Medical expense insurance1. Basic hospital, medical, and surgical policies2. Major medical policies3. Health Maintenance Organizations (HMOs)4. Preferred Provider Organizations (PPOs)5. Point of Service (POS) plans6. Flexible Spending Accounts (FSAs)7. Health Reimbursement Accounts (HRAs)8. High Deductible Health Plans (HDHPs) and relatedHealth Savings Accounts (HSAs)9. Stop loss
Students should be familiar with the following concepts: deductiblespreexisting condition basic medical expense policiesbasic surgical expensebasic physicians' (nonsurgical) expense basic hospital expensestop-loss featurelimited risk policy coinsurancesupplementary and comprehensive major medical expense policies
1. The miscellaneous expense benefit in a basic hospital expense policy normally will cover A. physicians' bedside visits B. the administering of anesthesia C. drugs and medicine administered in the hospital D. hospital room and board
C. drugs and medicine administered in the hospital
2. Clarence is to enter the hospital for a thyroidectomy. His basic medical expense policy includes a relative value schedule for surgical expense. The schedule lists 55 units for a thyroidectomy and a conversion factor of $8. How much will the policy pay? "A. $400 B. $440 C. $540 D. $550
3. Which of the following statements about deductible provisions in medical insurance policies is NOT correct? A. They help to eliminate small claims. B. They provide that initial expenses up to a specified amount are to be paid by the insured. C. They are most common in basic medical expense policies. D. They help to hold down premium rates.
C. They are most common in basic medical expense policies.
4. An insured has a basic hospital/surgical expense policy, which provides benefit of $50 per day for up to 30 days of hospitalization and $750 for miscellaneous charges. It bases its surgical benefits on a schedule approach. The insured is hospitalized for a severely broken leg that requires surgery. The surgical procedure has been assigned $500 by the policy, though the customary charge in the area is $600. The insured incurs the following covered expenses: $80 per day for seven days hospital charge $675 for the surgical procedure $800 for miscellaneous expenses The insured's policy will pay A. $1,600 B. $1,700 C. $1,810 D. $2,035
The insured's policy will pay A. $1,600 policy charges real benefit 50x7 = 350 560 misc = 750 800 surgical = 500 675 -------- --------- 1600 2035
5. When a medical expense policy pays benefits on a fixed-rate basis, it pays A. a certain percentage of whatever the hospital room charges are B. for total hospital expenses, less a deductible C. a flat amount per day for hospital room and board D. only for surgery and miscellaneous hospital expenses
C. a flat amount per day for hospital room and board
6. Wilbur's basic medical expense policy limits the miscellaneous expense benefit to 20 times the $90 daily room and board benefit. During his recent hospital stay, miscellaneous expenses totaled $2 100. How much, if any, of this amount will Wilbur have to pay? A. $0 B. $210 C. $300 D. $2,100
7. Which of the following examples pertaining to major medical policy deductibles is CORRECT'?A. Eric s major medical policy has a $500 flat deductible provision. He incurs covered expenses totaling $350. He will pay nothing and his major medical policy will pay $350. B. Sarah has a major medical policy with a $500 flat deductible and an 80/20 coinsurance provision. Her covered expenses total $1,800. Of that amount. she will pay $500 and her insurance will pay $1,300. C. Valerie incurs a hospital bill of $8,300. Her basic medical expense insurance pays $2,400. Valerie pays a $200 deductible and her major medical plan takes care of the balance of covered expenses. Her deductible would be classified as a corridor deductible. D. An integrated deductible amount is $2,000. With this deductible, after the basic policy benefits are exhausted. the insured pays the full $2.000 deductible and then the major medical benefits are payable.
C. Valerie incurs a hospital bill of $8,300. Her basic medical expense insurance pays $2,400. Valerie pays a $200 deductible and her major medical plan takes care of the balance of covered expenses. Her deductible would be classified as a corridor deductible. Why????
