Health Insurance - Medical Plans

Question 1

Two types of medical expense insurance plans:

Answer 1

1. ) Indemnity Policies;

2. ) Managed Care Plans

Question 2

Indemnity Policies

Answer 2

Reimburse the insured for the cost of covered medical care he or she receives. Insureds are generally free to select any doctor or medical care provider they choose.

Question 3

Managed Care Plans

Answer 3

Systems of healthcare delivery that combine features of a health care provider and an insurer. In effect, premiums paid into a managed care plan are viewed as prepayment for medical care services and treatment to be received through the plan’s network of providers. Plan members share in the cost of care through their premiums and co-payments collected at the time of service.

Question 4

Insureds vs. Subscribers/Members

Answer 4

Those who are covered under a traditional indemnity policy are called insureds. People covered under a managed care plan are called members (or, alternatively, subscribers or participants).

Question 5

Comprehensive Coverage

Answer 5

Coverage under medical expense insurance that covers a variety of conditions or medical services.

Question 6

Specified Coverage

Answer 6

Coverage under medical expense insurance that is limited to one specific form of care, such as vision or dental.

Question 7

Benefit Schedule

Answer 7

The insurer assigns a “price,” or a dollar amount or unit value, to each specific medical cost, procedure, charge, or aspect of coverage. The amount the insurer then pays to the insured is some percentage of this assigned price.

Question 8

Usual, Customary, and Reasonable (UCR) Basis

Answer 8

The amount payable for the covered service is based on the amount that is usual or common for the area in which the service is performed, or is based on the usual charge that most other health care providers of similar training or experience charge.

Question 9

America’s Health Insurance Plans

Answer 9

A national trade association that publishes widely used information about costs of medical procedures in various geographical areas.

Question 10

Basic Medical Expense (Indemnity) Policies

Answer 10

A category of medical expense insurance that provides coverage for a specific form of medical care. These “first dollar” plans pay benefits beginning with the first dollar the insured incurs, and typically do not involve a deductible or coinsurance.

Question 11

Three general types of basic medical expense policies.

Answer 11

1. ) Hospital Expense Insurance
2. ) Surgical Expense Insurance
3. ) Physician Expense Insurance

Question 12

First Dollar Coverage

Answer 12

Coverage where claims are paid 100% up to a specified amount with no deductible or copayment.

Question 13

Basic Hospital Expense Policies

Answer 13

A category of medical expense plan that covers only hospital costs usually on a per-day benefit for a certain number of days. Does no cover physician or surgeon fees.

Question 14

Basic Surgical Expense Policies

Answer 14

A category of medical expense plan that covers only surgeons’ fees and related costs associated with surgery.

Question 15

Basic Physician Expense Policies

Answer 15

A category of medical expense plan that covers routine doctor’s office visits, charges for diagnostic x-rays, and laboratory charges.

Question 16

Major Medical Insurance Policies

Answer 16

Indemnity plans that pay covered medical expenses with a broader coverage, higher lifetime benefit, etc.

Question 17

Two Types of Major Medical Expense Plans:

Answer 17

1. ) Supplemental Major Medical

2. ) Comprehensive Major Medical

Question 18

Supplemental Major Medical

Answer 18

A major medical policy that covers expenses that a basic plan does not cover.

Question 19

Comprehensive Major Medical Insurance

Answer 19

A stand-alone major medical policy that is not combined with other medical expense coverage.

Question 20

Major Medical Insurance Features

Answer 20

Deductibles, Coinsurance, Stop-Loss Limits, Exclusions for Pre-Existing Conditions

Question 21

Deductible

Answer 21

A stated sum of money that must be paid before any policy benefits are paid.

Question 22

Family Deductible

Answer 22

Deductible where once the sum of individual members’ deductibles equal the family deductible no additional deductibles must be paid.

Question 23

Flat Deductible

Answer 23

An amount that must be paid before benefits will be paid from a policy.

