Medical Plans/Exam Review
Fee-for-Service
A medical expense plan where providers receive a payment for their billed charges for each service provided.
1035 exchange. In accordance with Section 1035 of the Internal Revenue Code, certain exchanges of life insurance policies and annuities may occur as nontaxable exchanges.
A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called
Commingling. It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.
A producer who fails to segregate premium monies from his own personal funds is guilty of
It is a life contingency option. Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
Minimum Essential Coverage
Mandated by the affordable care act (ACA) all private health plans must include at least the following benefits: 1. Ambulatory patient services; 2. Emergency services; 3. Hospitalization; 4. Pregnancy, maternity, and new born care; 5. Mental health ans substance use disorder services, including behavi
Prepaid plans
Medical and hospital benefits in the form of service rather than dollars. Providers are compensated regularly whether or not they provide service, but no additional compensation is provided when services are rendered.
Health Maintenance Organization plan (HMO) HMOs provide a package of comprehensive health care services that include routine physicals, immunizations, well baby care, family planning, etc., as well as the treatment of sickness and injury.
The following healthcare plan would most likely provide the insured/subscriber with comprehensive health care coverage
Usual/reasonable/customary
The insurance company will pay an amount for a given procedure based upon the average charge for that procedure in that specific geographic area.
Have attained fully insured status Although Social Security offers many benefits, such as retirement, survivors and Medicare, only those who have attained fully insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status.
Which of the following is an eligibility requirement for all Social Security Disability Income benefits?
Joint and Survivor Joint & Survivor option guarantees an income for two or more recipients that none of them can outlive.
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?
NAIC A long-term care insurance shopper's guide must be provided in the format developed by the National Association of Insurance Commissioners (NAIC). The shopper's guide must be presented to the applicant prior to completing the application.
A long-term care insurance shopper's guide must be provided in the format developed by which of the following?
60% Under the bronze plan, the health plan is expected to cover 60% of the cost for an average population, and the participants would cover the remaining 40%.
According to the PPACA rules, what percentage of health care costs will be covered under a bronze plan?
The interest is not taxable since it remains inside the insurance policy. The interest credited under this option is TAXABLE, whether or not the policyowner receives it.
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
Funding against company's general financial loss. Both life and health insurance can be used for a variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key employees.
All of the following are business uses of life insurance EXCEPT
It is also known as the Superimposed Plan. A combination plan is basically a combination of the scheduled and nonscheduled plan. The combination plan covers diagnostic and preventive services on the usual, customary and reasonable basis but uses a fee schedule for other dental services.
All of the following statements are true of a Combination Dental Plan EXCEPT
50% tax on the amount not distributed as required When immediate annuities are used to pay IRA benefits, distributions must begin no later than age 70½ in order for the annuitant to avoid penalties. The penalty is 50% of the shortfall from the required annual amount.
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?
Dread disease coverage Limited coverage policies, such as dread disease policies, only cover specific medical costs, geared to a particular illness, such as cancer, or a field, like prescription drug or dental care.
An applicant has a history of heart disease in his family, so he would like to buy a health insurance policy that strictly covers heart disease. What type of policy is this?
The policy will not be affected. In insurance, fraud is the intentional misrepresentation of material information that is crucial when deciding whether or not to write a contract for an applicant. If an insurer finds that an applicant has committed fraud, it can void the contract, provided that the discovery occurs within the first two years of the effective policy date. In this particular instance the applicant did not commit intentional fraud.
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
The insured is in an accident and incurs a large claim. The company may not cancel coverage due to covered claims. All the rest are allowable reasons for an insurer to terminate the contract.
An insured purchased a noncancellable health insurance policy 1 year ago. Which of the following circumstances would NOT be a reason for the insurance company to cancel the policy?
At or before the time of application If an application is received in a face-to-face meeting, the applicant should get the disclosure document and the buyer's guide at or before the time of application.
If an annuity contract is applied for in a face-to-face meeting, when should the applicant get the disclosure document and the buyer's guide?
Increase premiums Optionally renewable policies allow the insurer to cancel a policy for any reason whatsoever. Policies can only be cancelled by class on the policy anniversary or premium due date (renewal date). If the insurer elects to renew coverage, it can also increase the policy premium.
In a optionally renewably policy, the insurer has which of the following options?
They must be guaranteed renewable. Each Medicare supplement policy must be at least guaranteed renewable.
Which of the following is true regarding Medicare supplement policies?
Optionally renewable The renewability provision in an optionally renewable policy gives the insurer the option to terminate the policy for any reason on the date specified in the contract (usually a renewal date). Furthermore, this provision allows the insurer to increase the premium for any class of optionally renewable insureds.
Which renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds?
Optionally renewable The renewability provision in an optionally renewable policy gives the insurer the option to terminate the policy for any reason on the date specified in the contract (usually a renewable date). Furthermore, this provision allows the insurer to increase the premium for any class of optionally renewable insureds.
Which renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds?
State government The state government offers and regulates Workers Compensation benefits, which vary slightly from state to state.
Workers Compensation benefits are regulated by which entity?