8. Arthur incurs total hospital expenses of $9,500, all of which are co\ eyed by his major medical policy. The policy includes a $500 deductible and a 75/25 coinsurance feature. Of the total expense, how much will Arthur have to pay? A. $2,375 B. $2.750 C. $2,875 D. $6,675
9. All of the following are types of deductible provisions associated with major medical policies EXCEPTA. corridor B. integrated C. flat D. stop-loss
10. If the coinsurance feature in a major medical insurance policy is 75/25 with a $100 deductible, how much of a $2,100 bill would the insured pay? A. $100 B. $500 C. $600 D. $1,500
Basic surgical expense policies generally provide coverage for all of the following EXCEPT?A) Surgeon services.B) Postoperative care.C) Anesthesiologist services.D) Miscellaneous expenses, such as lab fees and x-rays.
D) Miscellaneous expenses, such as lab fees and x-rays.Miscellaneous expenses are normally covered under basic hospital expense policies, not surgical expense policies.
HSA's are designed for?A) helping an individual accumulate funds to cover health insurance.B) helping an individual obtain medical insurance.C) helping an individual accumulate funds to cover medical expenses.D) helping an individual save for retirement.
C) helping an individual accumulate funds to cover medical expenses.An HSA is a tax-favored investment tool for accumulating funds to cover medical expenses.
A corridor deductible is used primarily to?A) help control the cost of the premium.B) enable the health insurer to make a profit.C) deter people from seeking second opinions.D) prevent the filing of large medical claim.
A) help control the cost of the premium.Deductibles help control the cost of insurance premiums.
Comprehensive Medical Expense Insurance combines which of the following coverage in one policy:A) Basic Hospital/Surgical and Major MedicalB) Disability Income and Accidental Death and DismembermentC) Disability Income and Basic Hospital/SurgicalD) Major Medical and Accidental Death and Dismemberment
A) Basic Hospital/Surgical and Major Medical
If the client goes out of the network for services on a PPO:A) There is no coverageB) The amount paid will be reducedC) The PPO coverage is excessD) Out of pocket expenses are negotiated
B) The amount paid will be reduced
Third party administrator (TPAs) do all of the following EXCEPT:A) Marketing B) UnderwritingC) Provide coverageD) Claims processing
C) Provide coverage
A service plan of health insurance:A) Pays only for specific services stated in the policyB) Pays the hospital directly for claims incurred by low income personsC) Is generally written only by insurance companiesD) Pays the hospital or doctor directly as provided by the service plan
D) Pays the hospital or doctor directly as provided by the service plan
All of the following are true about HMPs Except:A) They offer a limited choice of doctorsB) Covered individuals are known as subscribersC) Ambulatory services are covered on an out patient basisD) Treatment must always be pre-authorized by a primary care physician
D) Treatment must always be pre-authorized by a primary care physician
Major Medical Expense plans do not contain a:A) DeductibleB) Co-insurance requirementC) Schedule of benefitsD) High limit of coverage
C) Schedule of benefits
All of the following statements about Major Medical benefits are true, EXCEPT:A) The deductible can be expressed as a fixed dollar amountB) The benefit period begins only after a specified amount of expenses have beenaccrued within the accumulation periodC) Benefits are generally expressed as a percentage of eligible expensesD) Benefits have no maximum limit
D) Benefits have no maximum limit
A Major Medical Expense policy has a $100 per family, per year deductible and 80/20 co-insurance. Three claims occur during the year as follows: The first claim was for $200, the second claim was for $400 and the third claim was for $500. How much will the insurer pay:A) $300B) $640C) $800D) $1,000
Which type of insurance policy combines several types of benefits and provides more coverage than any of the others?A) Hospital ExpenseB) Comprehensive Medical ExpenseC) Major MedicalD) Surgical Expense
B) Comprehensive Medical Expense
All are true about Preferred Provider Organizations (PPOs), EXCEPT:A) They may only be started by hospitalsB) Coverage may be reduced for out-of-network servicesC) They may be started by insurance companies in order to compete with HMOsD) Clients are known as subscribers
A) They may only be started by hospitals
HMOs generally provide preventative care in all of the following areas EXCEPT:A) Well baby careB) Hearing loss exams for adultsC) Physical examsD) Wellness clinics
B) Hearing loss exams for adults
