Life & Health Chapter 8 Exam

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COBRA is a federal law requiring employers with _____ or more employees to provide the option to continue the employee's existing health coverage for dependents for up to _____ months following qualifying events.

a. 25, 45
b. 20, 18
c. 20, 36
d. 15, 36

d. 20, 36

The question specifies coverage for dependents (36 months), not employee and dependents (18 months).

Which of the following terms and definitions do not match?

a. Eligible Employee - an employee who is regularly employed.
b. Customer Groups - plans for small employers who have two or more employees.
c. Business Group of One - an individual, sole proprietor, or a single full-time employee of an S corporation or partnership who has carried on business activities for at least one year prior to the date of application.
d. Small Employer - any person, firm, corporation, partnership or association that is actively engaged in business.

b. Customer Groups - plans for small employers who have two or more employees.

Customer groups include depositor groups, creditor/debtor groups, etc.

J. J. Jr. is going to college and just recently came off his father's 40-employee group health plan. He is 26 years of age and wants to keep the same coverage until he earns his degree in approximately 24 months. What action would you suggest J. J. Jr take?

a. Take out a personal plan of coverage.
b. As a student, he is still covered with his father's group.
c. Sign up for the educational group activity plan.
d. Exercise the COBRA option under his father's group.

d. Exercise the COBRA option under his father's group.

Since J.J. Jr. has lost his dependent status, but still wants the same group coverage, he can continue under COBRA up to 36 months.

Under HIPAA, coverage may be nonrenewed for all of the following reasons, except:

a. Participation requirements not fulfilled
b. Nonpayment of premium
c. Noncompliance with plan provisions
d. Frequency of claims

d. Frequency of claims

Under HIPAA, all answers listed are a basis for nonrenewal, except frequency of claims.

Which statement would be considered inaccurate regarding the underwriting of a group plan?

a. The corporate home office of the group normally is the group's address.
b. The cost of a group policy is determined by the type, size, and average age of the group and claims experience with previous insurers.
c. The insurer can require a minimum percentage of the group to be enrolled to guard against adverse selection.
d. Contributory plans require that the employer pay the premium with 100% participation.

d. Contributory plans require that the employer pay the premium with 100% participation.

Contributory Plans require both the employee and employer contribute to the premium, and 75% participation is required.

When a group is covered by a MET, who is issued the Master Policy?

a. The sponsor
b. None is issued
c. The insurer
d. The trust

d. The trust

The sponsor develops the plan, sets the underwriting rules and administers the plan, but the trust itself is the Master Policyowner.

Which provision covers disabled children who are fully dependent upon the insured and incapable of self-support due to a physical or mental handicap?

a. Conversion Privilege
b. Extension of Benefits
c. Dependency Coverage
d. Continuation of Coverage

c. Dependency Coverage

The question is specifically describing a Continuation of Coverage Provision.

A specified period before new coverage goes into effect for a specified condition is known as which of the following?

a. Exclusion
b. Waiting period
c. Morbidity table
d. Probationary period

d. Probationary period

The question establishes a period before coverage goes into effect for specified conditions, not a period before an employee is even eligible to enroll for group benefits, which would be a waiting period.

Which provision of group health plans is used to determine primary and secondary coverage when covered by more than one plan to help reduce overinsurance?

a. Schedule of Benefits
b. Coordination of Benefits
c. Primary Care Coverage
d. Extension of Benefits

b. Coordination of Benefits

Coordination of Benefits is the method of determining primary and secondary coverage when an insured is covered by more than one group policy to help reduce overinsurance.

Which of the following is not used to reduce adverse selection?

a. The group must form for a purpose other than that of obtaining insurance.
b. Contributory plans require that both employees and their employer contribute to the plan, with 75% participation required.
c. There is a maximum number required before underwriting.
d. There is a minimum number required before underwriting.

c. There is a maximum number required before underwriting.

There is a minimum number required before underwriting, not maximum number.

Accident and Health policies provide coverages for all, except:

a. Workers' Compensation
b. Medical expenses
c. Loss of income
d. Accidental death and dismemberment

a. Workers' Compensation

Workers' Compensation is a general casualty contract, written with a Property/Casualty license, covering job related injury. It is not a policy written by Accident and Health insurers.

When replacing a group policy, it is important to know which of the following?

a. Evidence of insurability must be submitted with the application.
b. Must be written as a contributory plan.
c. The replacement is/is not within 60 days of the prior policy's termination.
d. Employee only coverage is required.

c. The replacement is/is not within 60 days of the prior policy's termination.

If the replacement is not within 60 days of the previous policy's termination, the carrier replacing the coverage is not required to cover all employees and dependents covered by, or eligible for, coverage under the previous policy as of the date of discontinuance.

