Study Chapter 9) Other Provisions

Interest on Claims Proceeds

Insurers are required to pay on valid health insurance claims within a certain amount of time. If the insurer fails to do so, the insurer will be required to pay interest on the claim. Interest is calculated from the day the health insurance claim payment should have been made.

Transplants

Transplant coverage may be offered in some health insurance policies. It may be included in the policy coverage, or added as a rider. The terms of coverage vary from policy to policy.

*Probationary Period* This prevents insurers from "buying a claim."

-A probationary period is the time between the effective date of the policy and the date coverage begins for all or certain physical conditions. -The probationary period protects the insurer from paying claims caused by an insured's pre-existing conditions. -This prevents insurers from "buying a claim." -For each type of coverage or condition that has probationary periods, the policy must state the term of the period before coverage begins.

Assignment Assignment = Transfer of Benefits

In medical expense insurance, the term assignment does not mean a transfer of ownership; instead it is a transfer of benefits from the policyowner to the medical provider. Under this arrangement, the *insurer pays benefits directly to the medical providers.*

Free Look 10 Day Free Look = Starts at Delivery

-Each insurance policy must provide notice that during the period of 10 days from the date of delivery to the policyowner, such policy may be returned for cancellation to the insurer. -The insurer will refund all premiums paid, including any policy fees or other charges, and the policy will be deemed void, as if no policy had been issued. -Most states require by law that all individual health insurance policies contain a free look period. -Some state have a 30 day Free Look from date of delivery for Long-term Care and Medicare Supplement policies.

Preauthorization or Preadmission Certificate

A policy may require that the insured or medical providers obtain approval from the insurer before performing a medical procedure. -Benefits or services which require preauthorization are payable only upon obtaining that approval. -The policy must state what types of benefits or services require preauthorization and the process for obtaining approval from the insurer.

Lifetime, Annual or Per Cause Maximum Benefit Limits

A policy may set a limit on all or certain benefits on a lifetime, annual, or per cause basis. Once the insurer has paid benefits reaching or exceeding the limit, the insurer is no longer obligated to pay for those benefits. The policy must state any benefit with limits, the amounts, and the period of the limitation.

Waiver of Premium

A waiver of premium provision provides for the continuation of coverage without payment of premiums *if the insured becomes totally and permanently disabled.*

The consideration clause in an accident and health policy states that: Select one: a. The applicant pays the initial premium b. Insurable interest must exist between the parties involved c. Any attachments to the policy constitute the entire contract of insurance d. Certain claims will be excluded under the policy

The Consideration clause in an accident and health policy states that something of value (a _consideration_) must be exchanged between insurer and insured, specifically that the insured must pay an initial payment of premium to activate the contract. The correct answer is: The applicant pays the initial premium

Insuring Clause Insuring Clause = Insurers Commitment to Pay

The insuring clause is the insurer's promise to pay benefits. -*Typically, the insuring clause is on the policy face.* -The insuring clause states the scope of coverage, the promise to pay benefits under the terms of the policy, any conditions within the policy, and any definitions required by law. -Insuring clauses typically contain a statement that "benefits are subject to all the provisions, conditions, and exclusions of the policy."

Which of the following is a way that insurers manage risk? Select one: a. Benefit Payment Clause b. Consideration Clause c. Probationary Period d. Insuring clause

The insuring clause states the insurer's commitment to pay benefits. The benefit payment clause is the provision that describes how and when benefits are paid. The consideration clause describes the promises exchanged between the insured and the insurer as evidenced by the payment of premiums . The Probationary Period is a risk management tool. The probationary period protects the insurer from paying claims caused by an insured's preexisting conditions. The correct answer is: Probationary Period

Pre-existing Conditions "Pre-existing conditions clauses protect the insurer from adverse selection."

-Pre-existing conditions clauses protect the insurance company from adverse selection. -Pre-existing conditions are conditions or the existence of symptoms for which medical advice, diagnosis, care, or treatment was recommended or received within no more than six months before the date of the enrollment of the policy -The insured must disclose pre-existing conditions in the insurance application, and the insurer must state the limitations and exclusions for the payment of benefits for pre-existing conditions.

*Elimination Period* Benefits are not paid during the elimination period. Elimination Period = Time Deductible

-The Elimination Period is a type of deductible based on time, not dollars. -Often confused with the probationary period, the elimination period is the period of time from which accident, illness, or disability begins, until benefits are paid. -Benefits are not paid during the elimination period. -The elimination periods do not have to be consecutive. -For each benefit that has an elimination or waiting period, the policy must state the terms of the period before the benefits become payable. -Elimination periods are common in disability income and long-term care policies.

Recurrent Disability

Recurrent disability occurs when the insured again becomes disabled from the same or related event or condition that caused the prior disability. Policies must state the terms for or whether a recurrent disability is considered an existing or new claim, as well as, any waiting or elimination periods associated with payment of benefits.

Reduction in Coverage

A Reduction in Coverage provisions lays out the terms and conditions under which the amount of coverage under the policy can be reduced. Reduction in Coverage provisions must be clearly labeled in the policy.

Coinsurance

A cost-sharing mechanism between the insurer and the insured in a medical insurance transaction in which the insurer agrees to pay a large percentage of the expenses, and the insured is responsible for paying the remainder.

This clause or provision requires the insured to pay a set or fixed dollar amount each time a particular medical service is used: Select one: a. A co-pay clause b. A co-insurance clause c. A deductible clause d. A maximum benefit clause

Co-pay clauses include a schedule for what the insured must pay for various medical services each time he or she uses those. The amount is usually modest. The correct answer is: A co-pay clause

*Coinsurance* Coinsurance = Percentage Copayments = Dollar Amounts

Coinsurance is the agreed upon proportions for which the insurer and the insured share payment of certain benefits or services under the policy coverage. Coinsurance proportions are usually 80% for the insurer and 20% for the insured. The policy must state what benefits or services are subject to coinsurance and the proportion for which each party is responsible. -Coinsurance is based on a percentage.