Benefit Schedule
specifically states exactly what is covered in the plan and for how much
Denial of coverage Cost-saving services, also known as case management provisions, include the following: controlled access of providers, large claim management, preventive care, hospitalization alternatives, second surgical opinions, preadmission testing, catastrophic case management, risk sharing, and providing high quality of care.
Which of the following is NOT a cost-saving service in a medical plan?
C. Coverage for catastrophic medical expenses
Which of the following is NOT true of the basic medical expense plans? a. First dollar coverage b. Low dollar limits c. Coverage for catastrophic medical expenses d. No deductibles
The owner is guaranteed a fixed interest rate for a specific period of time. Under a market value adjusted (modified guaranteed) annuity, the insurer guarantees a competitive interest rate for a specific period (the longer the period, the better the guaranteed rate). At the end of the period, the owner has the option of taking the accumulated value or reinvesting the values at a new interest rate.
Which of the following is true regarding a market value adjusted annuity?
It is nonrenewable. In term health policies, the owner has no rights of renewal.
Which of the following is true regarding a term health policy?
The cost of coverage is based on the ratio of men and women in the group. Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.
Which of the following statements about group life is correct?
If the primary beneficiary predeceases the insured The contingent beneficiary would need to outlive the insured and primary beneficiary.
An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
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.
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?
The insured is in an accident and incurs a large claim The company may not cancel due to coverage due to covered claims. All the rest are allowable reasons for an insurer to terminate the contract. -The insured does not pay the premium -The insured reaches the maximum age limit specified in the policy -Within two years of the application, the insurer discovers a misrepresentation
An insured purchased a noncancellable health insurance policy 1 year ago/ Which of the following circumstances would NOT be a reason for the insurance company to cancel the policy?
c. Is not covered An insurance company will pay the usual, reasonable, or customary amount for a given procedure based upon the average charge for that procedure.
In health insurance, of a doctor charges $50 more than what the insurance company considers usual, customary and reasonable, the extra cost a. Counts towards deductible b. Counts toward coinsurance c. In not covered d. Must be covered by the insurer
Adhesion A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as it is written.
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Specified coverage policies
Insurance policies that limit coverage to one illness or one limiting group of coverages, i.e. cancer policies, prescription drug coverage, dental plans, and other limited coverage plans. These polies are commonly written as a stand-alone individual policy or to complement a traditional fee-for-service Major Medical Expense Policy.
Comprehensive care policies
Plans that provide coverage for most types of medical expenses: a comprehensive package of health care services that typically includes preventive care, routine physicals, immunizations, outpatient services and hospitalization, such as HMOs.
Insuring clause. The insuring clause is a provision on the first page of the policy that states the coverage and when it applies.
The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the
90 days prior to the effective date of coverage. The term "uninsured small business" means a small employer that does not provide health benefits for at least 90 days prior to the effective date of coverage.
The term "uninsured small business" means a small employer that does not provide health benefits for at least
Once every 5 years Most dental plans limit coverage for repeated procedures. Dentures can only be replaced once every five years.
Under most dental plans, what limitations are posed for denture replacement?
60 days Unless specifically stated otherwise, individuals or enrollees have 60 days from the date of a triggering event to select a qualified health plan.
Under the Affordable Care Act, a special enrollment period allows an individual to enroll in a qualified health plan within how many days of a qualifying event?
50% If there are no distributions at the required age, or if the distributions are not large enough, the penalty is 50% of the shortfall from the required annual amount.
What is the penalty for IRA distributions that are below the required minimum for the year?
Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. Providing a copy of the Important Notice Regarding Replacement is a producer's responsibility.
When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT
To renew the policy until the insured has reached age 65 The guaranteed renewable provision is similar to the noncancellable provision, with the exception that the insurer can increase the policy premium on the policy anniversary date. As with the noncancellable policy, coverage is generally not renewable beyond the insured's age 65.
When an insurer issues an individual health insurance policy that is guaranteed renewable, the insurer agrees
At the time of initial solicitation The outline of coverage must be delivered to an applicant for a long-term care policy at the time of initial solicitation.
When must the outline of coverage be provided to the applicant for a long-term care policy?
Renewal Provision Renewability provisions are included in each health insurance contract and outlines both the insurer's and insured's right to cancel or renew coverage. This is considered to be very important provision required by HIPPA, the federal Health Insurance Portability and Accountability Act of 1996.
Which health insurance provision describes the insured's right to cancel coverage?
Funds exceeding the premium paid are taxable as ordinary income. The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.
Which is TRUE about the cash surrender nonforfeiture option?
Universal life As well as being a flexible premium policy, universal life is also an interest-sensitive policy. The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.
Which of the following Life Insurance policies would be considered interest sensitive?
Pure life provides payments for as long as the annuitant is alive. Pure or straight life annuity settlement option will only pay for as long as the annuitant lives; however, if he/she dies after receiving the first payment, no more payments would be made to any other person. For this reason, pure life has the potential to pay larger monthly benefits than other options.
Which of the following best describes a pure life annuity settlement option?
