a non-profit basis by a public authority
(Extra-billing and user charges are not prohibited, but will result in reduction in federal grants to the province)

Mnemonic: CUAPP - Candians Universally Appreciate Public PLans

Skwire Chapter 10, Page 152

Question 8

Benefits Covered by most Canadian Provincial Medicare Plans

Answer 8

1. (H)ospital Services - Room and board in a public ward, + physician services, diagnostics, anesthesia, nursing care, drugs, and supplies
2. (P)physician Services - includes services of a general practitioner, specialist, psychiatrist, and others
3. Services of (O)ther Professionals - Optometrists, Chiropractors, Osteopaths, and Podiatrists
4. Services of a physiotherapist if in a hospital facility
5. (R)x - 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)abratory 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 9

Concerns about the Canadian Medicare system, from recent reports

Answer 9

1. Waiting for months to see a specialist is common
2. Shortages of equipment, speciliasts, 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 the unavailability of after-hours clinics
5. People who need LTC tend to wait in hospitals because of 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

Waiting x3, O, L, T, R, E

Skwire Chapter 10, Page 156

Question 10

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

Answer 10

1. (H)ospital Charges - Plans usually play charges for room and board, up to the amount needed to upgrade to a semi-private or private room
2. (P)rescription Drugs - these represent approximately 70-75% of the cost of private medical plans. Various plan designs exists, but generally cover all drugs prescribed by a physician
3. Health (P)rofessional practitioner - eligible expenses are usually subject to inside limits (such as one treatment per day and a maximum number of treatments per year)
4. (M)iscellaneous 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 protheses
5. (V)ision Care - Eye exams by an optometrist are usually included in the medical plan, while glasses or contact lenses may be included in either the meidcal plan or on a stand-alone basis
6. (O)ut-of-Canada coverage - most common coverage is for emergency are for short trips outside Canada

Mnemonic - PPMPOV (Private Plans May Pay Only Vision)

Skwire Chapter 10, Page 162

Question 11

Organizations that sell Dental Insurance

Answer 11

1. Insurance Companies
2. Dental Services Corporations (Delta)
3. Blue Cross Blue Shield Plans
4. Dental HMOs
5. Dental Referral Plans (Discount Dental Plans)
6. Third Party Administrators

Mnemonic: Insurance + 3 Blues
(Insurance, 3 = Third Party, 3 = Dental ‘xxx’, Blues = BCBS)

Skwire Chapter 6, Page 72

Question 12

Typical Plan Design for Dental Insurance

Answer 12

1. Benefits are Divided into Classes:
   a) Preventive and Diagnostic (Class I) - Oral exams, cleanings, fluoride, sealants, x-rays
   b) Basic (Class II) - Fillings, extractions, endodontics (root canals), periodontics (gum disease treatment), and oral surgery
   c) Major (Class III) - inlays, onlays, crowns, bridges, and dentures
   d) Orthodontics (Class IV) - sometimes added to dental plans with lifetime maximum
2. Reimbursement varies by class, such as 100% for Class I, 80% for class III, 50% for Class III. Less cost sharing required on preventive services to encourage use
3. Calendar Year Deductible ($50 or $100) - often waived for Class I
4. Annual plan benefit maximum - ranges from $1000 to $2500 per person
5. No OOP Max (Except for ACA compliant pediatric dental subject to ACA OOP Max rules)

Think - Classes, Coinsurance, Ded, Annual Max, OOP Max

Skwire Chapter 6, Page 74

Question 13

Dental Plan Cost Containment Provisions

Answer 13

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

1. Frequency Limitations - Two cleanings per year, one set of x-rays, etc
2. Pre-existing condition limitations - prevent plan from paying for charges incurred prior to insurance effective date, such as replacement of missing tooth
3. Lease expensive alternative treatment - insurer reimburses based on the least expensive clinically acceptable treatment plan
4. Waiting periods - must be satisfied before coverage begins. Generally applied to Class III and Class IV services, 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

Think - Limitations, Exclusions, Before, and After

Skwire Chapter 6, Page 76

Question 14

Underwriting and Rating Parameters for Dental

Answer 14

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 EEs
4. ER Contribution - Most non-voluntary plans require a minimum ER contribution of 50% of the single EE Premium
5. Other Coverages - if dental is packages with other insurance options, helps prevent antiselection
6. New Business - Plans may charge higher rates to groups who are offering dental coverage for the firs ttime, 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

Mnemonic might be needed!

