(5) - Other Health Insurance Concepts
Group disability income insurance premiums paid by the employer are (A) Deductible by the employer as an ordinary business expense. (B) Taxable to the employee. (C) Tax deductible by the employee. (D) Tax deferred to the employer.
*(A) Deductible by the employer as an ordinary business expense. * - Group disability income premium paid by the employer is considered tax deductible by the business as an ordinary business expense. The premium payments are neither taxable nor tax deductible to the employee. -
Which of the following premium modes would result in the highest annual cost for an insurance policy? (A) Monthly (B) Quarterly (C) Semi-annual (D) Annual
*(A) Monthly * - If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge (loading) because the company will not have the premium to invest for a full year, and the company will have additional expenses in billing the premium. -
The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? (A) Subrogation (B) Arbitration (C) Salvage (D) Appraisal
*(A) Subrogation.* - After the insured accept payment from the insurer, they have been indemnified. Insurance policies require the insured to transfer any right to recovery to the insurer so that they seek recovery up to the amount they paid as loss. -
A man works for Company A and his wife works for Company B. The spouses are covered by health plans through their respective companies that also cover the other spouse. If the husband files a claim, (A) The insurance through his company is primary. (B) The insurance through his wife's company is primary. (C) The insurance plans will split the coverage evenly. (D) Both plans will pay the full amount of the claim.
*(A) The insurance through his company is primary.* - The policy that covers the person filing the claim will be considered the primary policy. -
Which of the following is NOT true regarding partial disability? (A) This is a form of insurance that covers part-time workers. (B) The insured can still report to work and receive benefits. (C) Benefit payments are typically 50% of the total disability benefit. (D) An insured would qualify if he couldn't perform some of his normal job duties.
*(A) This is a form of insurance that covers part-time workers.* - Partial disability covers full-time-working insureds who are unable to perform some, but not all, of their regular job duties or can no longer work full-time, which ultimately result in a loss of income. Payment from partial disability is typically 50% of the total disability benefits. -
When may an insured deduct unreimbursed medical expenses paid under a long-term care policy? (A) When the expenses exceed a certain percentage of the insured's adjusted gross income. (B) Only if the insured is age 65 or older. (C) All LTC expenses are tax deductible. (D) Only if the insured does not itemize the expenses.
*(A) When the expenses exceed a certain percentage of the insured's adjusted gross income.* - In either medical expense insurance policies or long-term care insurance policies, unreimbursed medical expenses paid for the insured, the insured's spouse and dependents may be claimed as deductions if the expenses exceed a certain percentage of the insured's adjusted gross income. -
An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer? (A) $0 (B) $500 (C) $1,000 (D) $2,000
*(B) $500 * - Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. The insured will, then, be reimbursed for out-of-pocket costs. -
Which of the following would best describe total disability? (A) A person's inability to qualify for insurance coverage. (B) A person's inability to work significantly reduced or eliminated for the rest of his/her life. (C) A person's inability to perform one of the regular duties of his/her occupation. (D) A person's total loss of income.
*(B) A person's ability to work is significantly reduced or eliminated for the rest of his/her life.* - While different policies might define "total disability" differently, any definition would imply that under a total disability a person's ability to work is significantly reduced or eliminated for the rest of his/her life. -
All of the following statements concerning workers compensation are correct EXCEPT (A) Benefits include medical, disability income, and rehabilitation coverage. (B) A worker receives benefits only if the work related injury was not his/her fault. (C) Workers compensation laws are established by each state. (D) All states have workers compensation.
*(B) A worker receives benefits only if the work related injury was not his/her fault.* - Workers compensation benefits are payable when a worker is injured by work-related injury, regardless of fault or negligence. -
Under which condition would an employee's group medical benefits be exempt from income taxes? (A) When the premiums and other unreimbursed medical expenses exceed 10% of the employee's adjusted gross income. (B) An employee's group medical benefits are generally exempt from taxation as income. (C) An employee's group medical benefits are never exempt from taxation as income. (D) When the premiums and other reimbursed medical expenses exceed 5% of the employee's adjusted gross income.
