D4. Medical Expense Plans

  1. All of the following are true about Health Maintenance Organizations (HMOs), EXCEPT:

    • C) They never provide coverage for out-of-network services
    • Health Maintenance Organizations (HMOs) were created by doctors and hospitals and utilize a primary care physician (gatekeeper) to help contain costs. Individuals covered by HMOs are referred to as subscribers and pay a fixed dollar amount (co-payment) when they go to see their primary care physician. HMOs do not provide coverage for out-of-network services, except in emergency situations.
  2. Charles Adams advised his insurance company of a loss covered by his major medical policy. If the insurance company does not provide Mr. Adams with the proper claim forms within 15 days, he has the right to:

    • C) Submit a description of the loss, in his own words, as Proof of Loss
    • If the insurer does not comply with a condition in the policy, then they have waived it and the insured may submit Proof of Loss in any form.
  3. A customer has a Major Medical policy with a $1,000,000 lifetime benefit. They have a $500 deductible and 80/20 co-insurance. If they have a $50,500 claim, how much of their lifetime limit will remain:

    • A) $960,000
    • First, subtract the $500 deductible from the amount of the claim, which means that $50,000 remains, of which the insurer will pay 80% or $40,000. Next, subtract the $40,000 paid from the $1,000,000 life time benefit, to find that $960,000 of coverage remains.
  4. A feature included in most major medical policies that limits the insured's maximum co-insurance contribution on a large claim is known as:

    • B) Stop loss
    • It is the "stop-loss" feature on a major medical policy that limits the insured's share of the co-insurance to a maximum dollar amount, often $5,000. For example, if the insured has a major medical policy with a $1,000 deductible, 80/20 co-insurance and a $5,000 stop-loss, how much would they have to pay on a $101,000 claim? First subtract the $1,000, which leaves $100,000 eligible for co-insurance, of which the insured would have to pay 20%, or $20,000. But, since they have a $5,000 stop-loss, their maximum share of the co-insurance is limited to that amount, plus the $1,000 deductible, for a total amount the insured would have to pay of $6,000.
  5. When benefits are paid to a policyholder covered under a hospital expense policy, the policy is considered to be:

    • B) Reimbursement
    • Service plans (like HMOs and PPOs) pay benefits directly to service providers such as doctors or hospitals. Reimbursement types of insurance, written by true insurance companies, pay benefits directly to the insured.
  6. Which of the following is not a medical expense coverage:

    • C) Workers' Compensation
    • Although Workers' Compensation provides medical expense coverage for sickness and/or injuries that occur on the job, it is actually classified as Casualty insurance, not medical expense.
  7. Harold has a disability policy with 90/10 coinsurance and a $200 deductible. If he has a $1,200 claim how much will the insurer pay:

    • C) $900
    • Harold will be responsible for paying the $200 deductible before any coverage applies. After the deductible, the 90/10 coinsurance will apply to the remaining $1,000. Of the $1,000 remaining, the insurer will pay $900 (90%) and Harold will be responsible for $100 (10%).
  8. If an individual wants to purchase a policy that would provide the broadest coverage for medical expenses they should purchase:

    • C) Comprehensive major medical
    • A Basic Hospital expense policy provides first dollar coverage (no deductible) for room and board expenses if the insured is confined to the hospital. A Surgical Expense policy also provides first dollar coverage and covers certain surgeries (those listed in the policy) up to a specified dollar amount. A Dental Expense policy will only cover dental related expense and NOT medical expenses. The broadest type of reimbursement medical expense plan is Comprehensive Major Medical, which covers doctor visits, hospital stays, and surgeries.
  9. If a subscriber of a Preferred Provider Organization (PPO) obtains care from an out-of-network provider, which of the following is true:

    • A) The care is covered, at a reduced amount
    • Preferred Provider Organizations (PPOs) were started by private insurance companies to try and compete with HMOs. PPOs do not have primary care physicians and provide coverage for out-of-network services (at a reduced amount).
  10. An insured has a disability policy with a maximum out of pocket limit of $10,000. The policy also has an 80/20 coinsurance requirement and a $500 deductible. If the insured has a $50,000 claim how much will the insurer pay:

