Chpt. 12

Business needs of insurance

In addition to protecting individuals against the possible loss of income, due to a disability disability, income policies are also used to protect businesses

What does the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 allow an employee to do?

In the event of employment termination, group health insurance can be kept if the employee pays the premiums

Health insurance will typically cover, which of the following perils

Injury due to accident

The Beneficiary of an Accidental Death and Dismemberment (AD&D)

Insurance policy is the person or entity designated in the policy to receive the death proceeds

Common disaster, provision

Insurance policy owner, if both the insured and the primary beneficiary die within a short period of time. The death benefits will be paid to be contingent beneficiary. It also states that the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds

Group health insurance

Insurance that provides coverage for a group of persons, usually employees of a company under one master contract

Non-participating plan

Insurance, under which the insured is not entitled to share in the divisible surplus of the company

Premium factors of health insurance

Interest Expenses Types of benefits Morbidity Age Sex Occupation

Probationary period

Is a specified number of days after an insurance policies issue date during which coverage is not afforded for sickness, standard practice for group coverages, as well as disability coverage the probationary period typically does not apply to accidents. The real goal of this provision is to prohibit people from buying insurance only when they need it, and immediately filing a claim otherwise known as adverse selection.

Creditable Coverage

Is previous coverage under another insurance plan when there has not been a break in coverage of 63 days and individuals waiting period for pre-existing conditions is reduced or eliminated all together when he or she has creditable coverage.

Primary beneficiary

Is the first in line to receive death benefit proceeds

Without a Section 125 Plan in place, what would happen to an employee's payroll contribution to an HSA?

It would be considered taxable income to the employee

Sonya applied for a health insurance policy on April 1. Her agent submitted the information to the insurance company on April 6. She paid the premium on May 15 with the policy indicating the effective date being May 30. On which date would Sonya have coverage?

May 30

Irrevocable Beneficiary

May not be changed without the written consent of the beneficiary. The irrevocable beneficiary has a vested interest in the policy there for the policy. Owner may not exercise certain rights without the consent of the beneficiary.

Per Stirpes (by the bloodline)

Means that in the event that a beneficiary dies before the insured benefit from that policy will be paid to that beneficiaries heirs

There are three basic categories of health coverage

Medical expense insurance Disability income insurance Accidental death and dismemberment insurance

Medical expense insurance

Medical expense insurance includes plans that cover hospital care, surgical expenses, doctor visits and outpatient care along with most of your other basic medical expenses

Enrollment card

Must be completed and signed by a new employee during the open enrollment period to enroll in group insurance

Medical Expense Insurance

Pays benefits for non-surgical doctors fees commonly rendered in a hospital sometimes pays for home and office calls

Conditionally, renewable

Policies give the insurer the option to terminate the policy only in the event of one or more conditions stated in the contract. Typically these conditions are age regulated. If the insurer decides to renew the policy they also have the option, and usually choose to increase the premiums on the anniversary date

Accidental results

Policies that use the accidental, bodily injury, provisions, sometimes called the results provision required that the results of the injury, hasta be unexpected an accidental. This is far less restrictive than the accidental means provision.

An individual may be excluded from group coverage for up to a year for any conditions in which the individual sought treatment six months prior to the enrollment date

Pre-existing conditions

Spendthrift Clause

Prevents a beneficiary from recklessly spending benefits by requiring the benefits to be paid in fixed amounts or installments over a certain period of time, a spendthrift clause would have no effect if the beneficiary receives the proceeds as one lump sum payment

Franchise health plans, a.k.a. wholesale plans

Provide health insurance coverage the members of an association or professional society. Individual policies are issued to individual members in the association, or society simply serves as the sponsor for the plan. Premium rates are usually discounted for franchise plans.

