Accident and Health Insurance - Basics

An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This indicates that his policy is written with a 30-day

Elimination period.

An insurance company wants to obtain the insurance history of an applicant. Which source releases coded information to insurers regarding information included on previous insurance applications?

Medical Information Bureau

Premiums without expense loading are called?

Net Premiums

Gross premium equation

Net premium (mortality minus interest earned) + expenses (or loading)

When is the insurability conditional receipt given?

When the premium is paid at the time of application

L has a major medical policy with a $500 deductible and 80/20 coinsurance. L is hospitalized and sustains a $2,500 loss. What is the maximum amount that L will have to pay?

$900 (deductible + 20% of the bill after the deductible [20% of $2,000]) L would first pay the $500 deductible; out of the remaining $2,000, the insurer will pay 80% ($1,600) and the insured will pay 20% ($400).

A successful self-funded program will have the following characteristics:

1. a group large enough to reasonably predict future loss experience 2. sound statistical data to support the self-funding concept 3. a stop-loss contract to assume losses beyond the insured's retention 4. a third party administrator who services claims.

There are 5 distinguishing features of managed care; What are they?

1. controlled access to providers 2. comprehensive case management 3. risk sharing 4. preventative care 5. high-quality care

Ray has an individual major medical policy that requires a coinsurance payment. Ray very rarely visits his physician and would prefer to pay the lowest premium possible. Which coinsurance arrangement would be best for Ray?

50/50 After the deductible has been paid, the insurance company will pay a specified amount for a physician's visit, while the insured pays the remaining percentage. This is called "coinsurance". Plans will often be listed in a fraction format, with the first number representing the amount that will be paid by the insurer. The less the insurer must pay with coinsurance payments, the lower the premiums will be.

Elimination Period

A period of days which must expire after the onset of an illness or occurrence of an accident before benefits will be payable. The longer the elimination period is, the lower the cost of coverage will be.

In health insurance, what is a copayment?

A specific amount paid by the insured when treatment is received

A deductible is

A specified dollar amount that the insured must pay first before the insurance company will pay the policy benefits. The higher the deductible, the lower the premium.

Managed care

A system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incentives for members to use providers and procedures covered by the plan.

What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided?

Application

Agent's report

Asks questions about the length of time that the applicant has been known to the agent, an estimate of the applicant's income and net worth and whether the agent knows of any reason that the contract should not be issued. The agent's statement does not become part of the "entire contract".

To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested?

At the time of application

What document describes an insured's medical history, including diagnoses and treatments?

Attending Physician's Statement

The agent is known as the "Field Underwriter" because of the information he/she gathers for the insurer. This helps the insurer

Avoid adverse selection.

The provision that provides for the sharing of expenses between the insured and the insurance company is

Coinsurance.

What is the contract provision that allows the insurer to nonrenew health coverage if certain events occur?

Conditionally renewable

Investigative Consumer Report

Considered to be a part of an insurance application. This report is used in the underwriting process in order to assess non-medical risk factors related to moral standing and avocations. Friends and colleagues are interviewed in order to evaluate the applicant's character, reputation, and habits. The applicant must be informed in writing if the insurer decides to conduct the investigation.

The purpose of managed care health insurance plans is to

Control health insurance claims expenses.

The gatekeeper of an HMO helps to

Control specialist costs.

Dread Disease Policy

Covers medical expenses for a particular medical condition, such as cancer or heart disease.

Critical Illness Policy

Covers multiple illnesses, such as heart attack, stroke, renal failure, and pays a lump-sum benefit to the insured upon the diagnosis (and survival) of any of the illnesses covered by the policy.

A health insurance policy that pays a lump sum if the insured suffers a heart attack or stroke is known as

Critical illness.

A waiver of premium provision may be included with which kind of health insurance policy?

Disability income

Because of the history of cancer in her family, Julie purchased a policy that specifically covers the expense of treating cancer. Her policy would be classified as what type of policy?

Dread Disease Policy

A policy which covers medical costs related to a specific condition is called a

Dread Disease Policy.

In group insurance, what is the policy called?

Master policy

Why is it essential for an insurer to document all correspondence with an insured?

Errors and omissions

Insurer X charges the premium from its insured customers, passing on operating expenses for the company. The operating expenses plus the premium equals the "gross" premium. What is another name for the operating costs for Insurer X?

Expense loading

The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called

Expenses.

What type of group rating do the Blue Cross and Blue Shield organizations use as a factor in developing the rates to be charged?

Experience Rating

PPOs contract on a

Fee-for-service basis.

A producer is acting in what capacity when he or she is trying to obtain creditable information about an applicant for health insurance?

Field underwriter

Health coverage becomes effective when the

First premium has been paid and the application has been approved.

Which of the following is another name for a primary care physician in an HMO?

Gatekeeper

A producer's function as the field underwriter is to...

Gather creditable information from an applicant that would assist the producer in screening marginal or unacceptable risks before taking an application for an insurance policy.