Skwire Chapter 6, Page 77

Question 15

Dental Reimbursement Models and Delivery Systems

Answer 15

1. Indemnity - traditional FFS Reimbursement. Plan members may use any dentist, but dentist will bill the patient for the balance remaining after the plan makes its maximum payment
   a) Scheduled indemnity plans
   b) UCR (usual, customary, and reasonable plans)
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) IPA plans (Independent providers association)
   b) Staff model dental HMO plans
4. Point of Service - hybrid of indemnity, PPO, and dental HMO concepts
5. Discount Dental Plans - member receives discounts from preferred providers (not insurance)

Skwire Chapter 6, Page 80

Question 16

Comparison of Dental Reimbursement Models

Answer 16

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

Patient Access - Any dentist for Indemnity and PPO, network access only for HMO

Benefit Richness - Coverage comparable, but HMOs have least out of pocket expense

Cost Management - Indemnity plans (some) < PPOs ( + Credentialing) < HMOs ( + Gatekeeper)

Utilization - Indemnity + PPO overutilize due to FFS; HMO underutilize due to Cap

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

Fraud potential - detecting fraud will be based on the insurer’s efforts, rather than plan type

Provider Contracting - PPOs and HMOs have contracts with dentists who agree to discounted charges. Indemnity does not.

Skwire Chapter 6, Page 82

Question 17

Claim administration procedures used by dental plans

Answer 17

1. Predetermination of benefits - plan wants members to submit expensive treatment plans for review before service
2. Least expensive alternative treatment
3. Coordination of benefits (COB) - 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) Dentists usual fee for procedure
   b) Fee level set by plan based on customary charges in geographic region
   c) Reasonable fee charged for a service when unusual circumstances or complications exist

Skwire Chapter 6, Page 85

Question 18

Factors that influence prescription drug costs

Answer 18

1. Prescription drug (P)ipeline - Manufacturers want to recover their investments in research and development of new drugs
2. Brand (P)atent Protection - Patents protect a drug’s original manufacturer from competition for a period of time
3. (S)pecialty Drugs - Have relatively higher cost than other brand name drugs
4. (B)iologics - these are very expensive ($2K to $500k per patient per month) and are not easily replicated, so generics will not be produced for most of them
5. (D)irect-to-consumer Advertising - marketing of high-cost drugs have been effective, resulting in many patients requesting the new drugs
6. Member Cost-Sharing (O)ffsets - 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. Faster (A)pproval Process by the FDA - this has increased the number of high-cost drugs coming to the market
8. (A)ging Population - leads to more demand for drug therapies
9. Increase in Awareness of and (T)esting for Disease - often results in drug therapies to avoid acute illnesses
10. (P)ersonalized Medicine - genetic testing sometimes leads to unnecessary medication use

Mnemonic: PAPA STOP BD (Papa stop using brand name drugs)

Skwire Chapter 7, Page 91

Question 19

Entities in the Pharmacy Benefits System in the US

Answer 19

1. Pharmaceutical Manufacturers - Research, obtain approval for, produce, and distribute prescription drugs. Sell drugs to wholesalers and also directly to pharmacies. Negotiate with PBMs, offering rebates in exchange for favorable formulary placement.
2. Pharmaceutical Wholesalers - Purchase prescription drugs from manufacturers and distribute drugs to pharmacies
3. Pharmacies - Dispense prescriptions directly to beneficiaries and purchase drugs either from wholesalers or manufacturers.
4. Pharmacy Benefit Managers (PBMs) - Separate List
5. Third-Party Payers (Insurance Companies, Employers, or Govt 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 20