Group coverage is unique in that it identifies a relationship between:

a. Employer and Employee
b. Risk and Management
c. Insured and Beneficiary
d. Insurer and Insured

b. Risk and Management

Group coverage is a relationship between the employer and employee, and the plan is either Contributory or Noncontributory.

Which is not a rating factor for small employer carriers?

a. Preexisting conditions may not be excluded any longer than one year.
b. They use anticipated claim experience.
c. They shall apply rating factors consistent among all small employers.
d. All plans issued or renewed in the same calendar month shall have the same rating period.

b. They use anticipated claim experience.

Small employer carriers utilize actual claim experience, not anticipated claim experience.

Reimbursement benefits may be paid directly to the medical providers under which condition?

a. Scheduled benefits
b. Loss of income benefits
c. Injury benefits
d. Assignment of benefits

d. Assignment of benefits

When a policy pays on a reimbursement basis, benefits are paid directly to the insured. The exception to this is if the insured assigned benefits to the provider(s), in which case it would then pay directly to the provider.

A group Medical Expense Policy is terminated. The benefits to a disabled employee are extended for three months with Basic Medical Expenses and 12 months for Major Medical Expenses, due to the:

a. Coordination of Benefits
b. Continuation of Coverage
c. Extension of Benefits
d. Conversion Privilege

c. Extension of Benefits

Since the disability occurred while covered by the terminated policy, benefits are extended for either 3 or 12 months, depending on whether the plan is Basic Medical or Major Medical.

How long may an insurer exclude preexisting conditions under Small Employer Medical Expense Group Coverage?

a. Cannot be excluded
b. Forever
c. 12 months
d. 6 months

c. 12 months

Preexisting conditions may not be excluded for any longer than 12 months.

This is a product designed to provide coverage for necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital. This product is called:

a. Long-Term Care
b. Outpatient Care
c. Retirement Benefits
d. Medicare Supplement

a. Long-Term Care

The question is describing a Long-Term Care Policy. Medicare Supplement is incorrect as it covers skilled nursing care only, and then on a limited basis by number of days.

Which event does not cause termination of continuing coverage by COBRA?

a. Employer ceases to maintain any group health plan.
b. Employee becomes covered by any other group health plan.
c. Employee becomes eligible for Medicare benefits.
d. Timely premium payments are submitted.

d. Timely premium payments are submitted.

The submission of timely premium payments would not cause termination of continuing coverage; not paying timely would be cause for termination of coverage.

Someone working for two different employers submits an Accident and Health application. Which occupation will be used to issue the Accident and Health Policy?

a. The one with the most hours per week.
b. The occupation of an applicant is not an underwriting factor.
c. The occupation with which the applicant has the least experience.
d. The most hazardous of the two.

d. The most hazardous of the two.

When one has two occupations, the most hazardous is used for rating, regardless of hours worked at each or experience in each.

Accident and Health Insurance, insures for two major perils, they are:

a. Driving under the influence and driving while intoxicated.
b. Accidental injury and sickness.
c. Automobile and home health care.
d. On the job and off the job.

b. Accidental injury and sickness.

Accidental injury and sickness are the perils insured. Intentional losses are excluded.

A firm with 50 employees replaces their existing group health plan. What will be required of the replacing insurer regarding ongoing existing claims and what is this requirement called?

a. Must extend claim payments under COBRA.
b. Will deny claims over 60 days old under ERISA.
c. Must continue to pay ongoing claims under the No Loss-No Gain Legislation.
d. Must continue to pay ongoing claims under the Dual Choice Provision.

c. Must continue to pay ongoing claims under the No Loss-No Gain Legislation.

The No loss-No Gain Legislation (a.k.a Hold Harmless Agreement) establishes mandatory risk transfer.

Which of the following terms and definitions do not match?
Choose one answer.
Score for this question: 1/1.
a. Field Underwriting - the agent's personal contact with the applicant.
b. Reimbursement - pays benefits directly to the insured.
c. Sickness - an illness or disease that first manifests itself, or that is first diagnosed and treated, while the policy is in force.
d. Blanket payments - is a lump sum payment for a maximum number of days.

d. Blanket payments - is a lump sum payment for a maximum number of days.

Blanket pays a set maximum overall benefit limit with no itemizing; not a maximum number of days.

Each small employer carrier shall offer at least two health benefit plans, these plans are:

a. Essential and Standard Health Plan
b. Major Medical and Dental
c. Contributory and Noncontributory
d. Reimbursement and Blanket

a. Essential and Standard Health Plan

Every small employer carrier must offer Essential (Basic) and Standard Health Plans.

