Insurance: Chapter 4

Question 1

What three things are comprehensive major medical plans based on?

Answer 1

1. Calendar year deductible
2. Coinsurance percentage
3. Stop-loss amount

Question 2

What is a deductible?

Answer 2

The amount that is paid before the coinsurance begins. They are usually fixed dollar amounts that apply separately to each person. Each family member pays an individual deductible

Question 3

What is coinsurance?

Answer 3

The percentage of covered expenses paid by the medical expense plan. Paid per calendar year.

Question 4

What is the stop-loss limit?

Answer 4

The threshold that is reached at which the insurance company pays 100% of the expenses. Also known as the breakpoint. Done in a calendar year.

                                  Deductible                 Stop-Loss                     Breakpoint
                                  $500                            $5,000 Insurance pays           0%                               80% = $4,000                   100% Insured pays           100% = $500                  20% = $1,400                       0%

In this example insured pays $500 deductible and 20% of $5,000. If the total claim is greater than stop-loss limit you calculate using stop loss limit amount.

Question 5

What does the affordable care act require in regards to continuance and portability?

Answer 5

Medical expense insurers to continue coverage regardless of claims as long as the insured pays the premiums. In many cases the premium will increase on renewal.

Question 6

What are the two parts of traditional medicare?

Answer 6

Hospital insurance protection (Part A) and Medical insurance protection (Part B)

Question 7

Who is eligible for Medicare Part A?

Answer 7

All persons age 65 and over who are entitled to monthly social security cash benefits or monthly benefits under railroad retirement programs.

Disable beneficiaries receiving benefits for at least two year are eligible.

A social security disability beneficiary is covered under Medicare after entitlement to disability benefits for 24 months or more. Includes any disabled workers at any age disabled widow/ers of workers age 50 and over, beneficiaries age 18 or older who receive benefits because of a disability beginning before age 22 and disabled qualified railroad retirement annuitants.

Question 8

What benefits are included with Medicare Part A?

Answer 8

1. Hospital stays: limited to 150 days for one stay. 1st deductible paid for first 60 days, 2nd for next 30 day and 3rd for last 60 days.
2. Post-hospital extended care in a skilled nursing home. Up to 100 days
3. An unlimited number of post-hospital home health services
4. Hospice care for terminally ill patients
5. Patient pays for first 3 pints of blood or donates them. Medicare covers additional blood

Question 9

What are the limitations of Medicare Part A?

Answer 9

1. Services outside the U.S. are generally not covered. (limited circumstances allow for services in Canada, Mexico, the Carribean and aboard ships in U.S. territorial waters may be paid by hospital insurance)
2. If person is covered by employer group health insurance, entitled to veterans benefits, or covered by workers comp then Medicare is the secondary payor.

Question 10

What is Medicare Part B and who is eligible?

Answer 10

Medical insurance, it is voluntary and financed through monthly premiums paid by those who enroll plus contributions from the federal government. The same persons eligible under Part A are eligible under part B.

The pays the deductible first, then it is an 80/20 split of the approved charges, no stop-loss limit. The 20% is an unlimited amount with great exposure for larger charges.

Question 11

What are the benefits of Medicare Part B?

Answer 11

1. Doctor’s services including house calls, office visits and Dr. services in other hospitals or institutions (nursing home)
2. Covered services include diagnostic tests, radiology/pathology, treatment for mental illness, transfusion of blood, PT, drugs and biologicals that cant be self administerd
3. Outpatient services from participating hospital for diagnosis or treatment
4. Unlimited number of home health services
5. Free preventative care services (wellness checkup)
6. Depression screening, counseling for alcohol misuse, obesity, behavioral therapy for cardiovascular disease

Question 12

What is excluded from Medicare Part B?

Answer 12

1. Routine dentures and dental care
2. Exams for eyeglasses or hearing aids
3. Most immunizations (except 1 free flue shot per year)
4. Prescription drugs

Question 13

What is Medicare Part D?

Answer 13

Plans run by an insurance companies approved by Medicare, to be eligible the person must have Medicare Part A and/or Part B. Drug manufactures generally provide a 50% discount. Beneficiaries who are already receiving Medicaid benefits will receive prescription drugs through Medicare.

*Donut hole numbers are not tested

Question 14

What are Medigap policies and how many are there typically in each state?

Answer 14

Policies with benefits to pay deductibles and coinsurance as well as add benefits not included in Medicare. There are 10 policies, Plan A - Plan J available in most states. Person must be enrolled in both Part A and Part B of Medicare to be eligible.

Question 15

What do HMO’s provide?

Answer 15

Wide range of comprehensive health care services to a group of subscribers for a fixed premium. Kid’s can remain covered on parent’s employer plan until they are 26.

Question 16

What is capitation?

Answer 16

A monthly fee is paid to the provider in exchange the individual receives virtually all the medical care required during the year.

Question 17

Who is the gatekeeper and what is there role?

Answer 17

A primary care physician, there role is to manage the care of an individual and determine what care is provided and when the individual should be referred to a specialist.

Question 18

What are the major disadvantages of HMO’s

Answer 18

1. Having to go through gatekeeper
2. Subscriber is not covered when they use a provider other than the HMO or providers who are affiliated with the HMO

Question 19

What are PPO’s

Answer 19

They represent a group of healthcare providers contracting with insurance companies, 3rd party admins or others to provide medical care services at a reduced fee

Question 20

How do PPO’s differ from HMO’s?

Answer 20

1. Health care providers in PPO are generally paid on a fee-for-service basis as needed
2. Employees are not required to use practitioners or facilities of the PPO. They can go outside the network but benefits are generally reduced relative to benefits paid for network provided care and deductibles will be higher out of network.