Functions performed by PBMs

Answer 20

1. (A)dminister prescription drug benefit programs
2. Negotiate (R)ebates with manufacturers
3. Negotiate (D)iscounts with pharmacies
4. Manage relationships with (T)hird party payers
5. Perform (U)tilization management
6. Run drug (A)dherence programs
7. Integrate drug benefits with (M)edical
8. Establish a (F)ormulary of drugs
9. Build a (N)etwork of pharmacies

Mnemonic - FRAUD AMNT

Skwire, Chapter 7, Page 98

Question 21

Types of Drugs

Answer 21

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 brand drugs do not
3. Specialty - high cost drugs, many of which require special treatment and delivery (e.g. 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 Biologics - Subsequent versions of biologic drugs developed by different manufacturers. May not be therapeutically equivalent to biologics.
6. Compound - drug mixed by a pharmacist. Can deliver a customized strength and dosage to meet a beneficiary’s specific needs.
7. Over-the-counter - do not require a prescription to purchase
8. Supplies - such as diabetic test strips and alcohol pads

Easy List Right?

Skwire Chapter 7, Page 100

Question 22

Stages of the prescription drug life cycle

Answer 22

1. Research and development by manufacturers - including initial drug discovery, preclinical testing, clinical trials, and review by the FDA - Typically 15 Years
2. Brand patent protection period - manufacturer awarded exclusive right to produce the drug - Typically 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 12 months
4. Generic drug lifespan - After the generic exclusivity period, all manufacturers may produce and sell the drug.

Skwire, Chapter 7, Page 101

Question 23

Methods of Prescription Drug Distribution

Answer 23

1. Retail pharmacies - physical locations where beneficiaries can visit to pick up prescription drugs. Typically dispenses a one-month supply
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 24

Types of Cost Sharing Plans for Pharmacy Benefits

Answer 24

1. Copay plans - often seen with managed care plans. Copays typically vary by tier.
2. Coinsurance plans - Will increase by tier. Typically includes a deductible, either integrated with medical plan or 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 25

Types of Formulary Designs

Answer 25

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 26

Most common pharmacy benefit tier designs

Answer 26

1. Two-tier - generics and brand name drugs
2. Three-Tier - Generics, preferred brands, and non-preferred brands
3. Four Tier - Most common is to add specialty drugs to a three-tier design
4. Five Tier - Start with a four-tier design with specialty as tier 4 and then split one of those tiers:
   a) Split generic tier into preferred and non-preferred (common design in M 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) Split generic, brand, and specialty into preferred/nonpreferred tiers

Skwire Chapter 7, Page 105

Question 27

Factors that determine leverage when negotiating rebates from drug manufacturers

Answer 27

Note: Rebates are payments from manufacturers in exchange for preferred status of their drugs on a formulary

1. Number of lives represented - successful contracting requires at least 500,000 lives over which the 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 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 (separate card for plan designs and disability provisions)
2. Group Supplemental (optional) life - Provides additional insurance beyond basic group term life. Typically employee-pay-all with unisex rates in 5-year age brackets.
3. Group AD&D - Typically offered as companion to group term life and with same face amount. 100% of face amount is paid on death or loss of more than one member (hand/foot/sight). 50% is paid on loss of one member.
4. Dependent Group Life multiple coverage options usually provided, up to $100,000 on spouse, $10,000 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 (descripted in separate list in Skwire Ch. 24)

Skwire Chapter 11, Page 171

Question 29

Typical Basic 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 EEs
2. Multiple of Earnings plans (most common) - such as 1x or 2x earnings
3. Salary bracket plans - salary ranges are established and benefits vary by range
4. Position plans - benefits vary based on EE’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 payment when an EE becomes totally disabled, as long as he or she is less than a certain age, typically 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

EEs are taxed on the value of ER-provided group term life insurance in excess of $50,000

Value is determined from Table I (rates vary by age) and is per $1000 of coverage

