MA Insurance Exam

All of the following are true regarding Key Employee Disability Income insurance EXCEPT a)The employer owns the policy. b)Benefits are paid to the employer to retrain a new person. c)Premiums are not tax deductible for the employer. d)Benefits are taxable to the employer.

d)Benefits are taxable to the employer. Key person disability income premiums are not deductible to the business, but the benefits are received income tax free by the business.

How many eligible employees must be included in a contributory plan?

75% At least 75% percent of eligible employees can be included in a contributory plan. Both the employees and the employer contribute to premium payments.

Who must sign the notice regarding replacement?

Both the applicant and agent Before issuing a replacement policy, the insurer must furnish the applicant with a notice regarding replacement, which must be signed by both the applicant and the agent.

Guarantee of insurability option in long-term care policies allows the insured to

Secure the policy's nonforfeiture values regardless of the insured's age or health status Guarantee of insurability option allows the insured to periodically increase benefit levels without providing evidence of insurability.

The regulation of the insurance industry primarily rests with

The State. Each state is responsible for the conduct of insurance within that state.

How do employer contributions to a Health Savings Account affect the insured's taxes?

The employer contributions are not included in the individual insured's taxable income.

An insured's long-term care policy is scheduled to pay a fixed amount of coverage of $120 per day. The long-term care facility only charged $100 per day. How much will the insurance company pay?

120 a day Most LTC policies will pay the benefit amount in a specific fixed dollar amount per day, regardless of the actual cost of care.

An insured has a major medical policy with a $500 deductible and 80/20 coinsurance. The insured is hospitalized and sustains a $2,500 bill. What is the maximum amount that the insured will have to pay?

900 The insured will pay the $500 deductible, plus 20% of the remainder: $2,500 (total bill) - $500 (deductible) = $2,000; 20% of $2,000 = $400; $500 (deductible) + 20% (coinsurance) = $900 (total amount due by the insured).

In a group policy, who is issued a certificate of insurance?

The individual insured The individuals covered under a group insurance contract are issued certificates of insurance. The certificate tells what is covered in the policy, how to file a claim, how long the coverage will last, and how to convert the policy to an individual policy.

Any individual insurance producer who allows his license to lapse may, within 12 months from the due date of the renewal fee, reinstate the same license

Without the necessity of passing a written examination, but a penalty fee of double the unpaid renewal fee must be paid. Any individual insurance producer who allows his license to lapse may, within 12 months from the due date of the renewal fee, reinstate the same license without the necessity of passing a written examination, but a penalty in the amount of double the unpaid renewal fee will be required for any renewal fee received after the due date.

Which of the following provisions is mandatory for health insurance policies? a)Physical examination and autopsy b)Recurrent disability c)Unpaid premiums d)Intoxicants and narcotics

a)Physical examination and autopsy Physical examination and autopsy is a mandatory provision required by law. The other answer choices are optional provisions.

Under HIPAA, which of the following is INCORRECT regarding eligibility requirements for conversion to an individual policy? a)The gap of coverage for eligibility is a period of 63 or less days. b)An individual who was previously covered by group health insurance for 6 months is eligible. c)An individual who has used up COBRA continuation coverage is eligible. d)An individual who doesn't qualify for Medicare may be eligible.

b)An individual who was previously covered by group health insurance for 6 months is eligible. All of these eligibility requirements are correct, except an individual who was previously covered for at least 6 months. HIPAA requires that the individual have a previous continuous creditable health coverage for at least 18 months.

The insurer may suspect that a moral hazard exists if the policyholder a)Is prone to depression. b)Is indifferent to activities that may be dangerous. c)Always drives over the speed limit. d)Is not honest about his health on an application for insurance.

d)Is not honest about his health on an application for insurance. Moral hazards refer to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.

When compared with the administrative cost found in individual coverage, the per capita administrative cost in group health insurance is

lower The per capita administrative cost in group health insurance is less than the administrative cost found in individual coverage.

Which of the following is not true of Disability Buy-Sell coverage? a)Benefits are considered taxable income to the business. b)It is typically written to cover partners or corporate officers of a closely held business. c)Premium payments are not deductible to the business. d)The policies provide funds for the business organization to purchase the business interest of a disabled partner. The buy-sell coverage benefits are tax free.

a)Benefits are considered taxable income to the business. The buy-sell coverage benefits are tax free.

For how long must producers maintain complete records of all complaints?

2 years In this case, producers must maintain complete records of all complaints for periods for 2 years following their receipt.