Question 24

Corridor Deductible

Answer 24

An amount that is applied after a basic plan pays benefits and before the supplemental plan pays benefits.

Question 25

Carryover Credit

Answer 25

Eligible health care expenses incurred in the last three months of a calendar year can generally be carried over and applied toward the deductible requirement of the following calendar year. This carryover credit is applied whether or not the current year’s deductible has been met.

Question 26

Coinsurance

Answer 26

In addition to the deductible, the insured must pay a certain percentage of the covered costs.

Question 27

Stop-Loss

Answer 27

Protects the insured by limiting the total out-of-pocket dollar amount he or she must pay on an annual basis.

Question 28

Pre-Existing Conditions

Answer 28

Conditions present before a policy’s effective date. Prior to the Affordable Care Act, pre-existing conditions were excluded from coverage for a specified period of time. Now, all medical expense policies must accept applicants regardless of pre-existing conditions.

Question 29

Health Maintenance Organizations (HMOs)

Answer 29

A corporation that delivers health care services. HMOs are finances by premiums. The HMO creates a network of associated doctors, medical care staffs, and participating hospitals and clinics. This network provides curative and preventative treatment to enrolled members. HMOs operate in limited geographical areas (“service areas”) and are sometimes also known as Health Insurance Corporations (HICs).

Question 30

Medical Savings Account (MSA)

Answer 30

The forerunners of HSAs. Group MSAs were created specifically for self-employed people and employees of small employers. Their purpose is to help fund qualifies medical expenses on a tax-advantaged basis.

Question 31

Health Savings Account (HSA)

Answer 31

A tax-exempt account into which account holders can make tax-deductible contributions to finance health care services. Funds in an HSA account grow tax-free. If withdrawn to cover medical expenses, they are also received tax free.

An HSA has two parts:

1. ) A high-deductible health insurance plan (HDHP) that covers medical expenses that exceed the high deductible
2. ) A tax-favored savings account that can be used to fund expenses subject to the high-deductible health insurance plan deductible.

Question 32

Medicare MSA Plan

Answer 32

Medicare MSA funds can be used to pay for deductibles and coinsurance, but they cannot be used to pay for prescription drugs that are covered under Medicare Part D.

Question 33

Flexible Spending Accounts

Answer 33

An FSA is designed specifically as a group benefit that an employer can offer to its employees. It allows the employees to contribute to the plan on pre-tax basis.

Question 34

Health Reimbursement Accounts

Answer 34

An HRA is funded solely by employer contributions, which are excluded from employees’ gross income. Employees receive tax-free reimbursements for qualified medical expenses within an annual limit. Unused funds can be applied to reimbursements in later years.

Question 35

Limited (Special) Risk Health Insurance

Answer 35

The most common types of limited risk policies are:

• Accidental death and dismemberment (AD&D) insurance
• Hospital indemnity insurance
• Critical illness (“dread disease”) insurance
• Blanket health insurance
• Prescription drug insurance
• Vision insurance
• Dental insurance

Question 36

Hospital Indemnity Insurance

Answer 36

Hospital indemnity insurance helps provide extra cash to cover personal expenses not covered by insurance during hospitalization. Benefits are paid in the form of periodic payments (weekly or monthly) directly to the policyowner, not the medical care provider, if the insured becomes hospitalized.

Question 37

Credit Disability Insurance

Answer 37

Covers the risk of a loan customer becoming disabled and pays a monthly benefit equal to the loan payment amount. The policy is written so that its benefit period matches the remaining loan period.The credit company is the applicant, owner, and beneficiary. The loan customer is the insured.

Question 38

Critical Illness (“Dread Disease”) Insurance

Answer 38

An umbrella term for a group of policies that each covers a specific type of disease or illness.

Question 39

Blanket Health Insurance

Answer 39

An accident-only policy issued to an organization to protect a group of individuals engaged in a specified group activity.