Monthly Imputed Income = [ Table I rate * (coverage amount - $50,000) / $1,000 ] - EE contributions

Skwire Chapter 11

Question 32

Benefit Provisions for Group Disability Income

Answer 32

1. (D)efinition of Disability (separate list)
2. (E)limination Period - Period of time EE must be disabled before collecting disability benefits. Commonly 3 months or 6 months for LTD. For STD, commonly 8 days or shorter for accidents other than sickness
3. (B)enefit Period - Commonly 2 years, 5 years, or to age 65 for LTD. For STD, typically 13 or 26 weeks to coordinate with LTD elimination period.
4. (B)enefit Amounts - benefit paid monthly for LTD and weekly for STD. Replaces a percentage of pre-disability earnings (such as 60% for LTD and less for STD). A maximum benefit amount may further limit payments.
5. (B)enefit Offsets - Benefits are reduced by income from other sources, such as social security, retirement benefits, worker’s compensation, and part-time work
6. (L)imitations and exclusions - benefits for mental illness and substance abuse are usually limited to the first 2 years of disability. Disabilities resulting from an act of war or intentionally self-inflicted injury are usually excluded
7. (O)ptional Benefits (separate List)

Mnemonic - ye OLDE triple Benefits

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 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, occupational duties are based on the employee’s own occupation, and loss of income percentage is 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 - EE 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 worker’s compensation.

Skwire Chapter 12, Pages 189 and 195

Question 34

Methods for reducing benefits for income earned during a disability

Answer 34

1. (P)roportionate loss formula - Calculates the percentage of lost earnings due to disability and applies it to the benefit otherwise payable
2. 50% (O)ffset - Reduces the benefit by $1 for every $2 of work earnings
3. (W)ork 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 proportionate loss formula or 50% offset is used.

Menmonic - POW - your benefit is reduced!

Skwire Chapter 12, Page 193

Question 35

Optional Benefits that may be added to group disability contracts

Answer 35

For LTD

1. (C)OLA - cost-of-living adjustment to provide inflation protection for benefits
2. (S)urvivor benefit - lump sum benefit payable to the insured’s survivors upon the death of the insured
3. (E)xpense reimbursement for day care expenses
4. (P)ension benefit - an additional benefit payment to replace lost contributions to retirement plans
5. (P)ortability - Allows an insured who leaves the group to continue group coverage
6. (C)onversion option - insureds who lose coverage can convert to either group or individual disability coverage
7. (S)pousal benefits - additional amounts for more serious disabilities, such as those resulting in total paralysis
8. (C)atastrophic benefits - additional amounts for more serious disabilities, such as those resulting in total paralysis

For STD

1. 24-hour coverage - to cover 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)

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

Skwire Chapter 12, pages 194 and 197

Question 36

Economic Fundamentals that have contributed to recent financial difficulties faced by LTC insurers

Answer 36

These have led many companies to take substantial premium increases and to exit the market

1. Reduced investment earnings caused by historically low interest rates
2. Higher cost of providing LTC, consistent with rapidly-rising medical costs in the US
3. Strong persistency, resulting in more policies than expected sticking around long enough to be eligible for benefits

HW: LTC Combo Products, Page 13

Question 37

Types of LTC Insurance Plans

Answer 37

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 care and $90 per day for assisted living facility care)
2. Service Indemnity model - a fixed benefit is paid for any day or week that formal LTC services are received, regardless of actual charges incurred
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

