Quiz 5 (Ch 15 - 17)

Dirk required surgery for a kidney impairment. His total bill for medical services was $50,000. Dirk has a medical expense policy with a $1,000 calendar-year deductible and a $5,000 annual out-of-pocket limit. His coinsurance percentage is 20 percent. The out-of-pocket limit applies to coinsurance only. Assuming this surgery and hospitalization were the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy, how much of the $50,000 bill will the insurer pay? o $44,000 o $39,200 o $40,000 o $39,000

$44,000

Lynn works for a state university. In addition to the university's regular retirement plan, Lynn participates in another retirement savings plan. She elected to have $5,000 of her salary withheld and contributed to a tax-sheltered annuity with an insurer. The type of plan that Lynn established is called a o defined benefit plan. o Keogh plan. o SIMPLE plan. o 403(B) plan.

403(B) plan

Which of the following statements about group insurance underwriting principles is true? o Employees should be required to remit premiums directly to the insurance company. o A group should be formed for the specific purpose of obtaining insurance. o The average age of the group should ideally increase over time. o A flow of people through the group is desirable.

A flow of people through the group is desirable.

Which of the following statements about pension funding agencies and funding instruments is true? o Under a trust-fund plan, individual annuities are purchased each year for employees participating in the plan. o A separate investment account is a group pension account with a life insurance company. o If the funding instrument is a commercial bank, the plan is called an insured plan. o Under a guaranteed investment contract, the insurer guarantees the principal of a lump sum deposit but does not guarantee the interest rate.

A separate investment account is a group pension account with a life insurance company.

Which of the following statements about group long-term disability income plans is true? o Maximum monthly benefits under long-term disability income plans are significantly lower than the benefits paid under short-term disability income plans. o Benefits are increased if a worker is eligible for Social Security or workers compensation benefits. o Coverage is provided for both occupational and nonoccupational disabilities. o The definition of disability becomes less restrictive after a worker has been disabled for 2 years.

Coverage is provided for both occupational and nonoccupational disabilities.

All of the following statements about HMOs are true EXCEPT o the selection of physicians is usually limited to physicians affiliated with the HMO. o HMOs place a heavy emphasis on controlling the cost of covered services. o HMO members pay nothing for medical care until care is provided, then they must pay high deductibles and large coinsurance payments. o they organize and deliver health care services

HMO members pay nothing for medical care until care is provided, then they must pay high deductibles and large coinsurance payments.

One provision of the Affordable Care Act provides creates in each state a transparent and competitive insurance marketplace where individuals and small firms can purchase affordable and qualified health coverage. This marketplace is called a o Health Insurance Marketplace. o Health Maintenance Organization (HMO). o Medicaid plan. o Medicare plan.

Health Insurance Marketplace.

Which of the following statements about tax-deferred retirement plans in the United States is true? I. Women, on average, receive lower employment-based retirement income than men. II. One way to hedge against inflation is to invest lump-sum pension distributions in fixed-income investments. o both I and II o II only o I only o neither I nor II

I only

Which of the following statements regarding health care expenditures in the United States is (are) true? I. As a nation, the United States spends significantly more per-person on health care than most other industrialized nations. II. Health care expenditures in the United States are high because everyone is covered by a health insurance plan. o I only o both I and II o neither I nor II o II only

I only

Which of the following statements about disability and disability income insurance is (are) true? I. Most disability income policies replace 100 percent of gross earnings. II. The probability of being disabled before age 65 is much higher than commonly believed. o II only o both I and II o I only o neither I nor II

II only

Which of the following statements about individual disability income policies that use a two-part definition of total disability is (are) true? I. During the initial period of disability, the insured must be unable to perform the duties of any gainful occupation. II. After the initial period of disability, the insured must be unable to perform the duties of any occupation for which he or she is reasonably fitted by education, training, and experience. o neither I nor II o both I and II o II only o I only

II only

Which of the following statements is true regarding disability income insurance? o Increasing the elimination period reduces the premium for disability income insurance. o A uniform definition of disability appears in all disability income policies. o Disability income insurance usually replaces 100 percent of lost income. o The purchase of disability income insurance is not necessary if you are covered under workers compensation.

Increasing the elimination period reduces the premium for disability income insurance.

All of the following are typical characteristics of individual medical expense coverage EXCEPT o deductibles. o annual benefit limits. o essential health benefits. o coinsurance.

annual benefit limits.

