Principles of Risk Management and Insurance: Principles of Risk Management and Insurance - Chapter 18 Flashcards

Which of the following is a reason that social insurance programs exist?

1. A) to compete with private insurance programs
2. B) to provide a base of economic security
3. C) to provide needs-tested benefits to low-income individuals
4. D) to reduce involvement of the government in insurance markets

Which of the following statements about the characteristics of social insurance programs is true?

1. A) Benefits are loosely related to a worker's earnings.
2. B) Benefits are paid primarily on the basis of individual equity.
3. C) Participation in social insurance programs is voluntary.
4. D) Social insurance programs must be fully funded at all times to pay required benefits.

Which of the following statements about the characteristics of social insurance programs is true?

1. A) They are designed to provide a floor of income with respect to the risks that are covered.
2. B) Social insurance benefits payments are unrelated to income.
3. C) Participants are required to satisfy a means test to receive benefits.
4. D) With few exceptions, participation in social insurance programs is voluntary.

Which of the following statements about participation in the Social Security program is (are) true?

1. Most private sector employees are covered under the Social Security program.
2. Each employee has the right to "opt out" of the Social Security program if the employee does not wish to participate in the program.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

One insured status under Social Security requires you to have earned at least six credits during the last 13 calendar quarters ending with the quarter of death, disability, or entitlement to retirement benefits. This insured status is

1. A) disability insured.
2. B) temporarily insured.
3. C) fully insured.
4. D) currently insured.

As of this year, Brad, age 50, has 40 credits under the Social Security program. These credits were all earned in the last 10 years. What is Brad's insured status under the program?

1. A) He is currently and fully insured.
2. B) He is currently insured, but not fully insured.
3. C) He is fully insured, but not currently insured.
4. D) He is neither currently insured nor fully insured.

Which of the following statements about the full retirement age under the Social Security program is true?

1. A) The current retirement age for full benefits is age 62.
2. B) Beginning in the year 2025, the retirement age will be gradually increased to age 75.
3. C) Early retirement with reduced benefits is allowed as early as age 55.
4. D) Delayed retirement beyond the age for full benefits increases the amount of the monthly benefit.

All of the following persons are eligible for a benefit under the retirement portion of the Social Security program EXCEPT

1. A) a divorced spouse, age 55, who was married to the retired worker for 6 years.
2. B) a retired worker's 63 year-old spouse who is no longer caring for children.
3. C) a retired worker's 52 year-old spouse who is caring for a 12 year-old daughter of the retired worker.
4. D) a retired worker's unmarried 20 year-old son who has been severely disabled because of an automobile accident while he was in elementary school.

Which of the following statements about a worker's primary insurance amount is (are) true?

1. It is the monthly amount paid to a worker who elects early retirement at age 62.
2. It is equal to 50 percent of the worker's final average pay that was subject to Social Security taxes.
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 the Social Security cost-of-living adjustment is (are) true?

1. The amount of the adjustment is limited to a maximum of 2.5 percent annually.
2. Increases are based on changes in the consumer price index.
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 with respect to the Social Security earnings test?

1. The earnings test does not apply to dividends, interest, and rental income.
2. The earnings test does not apply to work earnings for those individuals who have reached the full retirement age under Social Security.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

All of the following persons are eligible for survivor benefits under Social Security EXCEPT

1. A) dependent parents age 62 or older.
2. B) a surviving brother or sister, age 60 or older.
3. C) a surviving spouse age 60 or older.
4. D) a surviving spouse with eligible children younger than age 16.

Which of the following statements about disability benefits under Social Security is true?

1. A) There is a one-year waiting period before benefits are payable.
2. B) Benefits are payable as long as the disabled worker is unable to perform his or her regular occupation.
3. C) Benefits are payable only if the condition causing the disability is expected to result in death prior to age 65.
4. D) In addition to the disabled worker receiving the benefits, benefits can also be paid to eligible dependents.

In addition to most persons over age 65, which of the following persons is (are) eligible for Medicare benefits?

1. Persons under age 65 who have been entitled to Social Security disability benefits for at least 24 months
2. Persons under 65 who need long-term kidney dialysis treatment or a kidney transplant
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 the coverage of health care services under Part A of Medicare is (are) true?

1. Services in the patient's home are covered if the patient requires skilled care and meets certain conditions.
2. Hospice care is available for beneficiaries with a terminal illness.
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 hospice benefits under the hospital insurance (Part A) portion of Medicare is (are) true?

1. To become eligible for hospice care, a patient must first receive inpatient care for at least 10 consecutive days.
2. Hospice benefits are provided to persons who are terminally ill.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Which of the following expenses is covered under the medical insurance (Part B) portion of the Medicare program?

