Chapter 9 - Other Health Insurance Concepts

Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability? AResidual disability BRecurrent disability CPartial disability DIncome replacement

A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss. a

Alexander has a policy with his ex-wife as its beneficiary. What provision allows him to change the beneficiary to his new wife? AChange of beneficiary BAbsolute assignment CEntire contract DPayment of claims

A. Correct! The change of beneficiary mandatory provision allows the policyowner to change the beneficiary designation.

When an insurer combines two periods of disability into one, the insured must have suffered a AResidual disability. BPresumptive disability. CRecurrent disability. DPartial disability.

C. Correct! Recurrent disability is the period of time (usually within 3-6 months) during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability.

G. Total, Partial, Recurrent, and Residual Disability A brain surgeon has an accident and develops tremors in her right arm. Which disability income policy definition of total disability will cover her for all losses? A"Own occupation" - less restrictive than other definitions B"Own occupation" - more restrictive than other definitions C"Any occupation" - less restrictive than other definitions D"Any occupation" - more restrictive than other definitions

In theory, the brain surgeon could find other work, but because her disability income policy specifies that she is covered for her own occupation, she would be wholly covered. a

Under a Key Person disability income policy, premium payments AAre made by the employee and are tax-free. BAre made by the business and are tax-deductible. CAre made by the business and are not tax-deductible. DAre made by the employee and are not tax-deductible.

Premiums are nondeductible to the business; however, benefits are received tax-free by the business. c

G. Total, Partial, Recurrent, and Residual Disability Which of the following applies to partial disability benefits? APayment is limited to a certain period of time. BAn insured is entitled to a principal sum benefit for the partial loss of a limb. CPayment is based on termination of employment. DBenefits are reduced once an insured is no longer under a doctor's care.

The partial disability benefit is typically 50% of the total disability benefit, and is limited to a certain period of time. a

An employee is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would provide him with medical expense coverage and income assistance? ASocial Security Disability BWorkers Compensation CMajor Medical Insurance DLong-term Care

Workers Compensation provides employees with medical, income, death, and rehabilitation benefits in the event of work-related injury b

Personally-owned Health Insurance What percentage of individually-owned disability income benefits is taxable? A0% B50% C100% DAmount paid by insured

A

An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer? A$0 B$500 C$1,000 D$2,000

B Correct! Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. The insured will, then, be reimbursed for out-of-pocket costs.

The sole proprietor of a business makes a total salary of $50,000 a year. This year, his medical expenses have reached a total of $75,000. What amount may the sole proprietor deduct in regards to his medical expenses? A$10,000 B$25,000 C$50,000 D$75,000

C cannot exceed amount of total salary even if it's is more expensive

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? ASalvage BAppraisal CSubrogation DArbitration

C After the insured accept payment from the insurer, they have been indemnified. Insurance policies require the insured to transfer any right to recovery to the insurer so that they may seek recovery up to the amount they paid as loss.

Which of the following statements about occupational vs. nonoccupational coverage is TRUE? AIndividual disability policies never cover nonoccupational injuries. BOnly group disability income policies can be written on an occupational basis. CDisability insurance can be written as occupational or nonoccupational. DGroup medical expense policies and individual medical expense policies always cover both occupational and nonoccupational injuries.

C Correct! All disability insurance can be written on either an occupational or nonoccupational basis.

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? AArbitration BSalvage CAppraisal DSubrogation

Correct! After the insured accept payment from the insurer, they have been indemnified. Insurance policies require the insured to transfer any right to recovery to the insurer so that they may seek recovery up to the amount they paid as loss. d

Workers compensation insurance covers a worker's medical expenses resulting from work related sickness or injuries and covers loss of income from ATemporary job layoffs. BWork-related disabilities. CJob termination. DPlant or office closings.

Correct! All states have workers compensation laws, which were enacted to provide mandatory benefits for employee's work related injuries, illnesses, or death. B

B. Dependent Children Benefits Which statement accurately describes the Change of Beneficiary provision? ABeneficiaries can only be changed in the event of divorce, death, or severe psychiatric disorders. BChanging beneficiaries requires the consent of the original beneficiary. CAny policy that has a death benefit must also have a Change of Beneficiary provision. DSpouses are automatically irrevocable beneficiaries, with the exception of divorce or death.