Which of the following statements concerning defined contribution pension plans is (are) true? I. The contribution rate is fixed. II. The retirement benefit varies. o II only o both I and II o neither I nor II o I only

both I and II

A key feature of group medical expense plans is the employee being required to pay a percentage of covered expenses in excess of the deductible. This feature is o reinsurance. o other insurance. o pro-rated insurance. o coinsurance.

coinsurance.

The effect of an annual out-of-pocket limit in an individual medical expense policy is to o limit the lifetime benefits payable under the policy. o prevent the insured from receiving duplicate benefits if medical expenses are also covered under workers compensation insurance. o cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of annual out-of-pocket expenses. o put a cap on annual benefits the insurer will pay.

cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of annual out-of-pocket expenses.

All of the following statements about the tax treatment of Health Savings Accounts (HSAs) are true EXCEPT o distributions from a qualified HSA used to fund medical expenses are taxable income. o distributions from a qualified HSA prior to age 65 for nonmedical purposes are subject to a 10 percent penalty tax. o investment income in a qualified HSA accumulates income tax free. o contributions to a qualified HSA are tax deductible.

distributions from a qualified HSA used to fund medical expenses are taxable income.

The period of time during which an employee can sign up for group insurance coverage without furnishing evidence of insurability is called a(n) o noninsurability window. o eligibility period. o waiting period. o probationary period.

eligibility period.

The Affordable Care Act requires all new medical expense plans to provide a comprehensive set of coverages and services. This comprehensive set of coverages and services that must be provided are called o dread disease benefits. o respite care benefits. o long-term care benefits. o essential health benefits.

essential health benefits.

Under older group medical expense plans, physicians were paid a fee for each covered service and were reimbursed on the basis of reasonable and customary charges, up to a maximum limit. These older group medical expense plans were called o managed care plans. o point-of-service plans. o indemnity plans. o service medical plans.

indemnity plans.

High deductible group health insurance plans have all of the following characteristics EXCEPT o low coverage limits. o health savings accounts or health reimbursement arrangements. o high dollar deductibles. o coinsurance.

low coverage limits.

Which of the following statements about trust fund plans is (are) true? I. The trustee typically purchases annuities for retiring employees. II. The trustee guarantees the adequacy of the fund to pay the promised benefits. o I only o both I and II o neither I nor II o II only

neither I nor II

Individual medical expense insurance sold in the Health Insurance Marketplace is characterized by which of the following? o no exclusions o narrow range of benefits o no lifetime benefit limits o first-dollar coverage

no lifetime benefit limits

Barb was injured in an auto accident. She was totally disabled and collected disability income benefits for 8 months. She would like to return to work on a part-time basis to see if her recovery is complete. During this period, her insurer will pay reduced disability income benefits. This type of disability is called o permanent disability. o recurrent disability. o partial disability. o presumptive disability.

partial disability.

Prior to passage of the Affordable Care Act, insurance policies typically contained a provision excluding coverage for impairments that were present or were treated during a specified period prior to the effective date of the policy. This provision is a(n) o benefit period provision. o preexisting-conditions clause. o time limit on certain defenses. o incontestable clause.

preexisting-conditions clause.

Beth's disability income insurance policy provides benefits for accidental death, dismemberment, and loss of sight. The maximum amount payable under this benefit is known as the o principal sum. o monthly benefit. o cash value. o face value.

principal sum

Advantages of cafeteria plans include all of the following EXCEPT o greater employer control over increasing benefit costs. o reduced taxes for employees. o simplicity of benefit administration. o employees can select benefits that best match their needs.

simplicity of benefit administration.

Connors Company self-funds the medical expense benefits that it provides to its employees. Connors Company has a contract with a commercial health insurance company providing that the health insurance company will pay all claims in excess of $250,000. The arrangement with the health insurance company is called o managed care. o stop-loss insurance. o coinsurance. o reinsurance.

stop-loss insurance.

All of the following are potential disadvantages to employees covered by a money-purchase pension plan EXCEPT o the benefit formula may produce an inadequate benefit if an employee enters the plan at an older age. o the investment losses are borne by the employees. o the contribution rate by the employer is uncertain. o the retirement benefit can only be estimated in advance of retirement

the contribution rate by the employer is uncertain.

All of the following are historical reasons for the increase in health care expenditures in the United States EXCEPT o cost insulation because of third-party payers. o employer-sponsored health insurance. o technological advances in health care. o universal health insurance coverage.

universal health insurance coverage.