Principles of Risk Management and Insurance: Principles of Risk Management and Insurance - Chapter 15 Flashcards

Problems with the health care system in the United States that led to implementation of the Affordable Care Act included

1. Rising healthcare expenditures
2. Considerable waste and inefficiency in the healthcare system
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

All of the following are historical reasons for the increase in health care expenditures in the U.S. EXCEPT

1. A) cost insulation because of third-party payers.
2. B) employer-sponsored health insurance.
3. C) universal health insurance coverage.
4. D) technological advances in health care.

The Affordable Care Act requires that most U.S. citizens and legal residents have qualifying health insurance or pay a financial penalty. This provision of the Affordable Care Act is known as the

1. A) Health Insurance Marketplace option.
2. B) public option.
3. C) individual mandate.
4. D) premium subsidy option.

Under the Affordable Care Act, which of the following statements are true?

1. Health insurers cannot use pre-existing conditions exclusions.
2. Health insurers cannot impose annual benefit limits and lifetime benefit limits.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

One provision of the Affordable Care Act is designed to benefit young adults up to age 26. This provision allows these young adults to

1. A) remain covered under their parents' health insurance policies.
2. B) receive a tax credit for their health insurance premium if they are unemployed.
3. C) receive low-interest government loans to finance their health insurance.
4. D) receive coverage under Medicare if they are not covered by a private health insurance plan.

Which of the following statements regarding health care expenditures in the United States is (are) true?

1. As a nation, the U.S. spends significantly more per-person on health care than most other industrialized nations.
2. Health care expenditures in the U.S. are high because everyone is covered by a health insurance plan.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Individual medical expense insurance sold in the Health Insurance Marketplace is characterized by which of the following?

1. A) narrow range of benefits
2. B) no lifetime benefit limits
3. C) no exclusions
4. D) first-dollar coverage

Prior to passage of the Affordable Care Act, insurers could go back to the date a health insurance policy became effective and render the policy void due to a clerical error. This practice, which is prohibited under the Affordable Care Act except in cases of fraud or intentional misrepresentation of a material fact, is called

1. A) estoppel.
2. B) retention.
3. C) rescission.
4. D) reformation.

Under the Affordable Care Act, if a health insurer does not meet the minimum loss ratio requirement, the insurer must

1. A) pay a fine to the federal government.
2. B) issue rebates to the people the insurer covered.
3. C) not sell any health insurance for a period of one year.
4. D) reduce the premium on the policies it sells the following year.

Purposes of the coinsurance provision in medical expense insurance policies include which of the following?

1. to reduce premiums
2. to prevent overutilization of policy benefits
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

The effect of an annual out-of-pocket limit in an individual medical expense policy is to

1. A) limit the lifetime benefits payable under the policy.
2. B) put a cap on annual benefits the insurer will pay.
3. C) prevent the insured from receiving duplicate benefits if medical expenses are also covered under workers compensation insurance.
4. D) cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of annual out-of-pocket expenses.

All the following are common exclusions in a medical expense insurance policy EXCEPT

1. A) dental care.
2. B) surgeons' fees.
3. C) long-term care.
4. D) routine eye care.

Kristen has an individual medical expense policy with a $1,000 calendar-year deductible, a $5,000 annual out-of-pocket limit, and a 20 percent coinsurance requirement. Kristen was hospitalized for a surgical procedure in March, her first health care treatment received during the year. The total bill was $20,000. Considering the deductible and coinsurance, how much of this amount must Kristen pay?

1. A) $4,400
2. B) $4,800
3. C) $5,000
4. D) $5,100

Dirk required surgery for a kidney impairment. His total bill for medical services was $50,000. Dirk has a medical expense policy with a $1,000 calendar-year deductible and a $5,000 annual out-of-pocket limit. His coinsurance percentage is 20 percent. The out-of-pocket limit applies to coinsurance only. Assuming this surgery and hospitalization were the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy, how much of the $50,000 bill will the insurer pay?

1. A) $39,000
2. B) $39,200
3. C) $40,000
4. D) $44,000

Which of the following statements about long-term care insurance is (are) true?

1. Long-term care insurance is inexpensive, especially if purchased at older ages.
2. Purchasers have a choice of daily benefits and benefit periods.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Which of the following statements is (are) true concerning benefit payments under long-term care insurance?

1. Expense-incurred policies pay for actual charges up to a specified daily limit.
2. Per diem policies pay a specified daily benefit regardless of the charges incurred.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

All of the following statements about long-term care insurance are true EXCEPT

1. A) Premiums can be reduced by electing shorter elimination periods.
2. B) A common benefits trigger is the inability to perform a certain number of activities of daily living.
3. C) Protection against inflation is usually made available as an optional benefit.
4. D) Policies currently sold are guaranteed renewable.