Correct! Any policy that has a death benefit must also have a Change of Beneficiary provision. This allows the policyowner to change beneficiaries without the original beneficiary's consent, unless that person was designated as an irrevocable beneficiary. C

Under what condition are group disability income benefits received by an employee NOT taxable as income? AWhen the employee is 59 ½. BWhen the amount of the benefit is equal or less than the amount of contributed by the employer. CWhen the benefits received are equal or less than the employee's percentage of the contribution. DWhen the employer makes all the premium payments.

Correct! Benefits received by the employee that are attributable to his or her portion of the contribution are not taxable as income. c

A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? ANeither plan would pay. BEach plan will pay in equal shares. CThe insured will have to select a plan from which to collect benefits. DThe benefits will be coordinated.

Correct! Benefits will be coordinated when individuals are covered under two or more health plans. D

When a disabled dependent child reaches the age limit for coverage, how long does the policyowner have to provide proof of dependency in order for the dependent to remain covered under the policy? A10 days B15 days C31 days D60 days

Correct! Every policy providing coverage for a dependent child until a specified age will not terminate that coverage if the child is dependent upon the insured and is incapable of self-support because of physical or mental handicaps. Proof of the dependency is required within 31 days of the child attaining the maximum age. c

B. Dependent Children Benefits A policyowner names his five children as primary beneficiaries and his wife as a contingent beneficiary. If the policyowner and one of his children die, who would receive policy benefits? AThe wife (contingent beneficiary) BThe remaining 4 primary beneficiaries CThe oldest surviving primary beneficiary DThe insured's estate

Correct! If multiple primary beneficiaries are named in a policy, each will receive an equal percentage of the death benefit. In this case, since there are four remaining primary beneficiaries, they would receive the death benefit in equal shares. Only if all of the primary beneficiaries die, the contingent beneficiary would receive the entire death benefit. b

C. Primary and Contingent Beneficiaries Which of the following premium modes would result in the 2 est annual cost for an insurance policy? AMonthly BQuarterly CSemi-annual DAnnual

Correct! If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge (loading) because the company will not have the premium to invest for a full year, and the company will have additional expenses in billing the premium. a

A noncontributory group disability income plan has a 30-day waiting period and offers benefits of $2,000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive A$12,000, all of which is taxable. B$14,000, none of which is taxable. C$14,000, all of which is taxable. D$12,000, none of which is taxable.

Correct! In noncontributory group health plans, the employer pays the entire cost, so the income benefits are included in the employee's gross income and taxed as ordinary income. A

All of the following are true regarding Key Employee Disability Income insurance EXCEPT AThe employer owns the policy. BBenefits are paid to the employer to retrain a new person. CPremiums are not tax deductible for the employer. DBenefits are taxable to the employer.

Correct! Key person disability income premiums are not deductible to the business, but the benefits are received income tax free by the business. d

The purpose of managed care health insurance plans is to ACoordinate benefits. BControl health insurance claims expenses. CProvide for the continuation of coverage when an employee leaves the plan. DGive the insured an unlimited choice of providers.

Correct! Managed care is 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. b

The coverage provided by a disability income policy that does not pay benefits for losses occurring as the result of the insured's employment is called AOccupational coverage. BWorkers compensation. CNonoccupational coverage. DUnemployment coverage.

Correct! Most group disability income is nonoccupational coverage, covering insureds only off the job. The employer carries workers compensation for on the job injuries or sickness. c

Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income? A5% B7% C10% D15%

Correct! Most people who itemize their deductions can claim deductions for unreimbursed medical expenses, those that are not covered by health insurance, that exceed 10% of their adjusted gross income. C

D. Modes of Premium Payment An insured has a primary group health plan and an excess plan, each covering losses up to $10,000. The insured suffered a loss of $15,000. Disregarding any copayments or deductibles, how much will the excess plan pay? A$10,000 B$7,500 C$5,000 D$0

Correct! Once the primary plan has paid its full promised benefit, the insured submits the claim to the secondary, or excess, provider for any additional benefits payable. c

The mode of premium payment AIs defined as the frequency and the amount of the premium payment. BIs the factor that determines the amount of dividends in a policy. CIs the method used to compute the cash surrender value of the policy. DDoes not affect the amount of premium paid.

