Health Concepts
Janine, who was born in 1948, incurred $4,000 in unreimbursed LTC expenses for the calendar year. If her adjusted gross annual income is $37,000, what amount of her unreimbursed LTC expenses is tax deductible?
$1,225 Since Janine was born before January 2, 1950, she can deduct expenses that exceed 7.5% of her adjusted gross annual income. Math: 7.5% Threshold - $37,000 * 7.5% = $2,775 Janine exceeded her 7.5% threshold; therefore, she can deduct $1,225 of her annual unreimbursed LTC expenses ($4,000 - $2,775 = $1,225).
Patrice has a basic medical expense plan that covers $250 per day and up to 45 days for Room and Board. Her plan also includes $1,000 for unscheduled surgical expense, and 5 times the daily room and board limit for miscellaneous expenses. Last month she fell ill and was admitted to the hospital for 10 days, during which time she had to undergo surgery that cost $2,500, as well as incurred $1,500 in miscellaneous expenses. What is the total amount that Patrice would be responsible for after her insurer paid its share?
$1,750
**Tim was recently hospitalized and underwent an unplanned surgery. As a result, he incurred a total of $7,500 in medical expenses. Tim's major medical health insurance policy has a $3,500 deductible and 80/20 coinsurance with a stop-loss occurring at $5,000. According to his policy, of the $7,500 in medical expenses, what amount is Tim responsible for paying?
$4,300 Deductible + Coinsurance dollar amount = Stop-Loss (Out-of-Pocket Maximum) Step 1:Determine the deductible amount : $3,500 Step 2: Determine the coinsurance dollar amount : 20% of $4,000 ($7,500 - $3,500 deductible) = $800 Step 3: Add the deductible amount of $3,500 to the coinsurance dollar amount of $800. Tim is responsible for paying $4,300 of his medical expenses. He is responsible for paying $4,300 of his medical expenses.
According to the NAIC Model for Health Policy Provisions, if an insured does not pay his or her MONTHLY premium, the grace period provision will allow how many additional days beyond the payment date to make such payment before the policy is cancelled by the insurer for lack of premium payment?
10 days According to the NAIC Model for Health Policy Provisions, policy holders who pay monthly are provided 10 additional days after a premium is due to submit a payment before the policy is cancelled by the insurer.
Medicare Part A provides up to how many days of skilled nursing care in a skilled nursing facility?
100 days Medicare Part A provides up to 100 days of skilled nursing services at a skilled nursing facility.
Under the conversion privilege of group health insurance, individuals are allowed to convert their group plans to individual plans with the same benefits, but must do so within what period of time?
31 days A group health insurance policy must allow an employee to convert his or her group insurance policy into an individual plan upon leaving the group without need to provide evidence of insurability to the insurer. The conversion period is usually 31 days from the time of termination.
In regards to Medicare supplement policies, Plan A includes all of the following EXCEPT:
50% of the deductible associated with Medicare Part A Plan K covers 50% of the deductible in Medicare Part A, NOT Plan A.
In a disability income policy, short-term disability is defined as coverage lasting for what period of time?
6 months to 2 years
To provide an insurer time to investigate a claim, an insured cannot take legal action against the insurer for at least how many days after furnishing written proof of loss?
60 days An insurance company has 60 days from the time a policyowner submits a proof of loss before legal actions can be taken against them by a policyowner. In addition, legal action cannot be brought against an insurer usually after 3-5 years from the date written proof of loss is furnished to the insurer.
*Regarding Proof of Loss, within what amount of time must proof of loss be furnished to the insurer?
90 days A claimant has 90 days in which he or she is required to submit written proof of loss. In an extenuating situation, if 90 days is not realistic to submit for the claimant, he or she is allowed a maximum of one (1) year to submit Proof of Loss and still be accepted by the insurer.
*Written proof of loss must be filed with the insurance carrier within what amount of time from the date of loss?
90 days A claimant has 90 days in which he or she is required to submit written proof of loss. In an extenuating situation, if 90 days is not realistic to submit for the claimant, he or she is allowed a maximum of one (1) year to submit Proof of Loss and still be accepted by the insurer.
*What length of time is the Medicare Part A inpatient hospital benefit period?
90 days Medicare covers the first 90 days of hospitalization for each benefit period.
In the event that an insured becomes disabled due to loss of limbs or vision as a result of an accident, what will an AD&D policy pay the insured?
A lump-sum benefit called the 'capital sum' The Capital Sum is defined as the benefit amount that is payable to the insured as a result of dismemberment or the loss of eyesight, while the Principal Sum is payable to the policy's beneficiary upon the death of the insured. The capital sum benefit amount, often expressed as a percentage or fraction of the principal sum, will fluctuate depending on the seriousness of an accident, and in extreme cases such as the loss of eyesight, both arms or legs, the capital sum can equal 100% of the principal sum, but because it is payable to the insured, not the beneficiary, it is still considered to be the policy's capital sum.