Which of the following statements is true about the deductibility of premiums and the taxation of benefits on a non-contributory Group medical expense purchased by an employer for employees:A) Premiums are tax deductible for the employer but benefits are not taxed to the employeeB) Premiums are not tax deductible for the employer but benefits are taxed to the employeeC) Premiums are tax deductible for the employer, but benefits are taxed to the employee
A) Premiums are tax deductible for the employer but benefits are not taxed to the employee
All of the following are true about the co-insurance requirement on Major Medical EXCEPT:A) It is designed to prevent over utilization of coverageB) It is the percentage of the claim the insured has to pay after the deductibleC) It is always applied before the deductible is subtractedD) It may be subject to a "stop loss" provision
C) It is always applied before the deductible is subtracted
Which type of insurance policies combines several types of benefits and provides more coverage than any of the others?A) Hospital ExpenseB) Comprehensive Medical ExpenseC) Major MedicalD) Surgical Expense
B) Comprehensive Medical Expense
Flat Deductible is a stated amount that the insured must pay before policy become me payable. For example, if an insured has a policy with a $ 500 deductible and incurs $2,000 of Covered medical expenses, he or she must pay $500 toward the total. The insurer will then base its payments on the remaining $1,500. Quite often, policies will include a family deductible, usually equal to three times the individual deductible amount. In a family of four, for example, if three members each satisfied the individual deductible in one year, no deductible would be applied to medical expenses incurred by the fourth member.
A corridor deductible is typical for a supplementary major medical policy that works in conjunction with a basic medical expense policy. The first covered medical expense the insured incurs are paid by the basic policy. After the basic policies are exhausted, the insured pays the full deductible and then the major medical benefits are payable.
EXAMPLE CORRIDOR DEDUCTIBLE
Linda has a supplementary major medical policy that provides that provides for a corridor deductible of 500 $. The deductible applies after full payment of up to $2,000 by the basic medical expense policy and before additional expenses are shared on a coinsurance basis by the insurer and Lynda (see "Coinsurance," later in this chapter). Let us suppose that Lynda incurs a medical bill of $8,500. Responsibility for payment is as follows: Total expenses: 8,500 $ Basic medical expense pays: - 2,000 $ ________________ 6,500Corridor deductible paid by Linda -500Basis for Major Medical Expense 6,000 Payment and Coinsurance
Incorporated into the basic plan's coverage. The amount of the integrated deductible is the greater of what the base plan pays and a stated amount in the policy.
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: Top of Form•A $400 •B $500 •C $520 •D $1,500
Text Explanation: bAlways 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.
Which type of insurance policies combines several types of benefits and provides more coverage than any of the others? •A Hospital Expense •B Comprehensive Medical Expense •C Major Medical •D Surgical Expense
Text Explanation: bA 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.
On Medical expense insurance, which of the following is not considered to be an eligible dependent: •A A child under age 19 •B A child under 23, but still in college •C A physically handicapped child dependent on you regardless of age •D Your ex-spouse
Text Explanation: dIn most states, Medical Expense insurers will consider your dependents to include your children under 19, your children under 23, if still in college and your physically handicapped children, regardless of age. Ex-spouses may not be covered as dependents. Further, newborn children must be covered from the moment of birth and adopted children from the moment of adoption.
Major Medical Expense plans do not contain a: •A Deductible •B Co-insurance requirement •C Schedule of benefits •D High limit of coverage
Text Explanation: cIt is 'Basic' plans of Medical Expense insurance that contain a schedule of benefits, such as $2,000 a day for in-hospital care. Basic plans provide first-dollar scheduled coverage without a deductible. Major Medical policies have high limits, a deductible and co-insurance. Applicants may buy either a Basic plan or Major Medical, or both. If both are combined on the same policy, it is called a Comprehensive Major Medical policy, which is the broadest type of Medical Expense coverage sold by insurers.