    • B) $40,000
    • The insured is responsible for paying the deductible first, which is $500. Of the remaining balance ($49,500), the insurer is responsible for paying 80%, or $39,600. However, this would mean that the insured would be responsible for the deductible $500, plus the coinsurance which equals $9,900 (20% of $49,500 = $9,900). The co-insurance and deductible totals $10,400. Since the insured has a maximum out-of-pocket limit of $10,000, they are only liable for $10,000 of this claim, which means the insurer will pay a total of $40,000.
  11. Major medical insurance has all of the following characteristics, EXCEPT:

    • C) First-dollar coverage
    • Major medical insurance provides "comprehensive" coverage with high limits, a deductible and co-insurance. It is the "basic" plan of health insurance that provides first-dollar coverage, without a deductible.
  12. An insured has a Major Medical policy with a $1,000 deductible, 80/20 co-insurance and a $5,000 stop-loss. If they have a covered claim in the amount of $51,000, how much will their insurer pay:

    • C) $45,000
    • A "stop-loss" feature limits the amount of co-insurance that the insured will have to pay, which in this case is $5,000. However, since the insured also has to pay the $1,000 deductible, they will have to pay a total of $6,000 on this claim. If the insured has to pay $6,000 of this $51,000 claim, then the insurer will have to pay the difference, which would be $45,000.
  13. Which feature of a medical expense policy facilitates claims handling by enabling insurers to pay providers directly:

    • C) Assignment of benefits
    • Indemnity plans are also known as "reimbursement" plans, since the insured would have to pay the provider, then send their bill to their insurer for reimbursement. However, reimbursement type insurers may pay providers directly if the insured signs and submits an "assignment of benefits" form that authorizes them to do so.
  14. In a fee-for-service plan, the person who is paid by the insurer is known as the:

    • D) Provider
    • In a fee-for-service plan, it is the provider who is paid a fee for the service they provide to the subscriber.
  15. Which type of insurance policy combines several types of benefits and provides more coverage than any of the others:

    • D) Comprehensive Medical Expense
    • A Comprehensive Major Medical policy is a combination of a basic plan and a Major Medical plan. The basic plan provides first dollar coverage and what is not covered there reverts to major medical, after the "corridor" deductible is applied.
  16. The "carry-over" deductible applies to claims occurring within:

    • C) The last three months of the year
    • Most Major Medical policies will contain a carry-over deductible. This provision usually stipulates that if the insured had no claims during the year but does incur medical expenses in the last three months of the year, these late year expenses may be carried over to a new calendar year and applied to the new year's deductible.
  17. The owner of a medical expense policy has all of the following rights, EXCEPT to:

    • B) Add coverage for a spouse without providing proof of insurability
    • Generally, you cannot add coverage for yourself or a spouse without proof of insurability (taking a physical exam).
  18. Which disability policy would provide reimbursement for expenses incurred as the result of a broken leg:

    • A) Medical Expense
    • AD&D requires death or dismemberment. Disability Income pays loss of net earned income (we don't know if this person had a job). An endowment is a type of life insurance. Medical Expense will pay doctors and hospitals.
  19. An insured has a major medical policy that calls for a flat $2,000 deductible and 80/20 co-insurance. If the insured incurs medical expenses of $6,000, they would receive benefits of:

    • A) $3,200
    • Subtract the $2,000 deductible, then multiply by the 80% co-insurance to determine what the insured will receive.
  20. The purpose of the co-insurance clause in major medical policies is to:

    • D) Motivate the insured to minimize unnecessary care
    • Co-insurance requires the client to pay part of every claim after paying the deductible.
  21. An individual owns a hospital expense policy and a surgical expense policy. The hospital policy pays $100 a day for hospital room and board and a maximum of $1,000 for miscellaneous hospital charges. The surgical policy pays a maximum of $500 for any one operation. If the insured was hospitalized for 10 days and had charges of $200 a day for hospital room and board, $1,500 for miscellaneous expenses and $2,000 for the surgical expense, what would the two policies pay:

    • B) $2,500
    • The client owns two basic plans, one for hospital and the other for surgery. Figure each policy separately and then add their benefits together. Basic plans have first dollar coverage with no deductibles or coinsurance. The hospital policy will pay $100 a day for ten days ($1,000) plus another $1,000 for miscellaneous for a total of $2,000. The surgical policy will pay only $500 (the inside limit) for a surgery. Add them together for a total of $2,500. The rest isn't covered.
  22. When an HMO subscriber has an emergency, they should:

    • D) Go to the emergency room
    • Even if out-of-network, an HMO will provide coverage for emergency treatment without the prior approval of the gatekeeper or primary care physician.
  23. Tom O'Hara was hospitalized for two weeks and received a bill for $2,100. He has a major medical policy with a $100 deductible. His coinsurance is 80/20, figured after reducing the bill by the deductible amount. Mr. O'Hara is expected to pay a total of:

    • A) $500
    • Always subtract the deductible first. The covered claim was $2,100. After the deductible, $2,000 is eligible for coinsurance. If the insurer will pay 80% of $2,000 or $1,600, Tom must pay the balance. Subtract $1,600 from $2,100 to find what Tom has to pay out of his own pocket.
  24. A customer has a Major Medical policy with a $500 deductible and 80/20 co-insurance. During the year they have three claims, as follows: $300, $700 and $500. How much will their insurer pay:

    • A) $800
    • Add up the total amount of the claims, which is $1,500. Next, subtract the deductible, which is $500. Of the $1,000 left, the insurer will pay 80%, or $800. Of course, the insured will have to pay $700 of this claim out of pocket.
  25. A comprehensive medical expense insurance policy combines which of the following coverages under one contract:

    • C) Basic Hospital and Surgical coverage with Major Medical coverage
    • Comprehensive Major Medical is the best coverage available, since it combines the first dollar coverage of a basic plan with the high limits, deductible and co-insurance of a major medical plan. It is very expensive.
  26. A Point-of-Service (POS) plan has all of the following characteristics, EXCEPT:

    • B) Benefits are the same for treatment received within or outside the network
    • A Point-of-Service plan is similar to both an HMO and a PPO. It is like a PPO in that it offers a schedule of benefits that subscribers may obtain from any provider, either in- or out-of-network, although benefits may be reduced if the provider is out of network. It is like an HMO in that in-network care is managed by a primary care physician, or gatekeeper, in an effort to control costs.
  27. On a medical expense policy, the requirement that the insured seek a second surgical opinion prior to having surgery will result in:

    • D) Fewer claims
    • If the insurer requires the insured to have a second surgical opinion prior to having surgery done they are trying to reduce claims and save money. Having a second surgical opinion will result in fewer unnecessary surgeries, thereby reducing claims and keeping premiums lower.
  28. Which of the following types of plans limits care to pre-approved providers:

    • B) HMO
    • Except for emergencies, most HMOs require that services be provided by in-network providers in order for coverage to apply. PPOs will cover out-of-network services, but at a reduced rate. A Managed Indemnity Plan is a traditional insurance plan that provides for an unlimited choice of doctors. HMOs that provide for out-of-network services, but at a reduced rate, are known as Point-of-Service plans.
  29. All of the following statements about major medical benefits are true, EXCEPT:

    • C) Benefits have no maximum limit
    • Although Major Medical policies do have high limits, often $1,000,000 or more, the maximum benefit limit usually applies during the insured's lifetime. Once that limit has been paid out, there is no further coverage.
  30. When a doctor works at an independent clinic-type operation with other doctors of varying specializations in one facility in order to provide medical benefits to members of an HCSO, they are working in what is known as a(n):

    • B) Group practice model
    • An HCSO Group Practice Model is comprised of a group of independent doctors of varying specializations who all practice in one facility or clinic, providing medical services to members of the HCSO in addition to other non-member patients.
  31. If a major medical policy has a $300 deductible with a carry-over provision and the only expense the insured incurs during the year is a $100 doctor visit in November, how much would the insured have to pay of the deductible in the following calendar year?

    • B) $200
    • A "carry-over" deductible applies to claims that occur during the last three months of the calendar year. They carry over and apply to next year's deductible.
Card Set
D4. Medical Expense Plans