*Which disability insurance provision is less restrictive to an insured?
Accidental Bodily Injury The accidental means provision states that the 'cause' of an injury must be unexpected and accidental, while the accidental bodily injury provision states that the 'result' of an injury must be unexpected and accidental. Based on various court decisions, most DI policies are now written using the accidental bodily injury provision because it is not as restrictive as the accidental means provision.
In his free time, Ross enjoys white water rafting with his friends. Recently, Ross experienced troubles while on the river and ended up injuring himself in the process. Based on this information, which disability insurance provision would most likely deny benefits due to the cause of his injury?
Accidental Means provision Under the accidental means provision, the 'cause' of an injury must be unexpected and accidental in order for benefits to be payable to the insured. If his DI policy was written using the accidental means provision, Ross would most likely not be covered for his white water rafting injury. As a result of various court decisions regarding the restrictive nature of this provision, most DI policies are now written using the accidental bodily injury provision because it is not as restrictive as the accidental means provision.
Medical Loss Ratio (MLR) A basic financial measurement used in the Affordable Care Act to encourage health plans to provide value to enrollees. The MLR is also referred to as the '80/20 Rule,' and generally requires insurance companies to spend at least 80% of the money they take in on premiums on actual health care and quality improvement activities instead of administrative, overhead, and marketing costs.
Also referred to as the '80/20' rule, which financial measurement requires insurance companies to spend at least 80% of the money they take in on actual health care and quality improvement activities instead of administrative, overhead, and marketing costs?
Which answer BEST describes the Extra-Territorial Provision?
An employee is covered under the workers' compensation laws of the state in which he or she is employed, even if the employee is temporarily working in a different state.
While some LTC policies offer unlimited lifetime coverage, most plans limit coverage periods from 3 to 5 years, often with limited benefit amounts.
Being hospitalized for 33.3% in the year leading up to the diagnosis Chronic physical illness includes the inability of two or more of an individual's daily activities for a period of at least 90 days, such as feeding, toileting, bathing dressing and mobility. In order to qualify as cognitively impaired (a deficiency in the ability to think or reason), an impairment diagnosis must be certified by a physician within the previous 12 months.
Also known as a Flexible Benefits Plan, what benefit program offers employees a choice between permissible taxable benefits, including: cash, and nontaxable benefits such as life and health insurance, vacations, retirement plans and child care?
Cafeteria Plan Although a common core of benefits may be required, under a cafeteria plan, the employee can determine how his or her remaining benefit dollars are to be allocated for each type of benefit from the total amount promised by the employer.
Under the Uniform Individual Accident and Sickness Policy Provisions Law developed by the National Association of Insurance Commissioners (NAIC), which of the following is considered an Optional Provision for accident and health insurance?
Change of Occupation While it is not included in the 12 Mandatory Provisions of the NAIC Model, it is up to the insurance company to enforce the Change of Occupation provision.
Thomas is thinking of purchasing a disability income insurance, but he wants a plan that will increase in benefits over time to compensate for inflation. What type of policy rider should he add to his policy?
Cost of Living Rider Most commonly referred to as a 'COLA' rider, this added rider increases the monthly disability income amount, usually on an annual basis to keep up with rising inflation. Designed for long-term disability periods, a COLA does not initially adjust benefit amounts for the 1st benefit year. In order for adjustments to the benefit amount to occur, the insured must be disabled for more than a year.
*In comparison to 'first-dollar' coverage provided by basic medical expense insurance, major medical insurance includes which two key features?
Deductibles and Coinsurance Insurers require policyholders to absorb and pay these initial expenses before the insurer begins to pay benefits on a policy. This greatly reduces the insurer's costs and allows it to promote a smaller premium payment to maintain the policy.Basic physicians (non-surgical) expenses and basic surgical expenses Insurers require policyholders to absorb and pay these initial expenses before the insurer begins to pay benefits on a policy. This greatly reduces the insurer's costs and allows it to promote a smaller premium payment to maintain the policy.
**All of the following statements correctly describe a deductible EXCEPT
Deductibles are associated with basic medical insurance, major medical insurance and dental insurance. Unlike major medical and dental insurance, basic medical insurance is referred to as 'first-dollar' coverage because it provides benefits up front to an insured individual without having to satisfy any plan deductible.
Also known as a 'time deductible' in a disability income policy, what is the name of the period of time an insured must be disabled before disability income benefits are payable?
Elimination Period This elimination period is similar to a health policy's deductible amount in a medical expense plan because both require an insured to incur some expense before benefit payment begin.