Reimburse, Indemnify, Cash

Skwire Chapter 13, Page 202

Question 38

Plan Provisions on LTC Insurance Policies

Answer 38

1. Benefit Triggers (See list in Leida Chapter 2)
2. Elimination or waiting period - a time period during which the insured must remain disabled and benefit eligible before benefits are paid (commonly 90 days)
3. Covered Services (see list in Leida Chapter 2)
4. Alternate Plan of care - allows the insurer to pay benefits (at its discretion) for services not explicitly covered by the contract
5. Benefit limits - 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. Inflation protection - increases the benefit limits as LTC costs increase over time (separate list in Leida chapter 2)
7. Nonforfeiture benefits - sold as an optional benefit. Provides a reduced, paid-up benefit to insureds who lapse coverage (separate list)
8. Spousal riders and discounts - some plans offer a premium discount for individuals who are married
9. Restoration of benefits - many plans restore the lifetime maximum benefit if an insured recovers before exhausting the plan’s benefits
10. international coverage - some plans provide limited benefits for care received abroad
11. Shared 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. Policy exclusions - examples include pre-existing conditions or diseases, alcoholism and drug addition, and treatment covered by other policies or Medicare

Mnemonic -

Skwire Chapter 13, Page 204

Question 39

Types of Nonforfeiture Benefits on LTC Insurance Policies

Answer 39

1. Shortened benefit period - 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 paid.
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 nonforfeiture benefit - often provided to those who lapse due to a substantial premium increase and had not purchased a nonforfeiture benefit. Uses the shortened benefit period approach

Skwire Chapter 13, Page 208

Question 40

Types of Health Insurers and MCOs

Answer 40

(These plans make up the managed care continuum)

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 organized (EPOs) - similar to PPOs, but care received by nonparticipating providers is not covered (unless urgent or emergency)
6. POS plans - combine an HMO with indemnity-type coverage for care outside the HMO. Members decide at the point of service whether to use the HMO or go out of network
7. HMOs - provides basic and supplemental health services in the manner prescribed by the HMO Act (separate list)
8. CDHPs - combine a high-deductible health plan with some form of individual pretax savings account (HRA or HSA)
9. Third-Party Administrators - 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 27

Question 41

Common types of managed care overlays

Answer 41

1. General utilization management (UM) - offering a menu of UM activities that can be selected by employers or insurers
2. Large Case Management - includes identifying catastrophic cases, notifying reinsurers, monitoring the treatment, and negotiating payments for high-cost cases
3. Specialty UM - focuses on utilization 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 42

Features that differentiate HMOs from Health Insurers

Answer 42

1. Licensed under different laws than health insurers
2. Must provide adequate access to providers within their service areas
3. Must require “no balance billing” clauses in all provider contracts that are stronger than those found in non-HMOs
4. Must allow direct access to primary care physicians (PCPs) and ob/gyn physicians
5. Must have written policies and procedures for physician credentialing, utilization management, and quality management
6. Must maintain defined minimum levels of capital reserves
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 agency

Kongstvedt Chapter 2, Page 31

Question 43

Types of HMOs

Answer 43

1. Open-panel - the 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 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 - 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 - 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 HMOs - 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 44

Advantages and disadvantages of open-panel HMOs

Answer 44

Advantages

1. Easier to market and sell 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 HMO is not providing medical care itself, it has little ability ot manage care
2. Premiums are often higher than those of closed panels

Kongstvedt Chapter 2, Page 34

Question 45

Advantages and Disadvantages of Closed-Panel HMOs

Answer 45

Advantages

1. Ability to more closely manage care
2. Delegation of many routine medical management functions to the group, which reduces administrative costs
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 46

Types of Integrated health care delivery systems (IDSs)

Answer 46

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

1. IPAs
2. Physician practice management companies - these companies purchased physician practices. Most failed because once physicians sold their practices there was no longer sufficient incentive for them to be productive
3. Group practice within walls (GPWW) - formed as a vehicle for physicians to organize without being dependent on a hospital for services or support
4. Physician-hospital organization - an entity through which ah 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. Foundation 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 47

Structural requirements of accountable care organizations (ACOs)

Answer 47

ACA created ACOs for use in Medicare program. They help achieve more integrated and efficient care by fostering local organizational accountability for quality 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 sets 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 48

Key Characteristics of Patient-Centered Medical Homes PCMHs)

Answer 48

1. Patients have an ongoing relationship with 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 for the patient
4. 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 49