*(B) An employee's group medical benefits are generally exempt from taxation as income. * - Group medical and dental benefits are received tax-free to employees. Also, premiums paid by the employer are deductible as business expenses. -
Which of the following describes taxation of individual disability income insurance premiums and benefits? (A) Premiums are tax deductible, but benefits are not taxable. (B) Premium are tax deductible, and benefits are taxable. (C) Premiums are not tax deductible, and benefits are not tax deductible. (D) Premiums are not tax deductible, but benefits are taxable.
*(C) Premiums are not tax deductible, and benefits are not tax deductible.* - In individual disability income, benefits are not taxable, and premiums are not taxable. -
A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? (A) Each plan will pay equal shares. (B) The insured will have to select a plan from which to collect benefits. (C) The benefits will be coordinated. (D) Neither plan would pay.
*(C) The benefits will be coordinated.* - Benefits will be coordinated when individuals are covered under two or more health plans. -
All of the following are true of the Key Person disability income policy EXCEPT (A) Premiums are not deductible to the business. (B) It is typically written to protect the company in the even a key employee becomes disabled and is unable to work. (C) The income may be used to find a replacement for the key employee. (D) Benefits are considered taxable income to the business.
*(D) Benefits are considered taxable income to the business.* - Key person disability benefits are not considered taxable income to the business. -
Pre-Existing Condition Insurance Plan :
Makes health coverage available to individuals who have been denied health insurance by private insurance companies because of a pre-existing condition.
If an individual has __________ coverage, that individual is not eligible to use the Marketplace to buy a health or dental plan.
Medicare
Premium payments on personally owned disability income policies are __________ by the individual.
Nondeductible
Occupational Coverage :
Provides benefits for illness, injury or disability resulting from accidents or sicknesses that occur ON or OFF the job.
Partially Contributory Plan :
The cost of disability insurance is paid partially by the employer and partially by the employee. The portion paid by the employee is received income tax free and the portion paid by the employer is included in the employee's gross income and taxed as ordinary income. For Example). If an employee contributes 40% of the premium and received a benefit of $1,000, only $600 (60% = employer contribution) will be received tax free.
If a child is covered under both parent's policies, which would be the primary insurance for said children?
The order of payment will usually be determined by the birthday rule, i.e. the coverage of the parent whose birthday is earlier in the year. Occasionally the gender rule may also apply, according to which the father's coverage is considered primary.
True or False: Premiums paid by the employer for disability insurance for its employees are deductible as a business expense and are not considered as a taxable income to the employee.
True- However, benefits received by an employee that are attributable to employer contributions are fully taxable to the employee as income.
True or False: Catastrophic plans offer lower monthly premiums but also feature high deductibles.
True- once deductibles are met, costs of essential health benefits will be covered with no copayment or coinsurance.
True or False: Group medical and dental expense benefits are received income tax free by the employee.
True.
True or False: The patient Protection and Affordable Care Act (PPACA or ACA) gives small businesses and nonprofits a tax credit for an emloyer's contribution to health insurance for employees.
True.
Residual Disability :
Type of disability income policy that provides benefits for loss of income when a person returns to work after a total disability, but is still not able to perform at the same level as before becoming disabled. Many companies have replaced partial disability with residual disability.
PPACA Metal level plans and percentages insured will pay
- Bronze: 60% - Silver: 70% - Gold: 80% - Platinum: 90%
Workers Compensation laws provide four types of benefits :
- Medical benefits - Income benefits -Death benefits - Rehabilitation benefits
When is the proof of the dependency required for a dependent child that is incapable of self-support because of physical or mental handicap?
31 days of child attaining maximum age (26 years old). Proof of dependency is required annually after a 2-year period following attainment of maximum age.
Estate :
A person's net worth
Guaranteed Renewability :
An insurance company that offers either group or individual health insurance coverage must renew or continue the policy at the option of the plan sponsor or the individual.
Insurance sold to small business owners to reimburse them for the overhead expenses after a disability.
Business Overhead Expense (BOE). - Are tax deductible to the business as a business expense. -Benefits are usually limited to covered expenses incurred or the maximum monthly benefit stated in the policy, and are taxable to the business as received.
If the primary beneficiary should die before death benefits become payable, who would the benefits go to?
Contingent or secondary beneficiary If no beneficiary is designated, will be placed in the deceased estate.