1. A) long-term care in a skilled nursing facility
2. B) the fee charged by a surgeon for an operation
3. C) the cost of a semi-private room during a hospital stay
4. D) routine prescription drugs outside of the hospital

Which of the following statements about the medical insurance (Part B) portion of Medicare is (are) true?

1. Participation in Part B of Medicare is voluntary.
2. It is provided at no cost to anyone who is fully insured under Medicare.
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 the role of physicians with respect to Medicare claims is (are) true?

1. Physicians who do not accept an assignment of Medicare claims can charge as much as 200 percent of the Medicare-approved fee.
2. Physicians who accept assignment agree to accept the Medicare-approved amount as payment in full.
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 Medigap policies is (are) true?

1. Insurers are required to have an open enrollment period of 6 months from the date an applicant first enrolls in Medicare Part B and is age 65 or older.
2. Most policies are of limited value because they largely duplicate benefits already provided by Medicare.
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 the financing of the Social Security program is (are) true?

1. Although the self-employed pay an OASDI tax rate that is twice the employee rate, they are allowed certain deductions that reduce the effective tax rate.
2. The earnings base on which OASDI taxes are paid increases annually based on changes in average wages in the national economy.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Objectives of unemployment insurance include which of the following?

1. To help unemployed workers find jobs.
2. To encourage employers to stabilize employment.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

In order to receive unemployment insurance benefits, an unemployed worker must meet all of the following eligibility requirements EXCEPT

1. A) have qualifying wages and employment.
2. B) be able to work.
3. C) be actively seeking work.
4. D) satisfy a 6-month waiting period.

Which of the following statements about unemployment insurance benefits is true?

1. A) Benefits are a flat amount regardless of a worker's previous wages.
2. B) Because of federal legislation, the maximum benefit is the same in all states.
3. C) Most states pay regular benefits for a maximum duration of 26 weeks.
4. D) Under the extended benefits program, the federal government continues benefit payments for up to 3 years for workers who have exhausted their regular benefits.

Which of the following statements about the financing of unemployment insurance benefits is true?

1. A) Each state maintains its own trust fund at the state level, and the state pays qualified beneficiaries from the trust fund the state administers.
2. B) While experience rating is used for other types of insurance, it is not used in unemployment insurance.
3. C) Part of an employer's contribution is used for administrative expenses, to fund extended benefits, and to maintain a loan fund that can be drawn upon if the state's account is depleted.
4. D) Most state programs are financed primarily by payroll taxes paid by employees.

Which of the following statements about the problems and issues of unemployment insurance programs is (are) true?

1. Many state programs are inadequately financed.
2. Only a small portion of the total unemployed receive benefits at any time.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Prior to the passage of workers compensation laws, all of the following common law defenses could be used by employers to avoid financial responsibility for work-related injuries EXCEPT

1. A) contributory negligence.
2. B) the fellow-servant doctrine.
3. C) assumption of the risk.
4. D) employer liability laws.

Which of the following statements about workers compensation programs is true?

1. A) Injured workers must prove the employer was responsible for their injuries to collect benefits.
2. B) Workers compensation disability income benefits (amount and duration) are uniform from state to state.
3. C) Options available for complying with the law may include one or more of the following: self-insurance, private insurance, or insurance through a state fund.
4. D) Most states have elective laws whereby the employer can choose whether or not to provide workers compensation coverage to employees.

Which of the following statements about benefits provided by workers compensation programs is true?

1. A) Occupational disability and nonoccupational disability are covered.
2. B) Death benefits and benefits to eligible survivors are payable if a worker is killed on the job.
3. C) Medical benefits are usually subject to deductibles, coinsurance, and numerous exclusions.
4. D) Retirement benefits are payable to retired workers through workers compensation.

Which of the following is a current problem with workers compensation programs?

1. A) declining involvement of lawyers in workers compensation claims
2. B) exclusion of deaths and injuries attributable to terrorism
3. C) exclusion of benefits for occupational illness
4. D) overuse of opiate prescription drugs in workers compensation.

Which of the following statements about problems and issues in workers compensation insurance is (are) true?

1. Uncertainties created by the increasing use of medical marijuana is a growing problem for employers.
2. Enactment of the Affordable Care Act led many employers to stop offering medical benefits as part of the workers compensation coverage on their employees.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Marion owns substantial financial assets. She was surprised that she qualified for Social Security retirement benefits when she retired because of her high investment income. What characteristic of social insurance programs is Marion overlooking with respect to her Social Security retirement benefits?

1. A) Social insurance programs are financially self-supporting.
2. B) Social insurance program benefits are loosely related to earnings.
3. C) Social insurance benefits are not means tested.
4. D) Full funding of social insurance programs is unnecessary.

Tony is 48 years old. He earned the maximum taxable wage base under Social Security annually between the time when he was 26 and when he was 40. At age 40, he dropped out of the workforce to care for children as his wife had a high-paying job. Which statement is true regarding Tony's insured status under Social Security?