Mortality - Interest + Expense =

Gross premium

What is one way in which HMOs are different from traditional health insurance policies?

HMOs encourage preventive care.

Carry Over Provision

If the insured did not incur enough expenses during the year to meet the deductible, any expenses incurred during the last 3 months may be carried over to the next policy year to satisfy the new annual deductible

Upon the submission of a death claim under a life insurance policy, when should the insurer pay the policy benefit?

Immediately after receiving written proof of loss

Which type of a hospital policy pays a fixed amount each day that the insured is in a hospital?

Indemnity

Who must pay for the cost of a medical examination required in the process of underwriting?

Insurer

What is franchise insurance?

It is health coverage for small groups whose numbers are too small to qualify for true group insurance

In a group health policy, a probationary period is intended for people who

Join the group after the effective date.

In franchise insurance, premiums are usually

Lower than individual policies, but higher than group policies.

A woman's health insurance policy dictates which doctors she is allowed to see. Her health providers share an assumed risk for their patients and encourage preventive care. What best describes the health system that the woman is using?

Managed Care

Who is involved in completing the agent's report?

Only the agent

Which renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds?

Optionally renewable

Which renewability provision are you most likely to see on a travel accident policy?

Period of time The Period of Time (Term) provision means that the policy will only last a certain period of time and cannot be renewed. It will be cancelled at the end of the term for which it was purchased. A travel accident only policy will only provide coverage during the dates the insured is traveling.

Though the purpose of health insurance, as with all insurance, is to "indemnify" or restore the client to his/her pre-loss condition, there is a possibility that the insured will not be paid back the entire amount of the health-care expense. This occurs if the amount of the loss exceeds what?

Policy Limits

Which of the following is the most common time for errors and omissions to occur on the part of an insurer?

Policy delivery

A guaranteed renewable health insurance policy allows the

Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class.

When health care insurers negotiate contracts with health care providers or physicians to provide health care services for subscribers at a favorable cost, it is called

Preferred Provider Organization (PPO).

An applicant for health insurance has not had a medical claim in 5 years. He exercises daily and does not smoke or drink. What classification do you assume the applicant would receive from his insurer?

Preffered

An HMO is regarded as an organized system of health care that provides a comprehensive array of medical services on a

Prepaid basis.

One of HMO's distinguishing features is that it

Provides for both medical services and the method of financing of medical services.

Franchise Insurance

Provides health coverage for small groups whose numbers are too small to qualify for true group insurance. Franchise insurance is not group insurance, since individual policies are issued for each participant. Individual underwriting is done for each person, submitting his or her own application and medical history. Premiums charged are generally less than for an individual policy, but more than group coverage.

Medical Information Bureau

Receives information that an applicant provides in insurance applications and issues it in a coded format to insurers who request these reports. MIB information alone cannot be used to justify declining a risk, but it is helpful in providing insurers with information.

HMO

Regarded as an organized system of health care that provides a comprehensive array of medical services on a prepaid basis to voluntarily enrolled persons living within a specified geographic area.

Health insurance underwriting is best defined as

Selection, classification, and rating of risks.

There are two major causes of loss (or perils) covered under a health insurance policy; What are they?

Sickness and accident.

What is the best way to change an application?

Start over with a fresh application

Which of the following terms describes the specified dollar amount beyond which the insured no longer participates in the sharing of expenses?

Stop-loss limit

A person steps off a street car and trips and breaks his ankle. This type of injury can be described as

Sudden and unforeseen.

An insurer wishes to compare the information given in an insurance application with previous insurance applications by the same applicant but for different companies. What organization can help the insurer accomplish this?

The Medical Information Bureau

An employee becomes insured under a PPO plan provided by his employer. If the insured decides to go to a physician who is not a PPO provider, which of the following will happen?

The PPO will pay reduced benefits.

Which of the following is true about the requirements regarding HIV exams?

The applicant must give prior informed written consent. A separate written consent form must be obtained prior to an HIV exam. HIV exam results may be disclosed to underwriters, but not agents.

Morbidity

The incidence or probability of sicknesses or accidents within a given group of people.

Manny has been injured in an accident. Although she is still receiving benefits from her policy, she does not have to pay premiums. Her policy includes

Waiver of Premium Rider

Hospital indemnity/hospital confinement indemnity policy will provide payment based on

The number of days confined in a hospital.

Elimination Period

The time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.

What is the purpose of coinsurance provisions?

To help the insurance company to prevent overutilization of the policy

When an insurer issues an individual health insurance policy that is guaranteed renewable, the insurer agrees

To renew the policy until the insured has reached age 65.

Under a credit disability policy, until what point will payments to the creditor be made for the insured?

Until the disability ends or the debt is satisfied, whichever is sooner

Waiver of Premium Rider

should the owner be disabled and cant earn an income, after 6 months, all premiums will be paid by the insurer during the disability period; After 6 months, the premiums will be repaid