Which of the following statements about disability and disability income insurance is (are) true?

1. Most disability income policies replace 100 percent of gross earnings.
2. The probability of being disabled before age 65 is much higher than commonly believed.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Which of the following statements about individual disability income policies is true?

1. A) Benefits are typically paid only for disabilities resulting from sickness.
2. B) Benefits paid for partial disabilities are usually greater than benefits paid by the same policy for total disabilities.
3. C) Most policies pay a benefit equal to 100 percent of the disabled person's lost income.
4. D) Many policies provide or make available a residual disability benefit for persons who are able to work but at a reduced income.

All of the following statements about individual disability income policies are true EXCEPT

1. A) Premiums are often waived while a person is disabled but must be resumed if the insured recovers.
2. B) At the time of purchase, the insured can choose the length of the benefit period from among several available options.
3. C) In order to encourage rehabilitation, benefits may be continued during periods of vocational training.
4. D) Most disability income insurance policies contain an elimination period of 10 or fewer days.

Which of the following statements about individual disability income policies that use a two-part definition of total disability is (are) true?

1. During the initial period of disability, the insured must be unable to perform the duties of any gainful occupation.
2. After the initial period of disability, the insured must be unable to perform the duties of any occupation for which he or she is reasonably fitted by education, training, and experience.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Which of the following statements concerning individual medical expense insurance is (are) correct?

1. Once the deductible is satisfied, no additional deductible is payable during the calendar year.
2. Family deductibles are substantially higher than individual deductibles.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

All of the following statements about optional disability income benefits are true EXCEPT

1. A) Under a cost-of-living rider, benefits are periodically adjusted for inflation.
2. B) A Social Security rider pays additional benefits if the insured is turned down for Social Security disability benefits.
3. C) Adding a return of premium rider results in a lower initial premium.
4. D) Under an option to purchase additional insurance, the insured has the right to buy additional insurance at specified times without evidence of insurability.

Kevin has an individual disability income policy that his insurer agrees to keep in force until age 60. However, the company has the right to increase the premium each year for the underwriting class in which Kevin has been placed. Which renewal provision is found in Kevin's policy?

1. A) noncancellable
2. B) guaranteed renewable
3. C) conditionally renewable
4. D) nonrenewable.

Which of the following statements about mandatory provisions in individual health insurance policies is true?

1. A) Insurers are not permitted to place time limits on filing claims or providing proof of loss.
2. B) The time limit on certain defenses provision prohibits the insurance company from denying a claim based on a fraudulent misstatement by the applicant after the policy has been in force three months.
3. C) The usual length of the grace period is 180 days.
4. D) Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force.

One provision of the Affordable Care Act provides creates in each state a transparent and competitive insurance marketplace where individuals and small firms can purchase affordable and qualified health coverage. This marketplace is called a

1. A) Medicaid plan.
2. B) Medicare plan.
3. C) Health Maintenance Organization (HMO).
4. D) Health Insurance Marketplace.

Because of the Affordable Care Act, all new medical expense plans that offer individual and group coverage must accept all individuals and employers in the state who apply for coverage. These insurers are required to continue to renew the coverage at the option of the individual or plan sponsor. Thus, under the Affordable Care Act, the renewal provision is

1. A) conditionally renewable.
2. B) guaranteed issue.
3. C) nonrenewable.
4. D) renewable at the insurer's option.

Greta purchased a long-term care policy. Under a typical policy, Greta's eligibility for benefits may be triggered by

1. A) how long premiums have been paid.
2. B) inability to perform activities of daily living.
3. C) continuous hospitalization for at least 60 days.
4. D) eligibility for Medicare benefits.

The inability of the insured to perform some but not all of the important duties of his or her occupation is called

1. A) residual disability.
2. B) total disability.
3. C) recurrent disability.
4. D) partial disability.

Ellen purchased a health insurance policy. Under the provisions of the Affordable Care Act, which of the following renewal provisions must the insurer use in the policy?

1. A) cancellable
2. B) guaranteed issue
3. C) renewable at the insurer's option
4. D) conditionally renewable

The Affordable Care Act includes a provision designed to help small employers make health insurance coverage available to their employees. This provision allows small employers to reduce their federal income tax by a percentage of the employer's contribution to health insurance for employees. This subsidy, in the form of reduction of income taxes, is called a

1. A) marginal tax rate.
2. B) tax credit.
3. C) tax bracket.
4. D) tax deduction.

All of the following are typical characteristics of individual medical expense coverage EXCEPT

1. A) annual benefit limits.
2. B) essential health benefits.
3. C) deductibles.
4. D) coinsurance.

Barb was injured in an auto accident. She was totally disabled and collected disability income benefits for 8 months. She would like to return to work on a part-time basis to see if her recovery is complete. During this period, her insurer will pay reduced disability income benefits. This type of disability is called

1. A) recurrent disability.
2. B) presumptive disability.
3. C) permanent disability.
4. D) partial disability.

Prior to passage of the Affordable Care Act, insurance policies typically contained a provision excluding coverage for impairments that were present or were treated during a specified period prior to the effective date of the policy. This provision is a(n)

1. A) time limit on certain defenses.
2. B) preexisting-conditions clause.
3. C) benefit period provision.
4. D) incontestable clause.