Types of Individual Health Insurance

Answer 49

1. Major Medical
2. Limited Benefit Medical - don’t cover enough services to meet the definition of major medical (separate list for types of plans)
3. Group Conversions - policies offered (on guaranteed issue basis) to individuals leaving group coverage. State laws typically require this coverage to be offered.
4. Medicare Supp and Medicare Select - supplement Medicare coverage by filling in the gaps in that coverage
5. Medicare Adv and Medicare 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 a business against the impact of an employee becoming disabled
8. LTC - covers services for individuals who need assistance performing basic ADLs (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 50

Categories of essential health benefits (EHBs) under the ACA

Answer 50

1. Ambulatory patient services
2. Emergency services
3. Hospitalization
4. Maternity and newborn care
5. Mental health and substance use disorder services
6. Prescription drugs
7. Rehabilitative and habilitative services and devices
8. Laboratory services
9. Preventive and wellness services and chronic disease management
10. Pediatric services, including dental and vision care

Leida Chapter 2, Page 40

Question 51

Types of limited benefit medical insurance

Answer 51

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 for a specified list of medical conditions (such as cancer)
4. Critical Illness - Provides a lump sum benefit in the case of heart attack, stroke, heart surgery, cancer (except skin cancer), or diagnosis of specified conditions

Leida Chapter 2, page 47

Question 52

Enrollment requirements for Medicare Advantage and Part D plans

Answer 52

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

1. Enrolled in Medicare parts A and B
2. Does not have ESRD
3. Applies during a valid enrollment period, such as:
   a) Initial enrollment period - when beneficiaries fire become eligible
   b) Annual enrollment period - between October 15 and December 7 of each year, beneficiaries can enroll or change their MA or Part D coverage
   c) Special enrollment period -these exist for various reasons, such as 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 53

Steps in the Medicare Advantage and part D bid submission process

Answer 53

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. (R)ebate reallocation process - Part D bids must be adjusted once the final national average bid amount 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 (A)udit - after bids are approved, the plan may be selected 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 54

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

Answer 54

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

Mnemonic - GAP (adjustment is to cover the GAP!)

Leida Chapter 2, Page 67

Question 55

Major types of business protection coverage

Answer 55

1. Keyperson coverage - sold to business to protect them from the risk of key individuals become disabled. Benefits last one or two years, provide time for key employee to be replaced
2. Disability buyout coverage - provides the funds needed (generally lump sum) for a totally disabled partner or owner of a business to be bought out by the remaining partners 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 56

Benefit triggers for LTC insurance policies

Answer 56

The insured must 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 (Separate list)
2. A cognitive impairment that requires substantial 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 judgement in emergency situations
Leida Chapter 2, Page 71

Question 57

ADLs allowed by HIPAA, and typical definitions

Answer 57

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 oneself 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 58

Benefits that may be covered by LTC policies

Answer 58

1. Nursing 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. Assisted living facility (ALF) care - Care provided in a facility that is state-licensed as an ALF
3. Home and community-based care - LTC services provided in a person’s home or in a community-based facility (like an adult day care center)
4. Hospice Care - care provided through a facility or program designed to serve the terminally ill
5. Respite care - formal, paid care provided to relive an informal care provider
6. Home modifications and equipment (independent support services in Skwire) - services that allow an individual to remain at home, rather than have to be institutionalized (such as emergency alert systems and wheelchair ramps)
7. Care 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. Caregiver training - provides training and education to help informal caregivers obtain state licensure as a home health care provider
10. Death benefit - typically pays a percentage of all premiums paid minus any benefits paid
11. Cash alternative benefit (from Skwire Ch. 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

Leida Chapter 2, Page 74

Question 59

Methods of Providing Inflation Protection on LTC policies

Answer 59

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 (3 to 5 years) given opportunity to purchase additional coverage on a guaranteed issue basis
4. Coinsurance (rarely offered) - the insurer covers a specific percentage of actual or reasonable charges, and does not include a maximum indemnity limit

Leida Chapter 2, Page 76