1. A) Tony is fully insured and currently insured.
2. B) Tony is fully insured, but not currently insured.
3. C) Tony is currently insured, but not fully insured.
4. D) Tony is neither fully insured nor is he currently insured.

Frank is doing some life insurance planning. A financial advisor said, "be sure to consider Social Security when examining sources of funds available for family support if you die." The financial advisor was referring to which Social Security benefit?

1. A) retirement benefits
2. B) survivor benefits
3. C) disability benefits
4. D) health insurance benefits

Which of the following statements is true with regard to the Medicare program?

1. A) While Social Security old-age benefits are available at age 62, Medicare Part A benefits are not available, in most cases, until age 65.
2. B) If an individual delays collecting Social Security retirement benefits until after the full retirement age, he or she is not eligible for Medicare benefits until he or she begins to collect retirement benefits.
3. C) Part B of Medicare is funded through a payroll tax.
4. D) Beneficiaries must pay a monthly premium for Medicare Part A coverage.

Which of the following statements is (are) true with respect to the Medicare Advantage Plans?

1. These plans replace the original Medicare program, Parts A and B, which are no longer available to new retirees.
2. These plans provide an opportunity for retirees to receive Medicare coverage through private health care plans.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Dale, age 65, was dismayed to learn about all of the deductibles, co-pays, limits, and exclusions in the Medicare program. Dale bought a type of health insurance specifically designed to supplement Medicare, and selected his coverage from among 10 standard policies that private insurers offer. What type of health insurance did Dale purchase?

1. A) long-term care insurance
2. B) Medigap insurance
3. C) major medical insurance
4. D) viatical insurance

EFG Company experienced a reduced demand for its products during a recession. EFG managers were considering laying off some workers when the personnel director said, "Let's not lay off these workers. If we do, our unemployment insurance premiums will increase. The state considers employment stability when determining our premium." Considering the firm's employment record when determining the rate to charge for unemployment insurance is called

1. A) experience rating.
2. B) class rating.
3. C) schedule rating.
4. D) retrospective rating.

Beth was injured at work and is eligible to receive workers compensation benefits. All of the following benefits are provided under workers compensation EXCEPT

1. A) disability income.
2. B) retirement benefits for dependents.
3. C) rehabilitation benefits.
4. D) medical care.

Marco, a risk manager in California, is interviewing for a new position in the state of Washington. When Marco asked about methods of providing workers compensation, the answer surprised him. In Washington, employers can self-insure the risk or obtain coverage through a state fund. Private insurers do not market workers compensation insurance in Washington. Washington uses a

1. A) competitive state fund.
2. B) guaranty fund.
3. C) reinsurance facility.
4. D) monopoly state fund.

Which of the following statements about the financing of OASDI and Medicare is (are) true?

1. There is a maximum taxable wage base for OASDI.
2. There is a maximum taxable wage base for Part A of Medicare.
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 taxation of Social Security retirement benefits under federal law is (are) true?

1. Social Security retirement benefits are never considered taxable income.
2. Up to 85 percent of Social Security retirement benefits may be considered taxable income, depending on the amount of other income received by the beneficiary.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Which of the following would help to reduce the long-range OASDI actuarial deficit?

1. A) increasing the payroll tax rate
2. B) increasing benefits
3. C) reducing the taxable wage base
4. D) increasing the cost of living adjustment

Which of the following statements about the Medicare prescription drug benefit is (are) true?

1. Beneficiaries select a prescription drug plan and pay monthly premiums, with the premium reduced or waived for low-income beneficiaries.
2. The benefit provides first-dollar coverage of prescription drugs up to a maximum of $10,000 per year, but no coverage after $10,000.
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 Medicare Prescription Drug Plan are true EXCEPT

1. A) Medicare prescription drug coverage is available to all Medicare beneficiaries.
2. B) Medicare prescription drug coverage is funded exclusively through the Part A payroll tax.
3. C) The Medicare prescription drug program provides financial help for beneficiaries with limited income and financial resources.
4. D) In addition to the initial deductible, there is a coverage gap where the beneficiary must pay the entire cost of prescription drugs.

All of the following statements about the Medicare prescription drug benefit are true EXCEPT

1. A) Beneficiaries are required to pay a monthly premium for the benefit.
2. B) The plan provides protection against catastrophic prescription drug expenditures.
3. C) Coverage is limited to when a beneficiary is hospitalized or a resident of rest home.
4. D) The plan has a coverage gap before a beneficiary has coverage for catastrophic costs.