Which statement is incorrect regarding COBRA?

a. Coverage continues for 29 months for individuals receiving Social Security disability.
b. The employee or beneficiary must answer notification of an employee's right to continue coverage within 90 days, if coverage is elected.
c. Premiums for an employee disabled at time of termination may be increased to 150% of premium after 18 months of continued coverage.
d. The employer may require the former employee or beneficiary to pay an amount equal to 102% of the premium.

b. The employee or beneficiary must answer notification of an employee's right to continue coverage within 90 days, if coverage is elected.

The employee or beneficiary must notify the employer within 60 days if they elect coverage.

Which of the following would be considered a good result from an underwriter's action when an individual Accident and Health Policy is issued?

a. Issued standard
b. Issued rated-up
c. Application is rejected
d. Issued with exclusions or limitations

a. Issued standard

To be issued standard is the most favorable action listed, as the coverage requested is issued at the rate that was quoted.

Which of the following might be done to protect against adverse selection when underwriting group medical insurance?

a. Enroll the business owner first.
b. Include all dependents to make the group larger.
c. Require a minimum percentage of the group to enroll.
d. None of these.

c. Require a minimum percentage of the group to enroll.

By requiring a minimum percentage of the group to enroll, you spread the risk by possibly getting those of better health to participate along with those of poorer health.

A replacing insurer assumes the claims liability relieving the original insurer of any responsibility is a :

a. Hold-Harmless Agreement
b. Pre-existing condition
c. COBRA
d. HIPAA

a. Hold-Harmless Agreement

The process being described is mandatory risk transfer accomplished by a Hold-Harmless Agreement or No Loss-No Gain Legislation.

What is incorrect regarding the group underwriting process?

a. New employees usually become eligible to enroll after a waiting period.
b. Adverse selection is not a concern for group contracts.
c. Evidence of insurability is not required since premiums are adjusted annually by evaluating the group and the claims experience.
d. The insurer's office location is not a cost factor.

b. Adverse selection is not a concern for group contracts.

Adverse selection is a major underwriting concern for group contracts, and underwriting involves methods to reduce it.

When group health insurance is being replaced, ongoing claims under the former policy must continue under the new policy, overriding any preexisting condition exclusion. This is stated under which requirement?

a. Level of Benefits
b. Preexisting Conditions
c. No Loss - No Gain
d. Replacement of Group Policies

c. No Loss - No Gain

The question is describing the No Loss-No Gain Legislation, sometimes called a Hold-Harmless Agreement.

Which action would not render a small employer's health benefit plan nonrenewable?

a. Misrepresentation by the employer on the application.
b. The employer does not comply with the plan provisions.
c. Premiums are not paid.
d. Claims processing is very frequent.

d. Claims processing is very frequent.

The insurer cannot cancel for frequency of claims.

Upon receipt of an application, the insurer's underwriter may issue the contract with exclusions or limitations. This means that:

a. Coverage is issued, but at a higher rate than quoted.
b. Coverage is not issued.
c. Coverage is issued, but limits the insurer's obligation to pay.
d. Coverage is issued at the rate that was quoted.

c. Coverage is issued, but limits the insurer's obligation to pay.

The exclusions/limitations may be temporary or permanent and limits the insurer's obligation to pay.

A contributory group plan requires a participation percentage of:

a. 75%
b. 100%
c. 50%
d. 25%

a. 75%

Contributory plans require a participation percentage of 75%.

What factors are not used in underwriting an individual health policy?

a. Health history and foreign travel
b. Political affiliation and religious preference
c. Smoking and hobbies
d. Age and gender

b. Political affiliation and religious preference

Religious preference and political affiliation are not factors used in underwriting individual health policies.

Which is not a qualifying event for the continuation of dependent coverage under the Consolidated Omnibus Budget Reconciliation Act?

a. Death of employee.
b. Divorce or legal separation.
c. Termination of employee for theft.
d. Employee's entitlement to Medicare benefits.

c. Termination of employee for theft.

This would be termination for cause and neither employee nor dependent would be covered.

All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual cases, except:

a. Medical history
b. Nationality
c. Gender
d. Physical condition

b. Nationality

Underwriting for nationality would be discriminatory.

All of the following are accurate statements, except:

a. In group insurance, the contract is between the employer and the insurer.
b. Group insurance normally covers occupational injury or disease.
c. In group insurance, the employer receives a Master Policy and each employee receives a Certificate of Insurance.
d. The Coordination of Benefits provision is designed to help reduce overinsurance.

b. Group insurance normally covers occupational injury or disease.

Group insurance normally covers nonoccupational injury or disease. Workers' Compensation Insurance is designed for occupational injury and disease.

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