Eligible Expenses

Eligible expenses are the types of benefits or services provided under the policy coverage. The policy must state the types of benefits and services covered and the conditions and limitation on the coverage.

Copayment

Payments the insured makes for benefits or services provided under the policy coverage. Sometimes called "copays", these fixed-dollar payments are usually small ranging from $5 to $40.

Military Suspension Provision

Policies containing a military service exclusion or provision for suspension of coverage must state whether premiums are reduced or refunded or coverage is suspended for the period of service.

All of the following are true regarding recurrent disability, EXCEPT: Select one: a. Recurrent disability occurs when the insured becomes disabled from the same or related event or condition that caused a prior disability. b. Recurrent disability means that the insured has a total disability and returns to work, but can only perform some of the duties they could perform prior to the disability. c. Disability income policies may consider a recurrent disability a new or existing claim, depending on the policy. d. Waiting periods for a recurrent disability must be noted in the policy.

Recurrent disability occurs when the insured again becomes disabled from the same or related event or condition that caused the prior disability. Policies must state the terms for or whether a recurrent disability is considered an existing or new claim, as well as, any waiting or elimination periods associated with payment of benefits. The correct answer is: Recurrent disability means that the insured has a total disability and returns to work, but can only perform some of the duties they could perform prior to the disability.

Benefit Payment Clause

The benefit payment clause is the provision that describes how and when benefits are paid. Disability policies generally make periodic payments of disability income benefits, while hospital, medical, and accidental death and dismemberment policies make lump sum payments.

Which health insurance provision/clause describes the promises exchanged between the insured and the insurer, as evidenced by premium payments and the insured's statements in the application, and the insurer's promise to pay benefits, as stated in the policy? Select one: a. Insuring clause b. Consideration clause c. Policy face d. Benefit payment clause

The consideration clause describes the promises exchanged between the insured and the insurer, as evidenced by the payment of premiums and statements made by the insured in the application, and the insurer's promise to pay benefits under the terms of the policy. The consideration clause is usually on the policy face. The correct answer is: Consideration clause

Policy Face

The policy face provides the name of the insurer and insured, a summary of the policy coverage, conditions and exclusions, and the term of the policy, with expiration date. The face also states whether or not and how the policy may be renewed.

When does the probationary period of a health insurance policy begin? Select one: a. When the producer collects the completed application b. When the insurer approves the application c. Upon the policy effective date d. Upon the date that coverage begins

The probationary period is the time period from the policy effective date until the date that coverage begins. The correct answer is: Upon the policy effective date

Usual, Reasonable and Customary Charges

Usual, reasonable and customary charges are where the insurer pays an amount for each procedure or treatment based on the average charges in that geographic area. If a policy uses the terms usual, reasonable, or customary charges, or any other similarly ambiguous terms, the policy must define those terms in the policy.

*Copayments* Coinsurance = Percentage Copayments = Dollar Amounts

-Copayments are payments the insured makes for benefits or services provided under the policy coverage. -Copayments, or "copays," may be made to the insurer or the medical personnel or facility, depending on the policy. -The policy must state the amount for each copayment for benefits and services under the policy coverage. -Copayments are usually small dollar amounts ranging from $5 to $40. Copayments are based on a dollar amounts.

Consideration Clause Consideration = Promise of Premiums

-The consideration clause describes the promises exchanged between the insured and the insurer as evidenced by the payment of premiums and statements made by the insured in the application, and the insurer's promise to pay benefits under the terms of the policy. -The consideration clause is usually on the policy face in the frequency of premium payments provisions.

Deductibles

A deductible is the amount owed by the insured for benefits or services received before the insurer will pay benefits. The policy must state the amount of each deductible for benefits or services under the policy coverage.

Which of the following best describes coinsurance? Select one: a. The agreed upon proportion for which the insurer and insured share payment of benefits under coverage b. Payments the insured makes for benefits or services provided under policy coverage c. The amount owed by the insured for benefits or services received before the insurer will pay benefits d. Types of benefits provided by the policy

Coinsurance is the agreed upon proportions for which the insurer and the insured share payment of certain benefits or services under the policy coverage. Coinsurance proportions are usually 80% for the insurer and 20% for the insured. The policy must state what benefits or services are subject to coinsurance and the proportion for which each party is responsible. The correct answer is: The agreed upon proportion for which the insurer and insured share payment of benefits under coverage

All of the following statements are true about the elimination period, EXCEPT: Select one: a. The elimination period is the time between the effective date of the policy and the date coverage begins. b. The elimination period is the period of time from the date of accident, illness or disability, until benefits are paid. c. Benefits are not paid during the elimination period. d. The elimination period is common in disability income and long-term care policies.

The elimination period is the period of time from which accident, illness or disability begins, until benefits are paid. Benefits are not paid during the elimination period. A probationary period is the time between the effective date of the policy and the date coverage begins for all or certain physical conditions. The correct answer is: The elimination period is the time between the effective date of the policy and the date coverage begins.

Other Provisions and Clauses

The following provisions are usually included in individual health insurance policies, but are not required by law.

The period of time between an employee's coming to work at a firm that offers group health insurance to its employees and the time when he or she is covered by that insurance is called: Select one: a. Probation period b. Grace period c. Waiver period d. Elimination period

The probation period is the time between the time an individual is employed by a company and the date at which he or she becomes eligible for group health and life insurance. The correct answer is: Probation period