Under one type of Medicare Advantage Plan, members of the plan can see any doctor or health services provider that accepts Medicare patients. If members receive care outside the network of member physicians and care facilities, they must pay higher out-of-pocket costs. This type of Medicare Advantage Plan is a

1. A) Medicare HMO.
2. B) Medicare PPO.
3. C) Medicare Special Needs Plan.
4. D) Medicare Private Fee-for-Service Plan.

Which of the following statements concerning Medicare Prescription Drug Plans is (are) true?

1. The monthly premium is based on the health status of the beneficiary and the number of prescriptions the beneficiary needs.
2. After the beneficiary has paid an initial deductible, Medicare pays the entire cost of all prescription drugs the beneficiary needs.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

Under Part A of Medicare, how is reimbursement for inpatient hospital care determined?

1. A) The amount billed to Medicare by the hospital is the amount Medicare pays.
2. B) Eighty percent of the hospital's regular charge for care is paid.
3. C) The hospital's usual, reasonable, and customary charge is paid.
4. D) Hospital care is classified into diagnosis-related groups (DRGs) and the amount reimbursed depends on the DRG classification of the care delivered.

Which of the following statements about the financial status of Medicare Part A is (are) true?

1. Part A has serious financial problems.
2. Reforms instituted by Congress have reduced total Part A expenditures in recent years.
3. A) I only
4. B) II only
5. C) both I and II
6. D) neither I nor II

All of the following changes would reduce the long-range deficit for the Social Security program EXCEPT

1. A) increase the OASDI taxable wage base.
2. B) delay scheduled increases in the full retirement age.
3. C) make all OASDI benefits fully taxable.
4. D) use general revenues of the federal government to help pay benefits.

As an alternative to the Original Medicare Plan, beneficiaries can elect to enroll in private health insurance plans that cover all services that the Original Medicare Plan covers except hospice care. These private health insurance plans that are an alternative to the Original Medicare Plan are called

1. A) Medigap Insurance Programs.
2. B) PACE Programs.
3. C) Medicare Advantage Plans.
4. D) Medicare Prescription Drug Plans.

Under the Medicare Prescription Drug Program, a coverage gap (also called a "donut hole") exists after the beneficiary and drug plan pay a certain amount for covered drugs. The coverage gap refers to

1. A) the large, up-front deductible that must be satisfied if the patient has a prescription for a covered brand-name drug.
2. B) the temporary gap in coverage that begins when the beneficiary and drug plan pay a certain amount for covered drugs during the year and ends when the catastrophic limit is reached and coverage resumes.
3. C) the temporary gap in coverage that begins after beneficiaries reach the lifetime limit on catastrophic drug expenses and ends when a new deductible is met and coverage resumes.
4. D) the temporary gap in coverage that begins when prescription benefits terminate for beneficiaries who attain age 68 and resumes when beneficiaries attain age 72.

Which of the following statements regarding the Emergency Unemployment Compensation (EUC) program is true?

1. A) EUC benefits are limited to individuals who have exhausted regular state benefits and have annual incomes below the federal poverty level.
2. B) EUC benefits are funded entirely by the federal government.
3. C) EUC benefits are limited to employees who have lost their job because of a labor dispute.
4. D) EUC benefits are available on a case-by-case based and awarded at the discretion of the Secretary of Labor.

One type of Medicare Advantage Plans provides focused care for a specific group of people, such as diabetics and nursing home residents. This type of Medicare Advantage Plan is a

1. A) Point of Service (POS) plan.
2. B) Private Fee-for-Service plan.
3. C) Health Maintenance Organization (HMO) plan.
4. D) Special Needs plan.

A serious current concern with the Social Security program is the depletion of the Disability Income Trust Fund. Each of the following contributed to the depletion of the fund EXCEPT

1. A) aging of the workforce and baby boomers
2. B) changing to a less stringent definition of disability
3. C) the increased number of women in the workforce
4. D) growth in the size of the labor force over time

Which of the following statements about Social Security disability benefits is true?

1. A) Benefits replace ninety percent of a disabled person’s work earnings.
2. B) A waiting period is not required for Social Security disability benefits.
3. C) Social Security disability benefits are limited to a maximum duration of 60 months.
4. D) A strict definition of disability is used in the Social Security program.

An important current issue in state workers compensation programs is the overuse of a certain category of pain-killing drugs. These drugs have been associated with drug overdoses and drug addiction. This category of drugs is called

1. A) hypertension drugs.
2. B) statins.
3. C) opiates.
4. D) beta-blockers.

Which of the following statements about the impact of the implementation of the Affordable Care Act (ACA) on workers compensation is true?

1. A) Implementation of the ACA will increase fraudulent workers compensation claims.
2. B) Implementation of the ACA will create higher healthcare provider prices.
3. C) Implementation of the ACA will reduce the waiting time to see a physician, to have tests performed, and to begin physical therapy.
4. D) Implementation of the ACA will discourage annual physical check-ups and implementation of workplace wellness programs.