Correct! The mode refers to the frequency the policyowner pays the premium: monthly, quarterly, semiannually, or annually. The amount of premium will change accordingly. a

Workers Compensation benefits are regulated by which entity? AFederal government BState government CEmployer DInsurer

Correct! The state government offers and regulates Workers Compensation benefits, which vary slightly from state to state. b

Which of the following determines whether disability insurance benefits are taxed? AWhether the premiums were tax deductible BState statutes CContract provisions DIf the total of benefits paid meets the minimum state taxation standard

Correct! The taxation status of benefits is often determined by whether the premium has been tax deducted. A

Which characteristic does NOT describe managed care? AHigh-quality care BShared risk CPreventive care DUnlimited access to providers

Correct! There are five distinguishing features of managed care: controlled access to providers, comprehensive case management, risk sharing, preventive care, and high-quality care. d

Which of the following definitions would make it easier to qualify for total disability benefits? AThe more liberal "own occupation" BThe more strict "any occupation" CThe more liberal "any occupation" DThe more strict "own occupation"

Correct! Total disability is defined differently under some disability income policies. The more liberal "own occupation" definition of disability makes it easier to qualify for benefits.

D. Modes of Premium Payment A policyowner has a health insurance policy with his wife listed as the primary beneficiary. He would like to change the primary beneficiary to his sister. Which of the following is true? AUnless the policy designated the current beneficiary as irrevocable, the policyowner can make the change at any time. BThe policyowner can only change the primary beneficiary with the current beneficiary's consent. CThe beneficiary may only be changed if a court deems the change acceptable. DThe policyowner will have to cancel this policy and apply for a new one with a new primary beneficiary.

Correct! Unless a beneficiary is designated as irrevocable, the insured can change beneficiaries without the consent of the former beneficiary. a

A provision found in insurance policies which prevents the insured from collecting twice for the same loss is called AConsent to settle loss. BRight of salvage. CAppraisal. DSubrogation.

Correct! When the insureds accept loss payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss, and allows the insurer to indemnify the insurance company. D

Which of the following would best describe total disability? AA person's ability to work is significantly reduced or eliminated for the rest of his/her life. BA person's inability to perform one of the regular duties of his/her occupation. CA person's total loss of income. DA person's inability to qualify for insurance coverage.

Correct! While different policies might define "total disability" differently, any definition would imply that under a total disability a person's ability to work is significantly reduced or eliminated for the rest of his/her life. A

J. Subrogation All of the following statements concerning workers compensation are correct EXCEPT AWorkers compensation laws are established by each state. BAll states have workers compensation. CBenefits include medical, disability income, and rehabilitation coverage. DA worker receives benefits only if the work related injury was not his/her fault.

Correct! Workers Compensation benefits are payable when a worker is injured by a work-related injury, regardless of fault or negligence D

For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense? A50% B60% C90% D100%

D

The coverage provided by a disability income policy that does not pay benefits for losses occurring as the result of the insured's employment is called AWorkers compensation. BNonoccupational coverage. CUnemployment coverage. DOccupational coverage.

D Correct! Most group disability income is nonoccupational coverage, covering insureds only off the job. The employer carries workers compensation for on the job injuries or sickness.

C. Primary and Contingent Beneficiaries If an insured changes his payment plan from monthly to annually, what happens to the total premium? AIncreases BDecreases CStays the same DDoubles

Incorrect! Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount. b

Which of the following is NOT true regarding partial disability? ABenefit payments are typically 50% of the total disability benefit. BAn insured would qualify if he couldn't perform some of his normal job duties. CThis is a form of insurance that covers part-time workers. DThe insured can still report to work and receive benefits.

Partial disability covers full-time-working insureds who are unable to perform some, but not all, of their regular job duties or can no longer work full-time, which ultimately results in a loss of income. Payment from partial disability is typically 50% of the total disability benefit. c

When an insurer combines two periods of disability into one, the insured must have suffered a APartial disability. BResidual disability. CPresumptive disability. DRecurrent disability.

Recurrent disability is the period of time (usually within 3-6 months) during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability. d

Which of the following are the main factors taken into account when calculating residual disability benefits? AEarnings prior to disability and the length of disability BEmployee's full-time status and length of disability CPresent earnings and standard cost of living DPresent earnings and earnings prior to disability

Residual disability will help pay for loss of earnings by making up the difference between the employee's present earnings and what they were earning prior to disability. D

Which of the following statements regarding the Change of Beneficiaries Provision is false? AAll policies that allow a death benefit must at least provide the option of a change of beneficiary provision. BThe policyowner has the right to change beneficiaries in any case. CA policyowner can change beneficiaries without the consent of the former revocable beneficiary. DThe policyowner cannot change beneficiaries if he/she has chosen to have an irrevocable beneficiary, unless the policyowner has the permission of the irrevocable beneficiary.

The policyowner has the right to change beneficiaries unless he/she has chosen to have an irrevocable beneficiary. Otherwise, the policyowner can legally change beneficiaries, without the consent of the former beneficiary. b