Question 21

What are the income tax implications for healthcare plans?

Answer 21

Premiums are tax deductible by the employer. Benefits are taxable if they exceed any medical expense incurred. Self employed, partnerships and more than 2% shareholders of S-Corp may be able to deduct certain premiums if they are above the line.

Question 22

What is required by COBRA for self-funded or group health coverage?

Answer 22

That they offer terminated employees the right to buy continued health coverage that is identical.

Question 23

Who is exempt from federal legislation?

Answer 23

Small companies with fewer than 20 employees for at least half of the prior year.

Question 24

What makes a company subject to COBRA?

Answer 24

They have 20 or more employees on more than 50% of its typical business days in the previous calendar year. Both full and part time employees are counted, with part timers being counted as a fraction.

Question 25

How long is the continuation period for a disability qualifying event?

Answer 25

29 months

Question 26

For termination or change from full to part time employment who must coverage be offered to and for how long under COBRA?

Answer 26

up to 18 months to the terminated employees and other dependents

Question 27

For employee death, divorce, legal separation or eligibility for Medicare who must coverage be offered to and for how long under COBRA?

Answer 27

Spouses and other dependents for up to 36 months

Question 28

For loss of dependent status (marriage, reaching dependency age limit specified by plan) who must coverage be offered to and for how long under COBRA?

Answer 28

Dependents whose status change for up to 36 months

Question 29

Under what qualifying events can the coverage be extended and for how long?

Answer 29

Any of the events below can extend the initial 18 month period by another 18 months for a total of 36 months known as second circumstance.

1. Death of a covered employee
2. Divorce or legal separation of a covered employee or spouse
3. Covered employee becomes eligible for Medicare
4. Loss of dependent child status under the plan

Question 30

Under second circumstance is continuation automatic?

Answer 30

Continuation must be elected it is not automatic. Election period starts on the date of the qualifying event and may not end earlier than 60 days after the actual notice of the event to the qualifying beneficiary by the plan administrator. Once coverage is elected beneficiary must pay premium within 45 days.

Question 31

What does that affordable care act stipulate about coverage for dependents under age 19?

Answer 31

That no child under age 19 can be denied coverage because of pre-existing conditions

Question 32

When may you want to delay Part B Medicare enrollment?

Answer 32

If you or your spouse (or family member if you’re disabled) is still working and you have coverage through your employer or union.

Question 33

What are your 3 options when you or your spouse employment ends after delaying Part B Medicare enrollment?

Answer 33

1. Elect COBRA coverage through the employers plan at probably a higher cost to you
2. Sign up for Part B within 8 months without penalty, after 8 months may be required to pay increased premium
3. Upon signing up for Part B, your Medigap open enrollment period begins

Question 34

What is an HSA?

Answer 34

Health Savings Account, they operate alongside High Deductible Health Plans. Contributions to HSA are fed tax deductible

Question 35

What are the provisions for HSA accounts in 2022?

Answer 35

Contribution Source: Individual

Tax-deductible contribution amount: $3,650 Individual $7,300 Family

HDHP minimum deductible requirements: $1,400 Ind. $2,800 Family

HDHP maximum out of pocket requirements: $7,050 Ind. $14,100 Family

Eligibility: Ind. must be covered under qualified HDHP, below Medicare eligibility age and not covered by any other health plan

Catch-up provision: Ind. 55 and up may contribute and additional $1,000

Effective date: 1/1/2004

Employer contributions: Employers may contribute to HSA’s but not required

Question 36

What is the HSA design requirement?

Answer 36

A qualified HSA plan usually has a single annual deductible that applies to all medical expenses covered by the insurance policy whether you are insuring yourself or an entire family.

Question 37

What are some examples of HSA qualified expenses?

Answer 37

1. Dr. visits and tests not covered by insurance policy
2. Surgical procedures not covered by insurance
3. Prescription drugs
4. Acupuncture and chiropractic care
5. Eye exams or glasses
6. Hearing tests or hearing aids
7. Dental work or exams
8. Alcohol or drug abuse treatment
9. Insulin

New for 2022: Sunscreen, skin creams, eye drops, insect repellent, acne treatment

Question 38

What is true about distributions from HSA’s to MSA’s?

Answer 38

Distributions are excluded from persons gross income if they are used to pay eligible medical expenses of the account holder and as long as they are not paid or reimbursed by the high-deductible insurance plan

Question 39

What is a health reimbursement arrangement?

Answer 39

An HRA is an arrangement that is solely employer funded and reimburses employees for substantiated medical expenses up to a maximum dollar amount per coverage period.

Starting in 2022 HRA’s will reimburse for OTC drugs

Question 40

What are the characteristics of a HRA?

Answer 40

1. Cannot be part of a cafeteria plan (no salary reductions)
2. Reimbursed amounts are excludible from employees gross income
3. HRAs cannot offer a cash-out option at any time even at termination
4. HRA can reimburse expenses after employment whether or not employee elects COBRA
5. Employee can’t be reimburse for same expense by both FSA and HRA. HRA will come out first before the FSA money can be used
6. The employer retains any excess unused money in an HRA

Question 41

What is a Group Health Conversion Plan?

Answer 41

The exercising of the conversion privilege of the terminating employee to purchase a conversion plan for health insurance. The notification should be made immediately after termination or within 180 days before the end of the continuation period if COBRA is elected. Conversion may only be available under the group policy. Application under the plan must be made on or before health insurance under the plan ends. Employee must submit application and pay premium within 31 days of group insurance end.

The employer should inform the employee and all dependents that may be losing coverage of all available options.