True or False: All Health Insurance Marketplace plans do not have to cover pregnancy or childbirth if the pregnancy begins before the coverage takes effect.
False- This is an essential benefit.
States that have chosen not to build their own Marketplace, a ___________________________ is available that helps with comparison shopping tools, eligibility, enrollment, plan management, and consumer support.
Federally-Facilitated Marketplace (healthcare.gov)
Adjustable Gross Income :
Gross income (all income from whatever sources) minus adjustments to income
Guaranteed Issue :
Insurance companies must accept any eligible applicant for individual or group insurance coverage. Enrollment for coverage may be restricted to open or special enrollment periods.
Overinsurance :
Insurance that exceeds in amount the actual value of the person or property insured or insurance in a greater amount than the insured can afford
Small Business Health Options Program (SHOP) :
Intended to give small employers the same purchasing power that large employers have, the opportunity to make a single monthly payment, and the ability to offer a choice of plans.
For which disability income are premiums not deductible to the business, but the benefits are received tax free by the business?
Key Person Disability.
Subrogation :
Legal process by which an insurance company seeks recovery of the amount paid to the insured from a third party who may have caused the loss. Through this, the insured cannot collect twice.
How are the two ways Health Insurance can be written?
Occupational or Nonoccupational
Nonoccupational Coverage :
Only covers claims that result from accidents or sicknesses occurring OFF the job.
Coordination of Benefits (COB) Provision :
Purpose is to avoid duplication of benefit payments and overinsurance when an individual is covered under multiple group health insurance plans. Establishes which plan is the Primary, or the plan that is responsible for providing the full benefit amounts as it specifies. Can file claim to secondary for any additional benefits payable.
Mode :
Refers to the frequency the policyowner pays the premium Monthly > Quarterly > Semi-Annual > Annual Higher Frequency= Higher Premium
Who may deduct 100% of the cost of a medical expense plan provided to them and their families because they are considered self-employed individuals, not employees.
Sole proprietors and Partners.
Taxable :
Subject to taxation
Fully Contributory Plan :
The employee pay the entire cost of the disability insurance premium, so the income benefits are received income tax free by the employee.
Noncontributory plan :
The employer pays the entire cost of the disability insurance premium, so the income benefits are included in the employee's gross income and taxed as ordinary income.
How does PPACA define small employers?
Those with at least one but not more than 100 employees.
Short-Term Disability (STD) :
Usually have a benefit period of less than 2 years. Common to place a maximum dollar amount on the benefit that will be provided regardless of earnings, and to have an elimination period (except disability resulting from accidents).
Long-Term Disability (LTD) :
Usually pay benefits for 2 years or longer.
The Patient Protection and Affordable Care Act mandates that insurers provide coverage for adult children of the insured up to the age of (A) 19 (B) 21 (C) 26 (D) 30
*(C) 26* - The law extends coverage for children of the insured to age 26, regardless of their marital status, residency, financial dependence on their parents, or eligibility to enroll in their employer's plan. -
5 Basic Characteristic of true Managed Care Plan
- Controlled access of providers -Comprehensive case management - Preventive care - Risk sharing -High quality care
The Affordable Care Act has mandated increased preventive, educational, and community-based health care services, and was designed to do the following:
- Set up a new competitive private health insurance market -Hold insurance companies accountable by keeping premiums low, preventing denials of care and allowing applicants with pre-existing conditions to obtain coverage -Help stabilize budget and economy through reducing the deficit by cutting govt. overspending - Extend coverage for adult children in both individual and group health plans until age 26
Workers Compensation :
A benefit offered and regulated by the states, and will vary to some degree from state to state.
Affordable Care Act (ACA or PPACA) :
A federal law that mandates increased preventive, educational, and community-based health care services, and that established the Health Insurance Marketplace to make health coverage available to any uninsured individuals
Tax Deductible :
A qualified expense that may reduce the amount of income subject to taxation
Managed Care Program :
Any medical expense plan that attempts to contain costs by controlling the behavior of participants is considered managed care program.
Most people who itemize their deductions can...
Claim deductions for unreimbursed medical expenses that exceed 10% of their adjusted gross income (AGI). If insured or insured's spouse is 65 years or older, they may continue to deduct total medical and dental expenses that exceed 7.5% of their AGI.