One long-term care insurance benefit trigger considers whether the insured needs supervision to protect against threats to health or safety due to memory loss or disorientation. This benefit trigger is referred to as a(n)

1. A) activities of daily living trigger.
2. B) medical necessity trigger.
3. C) needs test trigger.
4. D) severe cognitive impairment trigger.

Beth's disability income insurance policy provides benefits for accidental death, dismemberment, and loss of sight. The maximum amount payable under this benefit is known as the

1. A) face value.
2. B) cash value.
3. C) principal sum.
4. D) monthly benefit.

Which statement is true regarding the advanced premium tax credits for individuals and families under the Affordable Care Act?

1. A) The tax credit is the same flat amount for individuals and families.
2. B) The tax credit is based on income and is designed to limit the amount spent on health insurance premiums to make the insurance affordable.
3. C) The tax credit is only available to high-income individuals and families.
4. D) The tax credit is an expenses that lowers taxable income.

The Affordable Care Act has provisions that improve the quality of health care and lower costs. All of the following are examples of these provisions EXCEPT

1. A) reducing paperwork and administrative expenses.
2. B) increasing the number of medical specialists and reducing the number of primary care physicians.
3. C) compensating physicians based on value rather than on the volume of services.
4. D) cracking down on healthcare fraud.

Some managed care plans use physicians, hospitals, and health care organizations that agree to make medical services available to insureds at discounted fees. Insureds are not required to use these entities, but if they do, health care costs are less than if these entities are not used. Such health care entities are called

1. A) Preferred Provider Organizations (PPOs).
2. B) Health Maintenance Organizations (HMOs).
3. C) Blue Cross/Blue Shield Plans.
4. D) Health savings accounts (HSAs).

Which of the following statements about eligibility requirements for qualified Health Savings Accounts (HSAs) is (are) true?

1. Only individuals who are eligible for Medicare benefits can establish a qualified HSA.
2. Applicants must be covered by a high deductible health plan and not be covered by any other comprehensive health plan to establish a qualified HSA.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

All of the following statements about the tax treatment of Health Savings Accounts (HSAs) are true EXCEPT

1. A) Contributions to a qualified HSA are tax deductible.
2. B) Distributions from a qualified HSA used to fund medical expenses are taxable income.
3. C) Investment income in a qualified HSA accumulates income tax free.
4. D) Distributions from a qualified HSA prior to age 65 for nonmedical purposes are subject to a 10 percent penalty tax.

Which of the following statements about high deductible health insurance plans is (are) true?

1. Coverage under a high deductible health plan is necessary to establish a qualified health savings account (HSA).
2. High deductible health plans provide a maximum limit on annual out-of-pocket expenses.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Which of the following statements about health savings accounts (HSAs) is true?

1. A) There are no limits to annual contributions that an individual may make to his or her HSA.
2. B) Once an individual has reached age 65 or is covered by Medicare, no additional contributions to the HSA may be made.
3. C) The health insurance plan covering the HSA account beneficiary is not permitted to use a deductible.
4. D) HSAs offer no tax benefits for the individual who establishes the account.

The Affordable Care Act requires all new medical expense plans to provide a comprehensive set of coverages and services. This comprehensive set of coverages and services that must be provided are called

1. A) essential health benefits.
2. B) dread disease benefits.
3. C) long-term care benefits.
4. D) respite care benefits.

The Affordable Care Act has a provision that expands a public assistance program designed to make health coverage available to low-income individuals by increasing the maximum amount of income that can be earned and still qualify for benefits. As a result, millions of individuals are eligible for coverage under this program. This public assistance program is called

1. A) Medicare.
2. B) Health Maintenance Organization.
3. C) Health Insurance Marketplace Exchange.
4. D) Medicaid.

All of the following are methods used to fund the Affordable Care Act EXCEPT

1. A) an excise tax on the sale of medical devices.
2. B) reduced payments to Medicare Advantage plans.
3. C) tort reform measures that reduce medical malpractice claims.
4. D) savings in the Medicare and Medicaid programs from reduced fraud and abuse.

Which of the following statements is true regarding disability income insurance?

1. A) The purchase of disability income insurance is not necessary if you are covered under workers compensation.
2. B) Increasing the elimination period reduces the premium for disability income insurance.
3. C) Disability income insurance usually replaces 100 percent of lost income.
4. D) A uniform definition of disability appears in all disability income policies.