%Premium costs for disability income insurance plans can be controlled by the length of the benefit period as well as extending the policy's:
Elimination period A DI policy's elimination period can last from 30 days (or less) to 6 months before benefits are payable. Generally speaking, the longer the elimination period, the lower the policy's premium for the insured.
In regards to disability insurance, which rider or waiver excludes coverage for a specific pre-existing condition in order to still qualify the individual for a disability insurance policy?
Impairment rider By adding an impairment rider to the policy, the DI insurer can specifically exclude the disqualifying condition in order to still allow the individual to qualify for the DI policy.
If June turned age 65 in April and is currently within her initial enrollment period for Medicare Parts A and B, towards the end of which month will her initial enrollment period end?
July The Initial Enrollment Period (IEP) provides an eligible individual with a 7 month period in which to enroll into Medicare Parts A and B, beginning 3 months before turning age 65, and lasting up to the 7th month limit, which includes the 3 months after turning age 65 (in addition to the individual's actual birth month). Since June turned 65 in April, her IEP began in January and extends 7 months towards the end of July.
How often does a Medicare enrollee pay his or her Medicare Part A deductible?
Once every benefit period Medicare enrollees are required to pay a deductible for each new benefit period.
*All of the following are associated with a basic medical expense plan EXCEPT
Percentage participation Percentage participation, also known as 'coinsurance,' is associated with comprehensive major medical insurance, not basic medical expense insurance. Coinsurance is defined as a percentage of additional medical expenses that a policyholder must pay in addition to a deductible.
*Which type of dental plan is similar to an HMO in that it offers services based on capitation payments?
Prepaid dental plan Prepaid dental plans are paid in advance and provide services to subscribers of the plan. Premium is paid into the insurance policy monthly to the insurer who then pays a monthly capitation fee to the dental providers for services performed.
William, who was injured in an accident, returned to work two months ago. However, as a direct result from his injury, he is unable to work as many hours as he did before the accident. As a result, what type of benefits would William receive under his disability income policy?
Residual Amount Benefit Partial (Residual) disability is defined as the ability to perform one or more normal job duties, but not all normal duties, or the inability to continue to work on a full-time basis, resulting in a decrease in an individual's normal income level due to a disability.
*Under the Presumption of Disability provision often included in disability income policy, what amount of benefits would be paid to an individual who lost two limbs but is still able to work?
The same amount of benefits as those individuals unable to work.
Long-term care policies generally provide coverage for what period of time?
While some LTC policies offer unlimited lifetime coverage, most plans limit coverage periods from 3 to 5 years, often with limited benefit amounts.
Mailing an issued policy either directly to the insured, or to the agent who then mails or delivers the policy to the insured is a process known as:
constructive delivery Constructive Delivery occurs when an insurer mails a policy to a customer directly or to the agent, who then delivers the policy to the customer.
*After the Initial Enrollment Period (IEP) has ended, individuals who do not elect to enroll into Medicare Parts A and B may do so
during the General Enrollment Period (GEP) from January 1st through March 31st. In addition to the initial enrollment period, individuals who choose not to enroll into Medicare initially may do so any year following their 65th birthday. A General Enrollment Period (GEP) from January 1st through March 31st provides eligible individuals with the opportunity to enroll into Medicare Parts A and B with coverage beginning on July 1st.
If Nancy has a long-term care insurance plan that offers a 'fixed' daily dollar amount of $200, and her current service costs $150 per day, what is the amount the insurance plan will likely pay as long as the service is required?
$200 Nancy's LTC benefits are 'fixed' (in comparison to 'expense-incurred'); therefore, regardless of the cost Nancy incurs per day ($150), her LTC policy pays the fixed daily amount of $200. She simply keeps the extra $50 benefit provided from this indemnity payment for her personal use.
ARC LLC is a limited liability partnership composed of 4 partners. Each partner purchased buy-sell disability policies, one for each of the other partners, to insure against the disability and business loss of any of the 4 partners of the LLC. As tax season comes to an end, what percentage of each partner's policy premiums can be deducted as a business expense for ARC LLC?
0% In regards to a 'key person' disability income plan or a partnership 'buy-sell' policy, since the business is providing protection for itself against the loss of one of its key executives or members, the company's premiums are not tax deductible as a business expense; however, benefits are received income tax-free to the business.
What percentage of an individual's disability premium expenses can be deducted from his or her annual income?
0% Premiums paid for individual disability insurance are not tax deductible from a policyholder's annual income; however, disability income payments are received income tax-free by the insured and are usually expressed as a percentage of the insured's pre-disability income amount.
What percentage of annual unreimbursed medical expenses can self-employed individuals, sole proprietors, and partnerships deduct from their annual income?
100% Self-employed individuals, sole proprietors, and partnerships can deduct 100% of their annual unreimbursed medical expenses, however, disability insurance taxation rules apply the same as they do for individual DI policies (taxable premiums and tax-free benefits).