What health insurance coverage is available to uninsured individuals?
Health Insurance Marketplace
Catastrophic Plans :
Young adults under 30 and individuals who cannot obtain affordable coverage may purchase these plans for essential benefits.
Which of the following is NOT true regarding Workers Compensation? (A) Benefits are offered by the insurer. (B) Benefits are not regulated by the federal govt. (C) Benefits vary from state to state. (D) Benefits are regulated by the state govt.
*(A) Benefits are offered by the insurer.* - The state govt regulates Workers Compensation benefits, which vary slightly state to state. -
Disability income benefits are received _______ by the individual.
Income tax free
Policyowner is not able to change this type of beneficiary, without their permission.
Irrevocable Beneficiary
Disability income coverage specifies that the policy covers the insured if he is unable to perform any job for which he is qualified. In this case, total disability is defined as (A) Own occupation - less restrictive than other definitions (B) Any occupation - more restrictive than other definitions (C) Any occupation - less restrictive than other definitions (D) Own occupation - more restrictive than other definitions
*(B) Any occupation - more restrictive than other definitions.* - If total disability is defined as any occupation, it means the coverage will apply only if the insured cannot find any means of income whatsoever. This is more strict than own occupation, where a person merely has to prove that they cannot perform the job for which they were previously trained. -
What type of insurance is sold to small business owners that must meet overhead expenses such as rent or utilities following a disability? (A) Buy-sell (B) Business overhead expense (C) Key-person disability (D) Medical expense coverage
*(B) Business overhead expense * - Business overhead expense (BOE) insurance is a unique type of policy that is sold to small business owners who must continue to meet overhead expenses such as rent, utilities, employee salaries, installment purchases, lease equipment, etc., following a disability. -
An employee insured under a group health policy is injured in a car wreck while performing her duties for her employer. This results in a long hospitalization period. Which of the following is true? (A) The group plane will pay depending on the employee's recovery. (B) The group plan will not pay because the employee was injured at work. (C) The group plan will pay. (D) The group plan will pay a portion of the employee's expenses.
*(B) The group plan will not pay because the employee was injured at work.* - Because the employee's injuries were work related, the group health policy would not respond. The insured would have to rely on worker's compensation for coverage. -
An employee is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would provide him with medical expense coverage and income assistance? (A) Social Security Disability (B) Workers Compenstion (C) Major Medical Insurance (D) Long-term Care
*(B) Workers Compensation* - Workers compensation provides employees with medical, income, death, and rehabilitation benefits in the event of a work-related injury. -
An insured is covered by a partially contributory group disability income plan that pays benefits of $4,000 a month. If the insured pays 25% of the monthly premium, how much of the monthly benefit would be taxable? (A) None (B) $1,000 (C) $3,000 (D) $4,000
*(C) $3,000* - On partially contributory group disability income insurance, only that portion of the benefits that are related to the premium paid by the employer is taxable to the employee. In this case, because the employer pays 75% of the premium, the employee will be taxed on 75% of the benefits. -
An insured has a primary group health plan and an excess plan, each covering $10,000. The insured suffered a loss of $15,000. Disregarding any copayments or deductibles, how much will the excess plan pay? (A) $10,000 (B) $7,500 (C) $5,000 (D) $0
*(C) $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. -
The sole proprietor of a business makes a total salary of $50,000 a year. This year, his medical expenses reach a total of $75,000. What amount may the sole proprietor deduct in regards to his medical expenses? (A) $10,000 (B) $25,000 (C) $50,000 (D) $75,000
*(C) $50,000* - The proprietors of a business may deduct the cost of a medical expense plan because the are considered to be self-employed individuals instead of employees. The deduction cannot legally exceed the taxpayer's earned income for the year even if the cost of the medical expense plan exceeds this amount (in this scenario, $50,000). -
Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance exceed what percentage of their adjusted gross income? (A) 5% (B) 7% (C) 10% (D) 15%
*(C) 10%* - Most people who itemize their deductions can claim their deductions for unreimbursed medical expenses, those that are not covered by health insurance, that exceed 10% of their adjusted gross income. -
All of the following are true regarding Key Employee Disability Income insurance EXCEPT (A) Benefits are paid to the employer to retrain a new person. (B) Premiums are not tax deductible for the employer. (C) Benefits are taxable to the employer. (D) The employer owns the policy.