Disability income insurance

Provides replacement income when wages are lost due to a disability It does not cover medical expenses associated with a disability, but provides a guaranteed flow of income, while the person is disabled

Health insurance, portability, and accountability act, a.k.a. HIPAA

Provides the ability to transfer and continue health insurance coverage for millions of American workers and their families when they change or lose their jobs the Hyppa privacy rule provides federal protection for an individual's health information, and gives patients in array of rights with respect to that information the HIPAA security rule provides technical safeguards to assure the confidentiality integrity and availability of electronic protected health information

Health insurance is funded by

Regular premium payments Premiums can be paid annually, semi annually, quarterly or monthly

COBRA

Requires employers with 20 or more employees to extend group health coverage to terminated employees and their families

Guaranteed renewable policy

Specify that the policy must be renewed usually until the insured reaches a specified age. However, the insurer still has the option, and usually choose to increase the premiums on the anniversary date. Medicare supplement policies and long term care policies are the most common types of guaranteed renewable policy's

Simultaneous Death Act

States that if the insured and the primary beneficiary die at approximately the same time for a common accident, with no clear evidence as to who died first, the uniforms simultaneous death act law will assume that the primary died first this allows the death benefit proceeds to be paid to the contingent beneficiaries

Noncancelable policy

States the policy cannot be canceled Newark, and it's premium rates be increased under any circumstances. Disability policies are the most common noncancelable (noncan) policies

Employers are entitled to take a tax deduction for premium contributions. They make to an employee group health plan, as long as the contributions represent ordinary, and necessary business expense.

Tax treatment of group plans

The Principal Sum under an AD&D policy

The amount payable as a death benefit it is the amount of insurance purchased. The principal sum represents the maximum amount the policy will pay.

Health insurance refers to

The broad field of insurance plans that provide protection against the financial consequences of illness, accident, injury, and disability

Tertiary Beneficiary

The third in line to receive the benefits of a life insurance policy. If no one named death benefit will go to insured's estate.

Accidental means

The unforeseen, unexpected unintended cause of an accident the cause of the mishap must be accidental for any accident base policy claim to be payable

Enrollment period

This is the limited period of time during which all members may sign up for a group plan this period typically happens once a year for a certain number of days

When can a group health policy renewal be denied according to the health, insurance, portability and accountability act (HIPAA)?

When contribution or participation rules have been violated

Contributory Plan

With a contributory plan, both the employees and the employer pay part of the premiums and 75% of all eligible employees must participate

The purpose of the coordination of benefits provision in group accident, and health plans is to

avoid overpayment of claims

What is issued to each employee of an employer health plan?

certificate

Under group health insurance, a certificate of coverage is issued to the

employee

In an employer-sponsored group accident and health plan, a master contract is issued to the

employer

Which of the following would be considered a possible applicant and contract policyholder for group health benefits?

employer

The limited period of time given to all members to sign up for a group health plan is called the

enrollment period

A group disability income plan that pays tax free benefits to covered employees is considered

fully contributory

A master contract and certificate of coverage can be found in which type of policy

group

Secondary (contingent) Beneficiary

is second in line to receive death benefit proceeds.

Which of the following is typically not eligible for coverage in a group health policy

temporary employee

What is a late enrollee

An individual who elects coverage after the initial eligibility period

Insurability, a.k.a.

Good health

Conversion Privilege

Members of a group have the ability to convert their policy to an individual plan

Waiting period

Period of time off in 12 months beginning with your affective date during with your health insurance plan does not provide benefits for pre-existing conditions this period may be reduced or waved based on any prior healthcare coverage you had before applying for your new health insurance plan

Business continuation plans

Provide a way to help a business continue in the event of a owner or key employee, dies, or in the event of a disabling sickness Or injury

Limited risk policy

Provides coverage for specific kinds of accidents or illness, such as injuries received as a result of travel, accidents or medical expenses stemming from a specified disease

Non-contributory plan

The employer pays the entire premium and 100% of the employees must participate

Eligible groups for group health insurance

To qualify for a group health insurance applicant must be part of a group formed for a reason other than just obtaining health insurance

Under the subrogation clause, legal action can be taken by the insurer against the

responsible third party

If an employee contribute 50% toward the disability plan premium provided by an employer, what would be considered the taxable income of a $1000 monthly disability benefit?