*How long is the probationary period in a DI policy?
15-30 days
Through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), employers with 20 or more employees are required to continue group medical expense coverage for terminated workers for a period up to what period of time?
18-36 months The Consolidated Omnibus Budget Reconciliation Act, also known as COBRA, was enacted in 1985 to extend group health coverage to former employees and their families for up to 18 or 36 months after termination of employment. Under this federal law, an employer group must consist of at least 20 employees.
A policyholder is responsible to provide the insurer with a 'written notification of claim' within how many days of an event in which the policyholder intends to file a medical claim?
20 days A Notice of Claim, also referred to as a 'written notification of claim,' must be submitted within 20 days of an event in which the policyholder intends to file a medical claim?
How many days of skilled nursing facility care will Medicare provide benefits before a daily copayment is required?
20 days Medicare provides up to 100 days per benefit period with Medicare covering 100% for the first 20 days, and sharing the cost through a daily coinsurance amount for days 21-100
According to the Uniform Individual Accident and Sickness Policy Provisions Law, what is the maximum time limit a policyowner has to bring legal action against an insurance company after written proof of loss is furnished?
3-5 years after proof of loss is first furnished Legal action cannot be brought against an insurer usually after 3-5 years from the date written Proof of Loss is furnished to the insurer.
*At what point can a policyholder file suit against a health insurance company for failure to pay a claim?
60 days after filing proof of loss An insurance company has 60 days from the time a policyowner submits a proof of loss before legal actions can be taken against them by a policyowner. In addition, legal action cannot be brought against an insurer usually after 3-5 years from the date written proof of loss is furnished to the insurer.
*If Carey purchases disability income insurance, and an accident occurs leaving her totally disabled, what percentage of her pre-disability earnings will the insurance most likely cover if she does not have any other disability income sources?
60% - 70% Long-Term Disability coverage includes a longer (90 days to 6 months) elimination period and provides benefits lasting several years, up to age 65. It also provides benefit amounts equal to 60-70% of the insured's pre-disability income.
*Which of the following statements regarding Workers' Compensation is CORRECT?
Businesses can purchase workers' compensation insurance from a private company or it can purchase such coverage directly from the state. Regulated on the state level, but administered through the Department of Labor, businesses can purchase workers' compensation insurance from a private company or it can purchase such coverage directly from the state.
Which type of insurance coverage pays directly to the insured instead of the hospital?
Hospital Income (Indemnity) Insurance Often times the insured will take this amount and direct it towards the major medical deductible and any coinsurance requirements. This indemnity payment will help cover, or at least lower, the amount of deductible and coinsurance expense the insured might incur from an injury or illness.
*In regards to Workers' Compensation and private disability insurance, which of the following statements is CORRECT?
In a group DI policy where an employer provides employees with additional DI coverage as a benefit of employment, DI insurance coverage for 'occupational' claims begins after Workers' Compensation coverage is exhausted.
Justin, age 37, earned an adjusted gross income of $45,000 for the calendar year. After a short stint in the hospital, his individual health policy covered most of his medical expenses; however, Justin was still responsible for paying his deductible, doctor copays and coinsurance amounts equaling $6,000 in unreimbursed medical expenses. Of this $6,000, what amount can Justin deduct when he files his annual taxes?$6,000
Solution: Since Justin was born after January 2, 1950, he can deduct expenses that exceed 10% of his adjusted gross annual income. Math: 10% Threshold - $45,000 * 10% = $4,500Justin exceeded his 10% threshold; therefore, he can deduct $1,500 of his $6,000 in medical expenses ($6,000 - $4,500 = $1,500).
Which Act amended Social Security to make Medicare secondary to group health coverage?
Tax Equity and Fiscal Responsibility Act (TEFRA) Depending on the employee and the extent of the group health coverage, an individual who qualifies for Medicare can still elect for group health insurance, in which case he or she can decline Medicare enrollment, or can enroll into Medicare and use it as secondary coverage to the group health insurance.
*Bob is turning 65 next month and is eligible for Medicare; however, since Bob is still employed and covered under his group health plan, he has decided to defer his Medicare enrollment until a later date. When Bob does enroll into Medicare, he will
be able to enroll into Parts A and B during a special enrollment period lasting 8 months following the date in which he leaves his group health plan without paying a Part B late enrollment penalty. A currently employed individual who is still insured under a group health plan when he or she reaches age 65 can either enroll into Medicare while still covered by his or her group health plan, or defer Medicare enrollment until he or she retires. Once employer group health coverage has ended, a retiree enters a Special Enrollment Period (SEP) in which he or she has 8 months to enroll into Parts A and B without being charged a Part B late enrollment penalty.