*(C) 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. -
Concerning group Medical and Dental insurance, which of the following statements is INCORRECT? (A) Premiums paid by the employer are deductible as a business expense. (B) Employee paid premiums may be deducted if certain conditions are met. (C) Employee benefits are tax deductible the year in which they were received. (D) Benefits received by the employee are free from federal income tax.
*(C) Employee benefits are tax deductible the year in which they were received.* - For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense. However, any premiums provided by the employee are only deductible if certain conditions are met. Group medical and dental expense benefits are received income tax free by the employee. -
Which of the following applies to partial disability benefits? (A) Payment is based on termination of employment. (B) Benefits are reduced once an insured is no longer under a doctor's care. (C) Payment is limited to a certain period of time. (D) An insured is entitled to a principle sum benefit for the partial loss of a limb.
*(C) Payment is limited to a certain period of time.* - The partial disability benefit is typically 50% of the total disability benefit, and it limited to a certain period of time. -
A woman contains health coverage through the Marketplace on October 1. Two weeks later she finds out she is 3 months pregnant. Which of the following is true about coverage for pregnancy? (A) Pregnancy will not be covered as a pre-existing condition. (B) Pregnancy may be covered with the insurer's special approval (C) Pregnancy will be covered immediately. (D) Pregnancy will only be covered if additional premium is paid.
*(C) Pregnancy will be covered immediately.* -All health insurance Marketplace plans must cover pregnancy and childbirth, even if pregnancy begins before the coverage takes effect. -
Benefits paid on a partial disability policy are paid...
In a flat amount, or a residual amount.
Which of the following is INCORRECT concerning taxation of disability income benefits? (A) If the employer paid the premiums, income benefits are taxable to the insured as ordinary income. (B) If the insured paid the premiums, any disability benefits are tax-free. (C) If the benefits are for a permanent loss, the benefits paid to the employee are not taxable. (D) If paid by the individual, the premiums are tax deductible.
*(D) If paid by the individual, the premiums are tax deductible.* - If an individual purchases his or her own disability insurance with before-tax dollars, any benefits paid are tax free, but the premium is not tax deductible. If an employer pays premium, the employer may deduct the premium as a business expense. Any benefits paid to an employee are taxable, unless it is for a permanent loss of a body part, or loss of use of a body part. -
The coverage provided by a disability income policy that does not pay benefits for losses occurring as the result of the insured's employment is called (A) Unemployment coverage (B) Occupational coverage (C) Worker's compensation (D) Nonoccupational coverage
*(D) Nonoccupational coverage.* - Most group disability income is nonoccupational coverage, covering insureds only off the job. The employer carries workers compensation for on the job injuries or sickness. -
Premium payments for personally-owned disability income policies are (A) Eligible for tax credits. (B) Tax deductible. (C) Tax deductible to the extent they exceed 10% of the adjusted gross income of those itemizing deductions. (D) Not tax deductible.
*(D) Not tax deductible.* - Premiums for personally-owned individual disability income policies are not deductible. -
What are the 4 standards health insurers must base their premium rates?
- Geographic rating area (location of residence within the state) - Family composition (single or family enrollment) - Age - Tobacco Use For individual plans, the location is the insured's home address For small group plans, the location is the employer's principal place of business
Eligibility for Marketplace
- Must be a US citizen or national or be lawfully present in the US - Must live in the US - Cannot be currently incarcerated
What insurances are exempt from the PPACA changes?
- Retiree-only - Stand-alone dental plans - Medigap - Long-term care
Typically written to cover partners or corporate officers of a closely help business.
Disability Buy-Sell Insurance - Provides funds for business organization to purchase the business interest of a disabled partner. - Premiums are not deductible to the business, but the benefits are received income tax free by the business.
Change of Beneficiary Provision :
Gives the policyholder, unless he/she has made an irrevocable designation of a beneficiary, the right to change any primary and/or contingent beneficiary or make any other change without consent of the beneficary(ies).