Any person who violates a cease and desist order of the Commissioner after it has become final must

Pay a fine to the state not to exceed ten thousand dollars for each violation, which may be recovered in a civil action. Any person who violates a cease and desist order of the Commissioner after it has become final must pay a fine to the state not to exceed $10,000 for each violation, which may be recovered in a civil action. Upon order of the Commissioner, the person will be subject to suspension or revocation of his/her license.

Which of the following insurance options would be considered a risk-sharing arrangement? a)Reciprocal b)Stock c)Mutual d)Surplus lines

a. reciprocal When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

The Federal Fair Credit Reporting Act a)Prevents money laundering. b)Regulates consumer reports. c)Protects customer privacy. d)Regulates telemarketing.

b)Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.

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?

$5,000 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.

What is the license renewal period for a portable electronics insurance license?

2 years The license is valid for a 2-year period and no examination is required for licensure.

An insured carries health insurance with two different providers and is covered on an expense incurred basis. He has an appendectomy and files the claims to both insurers. Neither company is notified in advance that the insurer has other coverage. What should each insurer pay?

A proportionate amount In the event that an insured is covered on an expense-incurred basis for the same expenses under multiple insurers and the insurers are not informed about the other sources of coverage before the loss, proportionate shares of the claims should be paid.

ow long is an open enrollment period for Medicare supplement policies?

An open enrollment period is a 6-month period that guarantees the applicants the right to buy Medigap once they first sign up for Medicare Part B.

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

An unfair trade practice. It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association.

In order to minimize adverse selection, employer group dental plans may require employees who enroll after they were initially eligible to participate to do all of the following EXCEPT a.)Increase benefits for a period of one year. b)Submit evidence of insurability. c)Satisfy a longer probationary period. d)Reduce benefits for a period such as one year.

D. Reduce benefits for a period such as one year Dental claims expenses are substantially higher in the group dental plan the first year than in subsequent years. This is because individuals delay their dental needs until the dental plan becomes effective. To minimize the effects of this adverse selection, the insurer will utilize methods to combat this first year expense.

The HMO Act of 1973 required employers to offer an HMO plan as an alternative to regular health plans if the company had more than 25 employees. How has this plan since changed?

Employers are no longer forced to offer HMO plans. The HMO Act of 1973 forced employers with more than 25 employees to offer an HMO plan as an alternative to their regular health plans. The part of the act requiring dual choice has expired and has not been reinstated.

When a person applies for Medicare supplement insurance, whose responsibility is it to confirm that the applicant does not already have accident or sickness insurance in force?

Insurer Although it is illegal for an applicant to intentionally misrepresent himself in an insurance application, it is the insurer's ultimate responsibility to make sure that the applicant does not already have another accident or sickness policy in force.

A policyowner is reading a statement on the first page of his health insurance policy, which says "this is a limited policy." What is the name of this statement?

Limited Policy Notice It is required by law that a Limited Policy Notice must be printed on the first page of insurance policies. The statement reads "this is a limited policy," which means that the benefits offered by the policy are limited.

Regarding cost containment in medical plans, what type of review process do employers and insurers use to evaluate the utilization review process and the effectiveness of the professionals involved in large insurance claims?

Retrospective review Under the retrospective review process, employers and insurers can evaluate the utilization review process and the effectiveness of the professionals involved in large claims. These reviews include hospital bill audits.

If a member of a Blue Cross/Blue Shield (BC/BS) obtains medical treatment from a non-participating provider, the insurer will pay

The amount that would have been paid to a participating provider. If a subscriber/member incurs medical expenses from a nonparticipating provider, the BC/BS is responsible for only that amount that it would have paid to a participating provider.

Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is a)Monthly. b)Within 45 days. c)Weekly. d)Biweekly.

a)Monthly. If a claim involves disability income benefits, the policy must pay those benefits not less frequently than monthly. In all other cases, the company may specify the time period of 45 or 60 days for payment of claims.

Which of the following is NOT a characteristic of a group long-term disability plan? a)The benefit can be up to 66 and 2/3% of one's monthly income. b)The benefit can be up to 50% of one's yearly income. c)The elimination period is the same as in the short-term plan's benefit period. d)The benefit period may be to age 65.

b)The benefit can be up to 50% of one's yearly income. The maximum benefit is based upon monthly income.

All of the following are covered by Part A of Medicare EXCEPT a)Home health services. b)Physician's and surgeon's services. c)In-patient hospital services. d)Post-hospital nursing care.

b. Physician's and surgeon's services. Physician's and surgeon's services are covered under Part B.