$500

Accidental death and dismemberment insurance

(AD&D insurance) is the purest form of accident insurance. It provides the insured with a lump sum benefit amount in the event of accidental death or dismemberment under accidental circumstances.

Sole proprietors are permitted tax deductions for health costs paid from their earnings in the amount of

100% of costs

How many employees must an employer have for a terminated employee to be eligible for COBRA

20 employees

Revocable Beneficiary

A beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary

Business Overhead Expense Insurance

A form of disability income coverage, the signs to pay necessary business overhead expenses such as rent should be insured business owner become disabled overhead expenses. Include such things as rent or mortgage payments, utilities, telephone least equipment, employees salaries, and the like this includes all the expenses that would continue, and must be paid regardless of the owners, disability business. Overhead expense policies did not include any compensation for the disabled owner.

disability income insurance

A form of insurance that ensures, the beneficiaries earn income against the risk that a disability creates a barrier for a worker to complete the core functions of their work. Other disability insurance is designed to protect ones income. There are typically rules and regulations in place limiting the benefits of a disability policy to one's income level, and typically only allowing protection for a portion of their income.

Health insurance

A general way of describing insurance against loss through sickness or accidental bodily injury. It is also called accident and health, accident and sickness sickness an accident or disability insurance. It is important to remember the general term health insurance applies to many different types of insurance not just the medical insurance that pays for doctor and hospital visits.

Participating plan of insurance

A plan under which the policy owner receives shares, commonly called dividends of the divisible surplus of the company

Interim Coverage

A short term policy purchased on an interim basis, typically when in between jobs, or waiting for a new policy to start

Health savings accounts

A tax advantage, medical savings account available to taxpayers in the United States, who are enrolled in a high deductible. Health plan HDHP the funds contributed to an account are not subject to federal income tax at the time of deposit, qualified, healthcare expenses. Include amounts, paid for doctors fees, prescription and non-prescription medicines necessary hospital services not paid for by insurance retiree health insurance premiums Medicare expenses but not Medigap qualified long-term care services cobra coverage qualified medical expenses are expenses incurred by the HSA owner, the spouse in the dependents. Nonqualified withdrawals are subject to income taxes in a 20% penalty HSA's are fully portable and assets can accumulate over the years upon death. HSA ownership may be transferred to a spouse tax free.

Under a disability income policy, which provision would be payable if the clause of an injury is unexpected and accidental?

Accidental bodily injury provision

Conversion privilege

Allows a policy owner before an original insurance policy expires to elect to have a new policy issue that will continue the insurance coverage conversion may be affected at attained age premiums based on the age, attend at time of conversion or at original age premiums based on age a time of original issue conversion is a common privilege for term, life insurance, and all group insurance. The insured does not have to prove insurability, a.k.a. good health when converting a policy.

Cancelable policies

Allows the insured to cancel, or terminate the policy. At any time this type of renewability is prohibited in most states.

Which of the following does coordination of benefits allow

Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paid

Disability buy sell plans

Also known as disability buyout agreement Our agreements between business co-owners that provides the shares owned by anyone of them, who becomes disabled, shall be sold two and purchased by the other co-owner, or by the business, using funds from disability income insurance. The buyout plan usually contains a provision, allowing for a lump sum payment of the benefit there by facilitating, the buyout of the disabled's interest the policy is legally binding and proceeds are normally received tax free

Pre-existing conditions

An illness or medical condition that existed before a policies effective date are usually excluded from coverage through the policy standard provisions, or by waiver under HIPAA are defined as health issues that existed were treated or diagnosed within six months prior to employment and enrollees pre-existing conditions for a health benefit plan may be excluded for up to 12 months 18 months for late enrollees is an individual who elects coverage after the initial eligibility period

Capital sum

Another form of payment payable under a AD&D policy and is the amount payable for the accidental loss of sight or accidental dismemberment or the capital sum. It is a specified amount, usually expressed as a percentage of the principal sum, which varies according to the severity of the injury.