If the client goes out of network for services on a PPO: •A There is no coverage •B The amount paid will be reduced •C The PPO coverage is excess Text Explanation: bCoverage still applies, but with higher deductibles or co-payments.
Ambulatory medical care saver money on all of the following EXCEPT: A) Hospital room B) Surgeon's fees C) General nursing D) Intensive care
B) Surgeon's fees
All of the following are true about the co-insurance requirement on Major Medical EXCEPT: A) It is designed to prevent over utilization of coverage B) It is the percentage of the claim the insured has to pay after the deductible C) It is always applied before the deductible is subtracted D) It may be subject to a "stop loss" provision
C) It is always applied before the deductible is subtracted
Which type of insurance policies combines several types of benefits and provides more coverage than any of the others? A) Hospital Expense B) Comprehensive Medical Expense C) Major Medical D) Surgical Expense
B) Comprehensive Medical Expense
A service plan of health insurance: A) Pays only for specific services stated in the policy B) Pays the hospital directly for claims incurred by low income persons C) Is generally written only by insurance companies D) Pays the hospital or doctor directly as provided by the service plan.
D) Pays the hospital or doctor directly as provided by the service plan
On medical expense insurance, when only one deductible applies to all family members injured in the same accident, it is called a _______deductible: A) Stop loss B) Family C) Corridor D) Common accident
D) Common accident
Basic Medical Expense policies generally begin to pay benefits? A) on the 5th day in the hospital. B) after 10 days. C) after 45 days. D) on day 1.
D) on day 1. Basic medical expense insurance is sometimes called "first dollar insurance". Unlike major medical expense insurance, it provides benefits up front, without requiring the insured to first satisfy a deductible.
When a group of doctors and hospitals in a designated area contract with an insurer to provide health care at a prearranged figure to the insured, the arrangement is known as? A) Professional Service Organization (PSO). B) Designated Provider Organization (DPO). C) Preferred Provider Organization (PPO). D) Health Maintenance Organization (HMO).
C) Preferred Provider Organization (PPO). PPO's is a collection of health care providers who offer their services to certain groups at prearranged prices.
Which of the following best describes the characteristics of Preferred Provider Organizations (PPO's)? A) If service is obtained outside the PPO, benefits are reduced and costs increase. B) PPO's are generally public in nature rather than private. C) Health care providers themselves are barred from forming a PPO due to conflict of interest. D) PPO's operate like an HMO on a prepaid basis.
A) If service is obtained outside the PPO, benefits are reduced and costs increase. Members are not mandated to use the PPO. However, if they go outside the PPO for health care services, benefits are reduced and costs increase.
Which of the following is NOT a general category by which Basic Medical Coverage Expense policies classify their coverages? A) Loss of income expense. B) Physicians nonsurgical expense. C) Hospital expense. D) Surgical expense.
A) Loss of income expense. Lost income is not a category which Basic Medical Coverage Expense policies classify their coverages.
POS (1) POS (2)POS (3) POS (4)
POS (1) 1. A hybrid arrangement of a traditional HMO & PPOPOS (2) 2. Members are allowed for some coverage for out-of-network utilizationPOS (3) 3. Two Types:(a) Open-Ended HMO: Members can use non-network providers(b) Gatekeepers PPO: Include primary care physiciansPOS (4) 4. An individual decides at the point services are needed(a) use a network physician (out of pocket cost is low)(b) use a non-network physician (high out of pocket cost)
Characteristics of HMO (1) Characteristics of HMO (1)1. Characteristics of HMO (2) Characteristics of HMO (3) Five Types of HMO (1) Types of HMO (2) Types of HMO (3) Types of HMO (4) Types of HMO (5)
Characteristics of HMO (1) 1. An Organized, integrated system of healthcare that provide services to its members within a specific geographic region Characteristics of HMO (2) 2. Restriction on the choice of physicians upon delivery of service (a) Employees must select a primary care physician from a network of doctors who have contracts with the HMO. (b) PCP acts as a gatekeeper who provide referrals to specialists or hospitals. (c) Care from non-network provider is usually not allowed unless in emergency Characteristics of HMO (3) 3. Cost Control (a) PCP is paid a Capitation Fee -- Providers are at financial risk for over-utilization (b) Emphasis on outpatient treatment More focus on outpatient hospitalization restrictions (c) High degree of utilization management than other plans Five Types of HMO (1) 1. Staff Model (a) HMO owns its own facilities and hires its own physicians (b) Employees in HMO are paid a salary (c) Great potential for cost Savings. Types of HMO (2) 2. Group Model (a) Physicians work for another entity that has contract with HMO (b) HMO pays for services on a capitation basis Types of HMO (3) 3. Network Model (a) Like a group model (b) The HMO contacts with more than one independent group of physicians ** physicians will affiliate with different groups and provide more services in that region. Types of HMO (4) 4. Individual Practice Associations (a) Participating physicians practice in their own office (b) Usually have contractor arrangements with hospitals to provide inpatient care. Types of HMO (5) 5. Mixed Model (a) Mix of 2 or more of the above plans.
Using an FSA is like giving yourself a pay raise.A flexible spending account (FSA) allows you to set aside a portion of your salary, before taxes, to pay for qualified medical or dependent care expenses. Because that portion of your income is not taxed, you end up with more money in your pocket.Health FSA/Limited Health FSASet aside money to pay expenses not covered by your medical insurance. There are two types of accounts:Health FSAFor use with traditional insurance plans. Use it to pay for things like coinsurance, prescriptions and medical equipment.Limited Health FSAFor use when you have both a high deductible health plan (HDHP) along with a health savings account (HSA). The Limited FSA is available for dental and vision expenses only.Dependent Care Account (DCA)Deduct a portion of your paycheck to use for dependent care for children up to age 13, a disabled dependent of any age or a disabled spouse. To be eligible for this type of account, both you and your spouse (if applicable) must work, seeking work or be full-time students.
FLEXIBLE EXPENDING ACCOUNT (FSA's)
Tax-advantaged Savings Account Funds are used for qualified medical expenses and dependent care 2 Types 1. Qualified Medical Expense Accounts 2. Dependent Care Expense Accounts An individual may reimburse qualified expenses for a spouse or dependents in either account General Facts -Can be offered with an employer cafeteria plan -Withdrawals can be made through an FSA debit card -Funds are subject to the use-it or lose-it rule --> all funds must be used in the plan year -Funds can be used for a wide range of medical expenses, such as over-the-counter drugs and child care Eligibility Plans are established through an employer for the benefit of its employees Employee contributions are made through a voluntary withholding of wages/salaries (salary reduction agreement) Some plans involve employers contributing to the account as well Contribution Limits There is an annual limit (starting in 2010), indexed annually Limit is subject to the cost of living adjustment (COLA) Tax Benefits Funds are NOT subject to federal income or social security taxes Employees income is contributed pre-tax, which lowers their taxable income Withdrawals may be tax free if you are paying for qualified medical expenses
What is a health reimbursement arrangement plan? Employees are not allowed to contribute to this plan.Is there a limit on how much the employer can contribute to an HRA? Cash payouts are permitted. True or false? The HRA group health plan is subject to _____ continuation coverage requirements. What is a Health Savings Account? Who are HSA's available to? To qualify as high deductible health insurance, the annual deductible must be at least $___ for individual, and $____ for family coverage, and the maximum out-of-pocket expense may not exceed $___ for individual, and $___ for family coverage. $1100, $2200, $5600, $11200Who can contribute to an HSA?Can the distributions be included in the employee's gross income?Deductions may be included and subject to _____ if used for other purposes
An HRA is a type of health insurance plan that reimburses employees for qualified medical expenses.Employees are not allowed to contribute to this plan.No limitCash payouts are permitted. True or false? FalseCOBRAA trust created exclusively to pay the account holder's qualified medical expenses.Any employer or individual who has high deductible health insurance coverage. $1100, $2200, $5600, $11200Employers and individualsDistributions cannot be included in the individual's gross income if used exclusively to pay for qualified medical expenses.Penalty