Maternity benefits

Any policy of health insurance that provides coverage for maternity care must also cover the services of certified nurse-midwives and services of licensed birth centers In addition, the insurance company cannot limit the length of stay for Maternity or newborns that are less than medically necessary

Cafeteria plans

Are benefit arrangements in which employees can pick and choose from a menu of benefits thus tailoring the benefits package to their specific means taxation of cafeteria plans is regulated by section 1 to 5 of the internal revenue code. Thus sometimes cafeteria plans are referred to as a section 125 plan

Credit policies

Are designed to help the insured pay off a loan in the events they are disabled due to an accident or sickness, or in the event they die if the insured becomes disabled, the policy provides for monthly benefit payments, equal to the monthly loan payments do if the insured dies the policy will pay a lump sum to the creditor to pay off the loan credit policies typically cannot exceed the amount of the loan as that is the only amount the creditor has insurable interest in

Non-renewable policy's

Are for predetermined terms of the year or less typically short term health insurance and are considered temporary

Blanket health policies

Are issued to cover a group who may be exposed to the same risks, but the composition of the group the individuals within the group are constantly changing. A blanket health plan may be issued to an airline or a bus company to cover, is passengers or to a school to cover it students know certificates of coverage are issued and a blanket health plan as compared to group insurance.

The five principal renewability classifications are

Cancelable Optionally, renewable Conditionally, renewable Guaranteed renewable Noncancelable Generally speaking, the more advantageous the renewability provision's to the insured, the more expensive the coverage

Non-occupational coverage

Coverage provided by disability income policy that does not provide benefits for losses occurring as the result of the insureds employment

Special risk policy

Covers unusual hazards, normally not covered under ordinary accident and health insurance.

Renewability provision's

Defined the rights of the insurer to cancel the policy at different points during the life of the policy there are five principal renewability classifications

Patient protection and affordable care act

Designed to increase health insurance, quality and affordability, lower the uninsured rate by expanding insurance coverage and reduce the cost of healthcare. It introduced mechanisms, including mandates, subsidies and insurance exchanges. The law requires insurers to accept all applicants, cover a specific list of conditions, and charge the same rates, regardless of pre-existing conditions or sex often shortened to the affordable care act and nicknamed. Obamacare only applies to specific medical coverage. It does not apply to all health insurance policies.

Coordination of benefits

Designed to prevent duplication of group, insurance, benefits, limits benefits from multiple group, health insurance policies in a particular case to a percentage of the expenses, covered and designates the order in which the multiple characters are to pay benefits

Per Capita (by the head)

Evenly distribute benefits among all named a living beneficiaries

Consolidated Omnibus Budget Reconciliation Act (COBRA) 1985

Federal legislation, which extends group health coverage to terminated employees, and/or their families at the individuals expense for up to 18 months cobra coverage may be extended beyond 18 months in certain circumstances cobra rules typically apply when an employee loses coverage through lots of employment, except in cases of Gross misconduct, or due to a reduction in work hours, cobra benefits, also extend to spouses or other dependents in case of divorce, or the death of the employee children who are born to adopted or place for adoption with the covered employee, while he, or she is on cobra coverage are also entitled to coverage all companies that have averaged at least 20 full-time employees over the past calendar year must comply with cobra regulations

Provide health coverage for small groups, whose numbers are too small to qualify for true group insurance

Franchise health plans

Optionally renewable policy is

Give the insurer the option to terminate the policy on a date specified in the contract. If the insured decides to renew the policy, they also have the option, and usually choose to increase the premiums on the anniversary date.