3 – Medical Expense Insurance

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An insured covered by a group Major Medical plan is hospitalized after sustaining injuries that resulted from an automobile accident. Assuming the plan had a $1,000 deductible and an 80/20 Coinsurance clause, how much will the INSURED be responsible to pay with $11,000 in covered medical expenses?

The correct answer is "$3,000". In this situation, the insured is responsible for $1,000 deductible + 20% of the remaining bill = $3,000.

Which of the following costs would a Basic Hospital/Surgical policy likely cover?

Surgically removing a facial birthmark

Which of these is NOT a characteristic of a Health Reimbursement Arrangement (HRA)?

Employee funds the HRA entirely HRA plans are employer-funded medical reimbursement plans

Which of the following phrases refers to the fees charged by a healthcare professional?

Usual, customary, and reasonable expenses

J’s Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay

In this situation, $2,000 + 20% of the remaining bill = $3,600 10000-2000=8000 8000×20%=1600+2000

Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy?

Discourages overutilization of the insurance coverage A purpose of the Coinsurance clause in a Major Medical Policy is to discourage overutilization of the insurance coverage.

S wants to open a tax-exempt Health Savings Account. To qualify for this type of account, Federal law dictates that S must be enrolled in a

High-deductible health plan To be eligible for a Health Savings Account, an individual must be covered by a high-deductible health plan (HDHP), must not be covered by other health insurance (does not apply to accident insurance, disability, dental care, vision care, long-term care), must not be eligible for Medicare, and can’t be claimed as a dependent on someone else’s tax return.

Major Medical policies typically

contain a deductible and coinsurance

Which of the following BEST desscribes a Hospital Indemnity policy?

Coverage that pays a stated amount per day of a covered hospitalization The typical Hospital Indemnity policy pays a stated amount per day of a covered hospitalization.

Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?

The correct answer is "The maximum amount considered eligible for reimbursement by an insurance company under a health plan". Usual, customary, and reasonable (UCR) charges are the maximum amount the insurer will consider eligible for reimbursement under a health insurance plan.

Basic Hospital and Surgical policy benefits are

lower than the actual expenses incurred

An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred?

$5,000 + 20% of the remaining bill = $7,000

A Hospital/Surgical Expense policy was purchased for a family of four in March of 2013. The policy was issued with a $500 deductible and a limit of four deductibles per calendar year. Two claims were paid in September 2013, each incurring medical expenses in excess of the deductible. Two additional claims were filed in 2014, each in excess of the deductible amount as well. What would be this family’s out-of-pocket medical expenses for 2013?

In this situation, the insured’s maximum out-of-pocket expenses for 2013 would be $1,000.

In order to establish a Health Reimbursement Arrangement (HRA), it MUST

The deductible can be expressed as a fixed dollar amount
The benefit period begins only after a specified amount of expenses have accrued
Benefits are generally expressed as a percentage of eligible expenses
Benefits have no maximum limit

In order to establish a Health Reimbursement Arrangement (HRA), it must be established by the employer.

All of the following statements about Major Medical benefits are true EXCEPT

Benefits have no maximum limit

A major medical policy typically

A major medical policy provides benefits for reasonable and necessary medical expenses, subject to policy limits.

Comprehensive Major Medical policies usually combine

Major Medical with Basic Hospital/Surgical coverage

A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will

continue coverage but exclude the heart condition If the insured did not cite the condition on the application and the insurer did not exclude the conditon, the pre-existing condition provision still applies. Exclusions are subject to the "time limit on certain defenses" provision, however.

All of the following are limited benefit plans EXCEPT

cancer policies
life insurance policies
dental policies
critical illness policies

life insurance policies All of these are limited benefit plans EXCEPT life insurance policies.

With a Basic Medical Expense policy, what does the hospitalization expense cover?

The hospitalization expense of a Basic Medical Expense policy pays for hospital room and board.

N has a Major Medical policy that only pays a portion of N’s medical expenses. N is responsible for paying the remaining balance. This provision is known as

Coinsurance The provision in a Major Medical policy that requires the insurance company pay only part of a loss and the insured to pay the balance is known as coinsurance.

For which of the following expenses does a Basic Hospital policy pay?

Hospital room and board A Basic Hospital policy pays expenses for hospital room and board, as well as other miscellaneous medical expenses incurred during hospitalization.

Which of the following services is NOT covered under a hospitalization expense policy?

daily room and board
surgeon’s fees
intensive care
miscellaneous expenses

surgeon’s fees While an insured is hospitalized, the hospitalization expense coverage includes benefits for the cost of all of these services EXCEPT a surgeon’s fees.

Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim?

In this situation, $10,000 x 20% coinsurance + $100 deductible = $2,100.

Deductibles are used in health policies to lower

overuse of medical services

Which of the following policy features allows an insured to defer current health charges to the following year’s deductible instead of the current year’s deducitble?

The Carryover provision permits expenses incurred during the last three months of the calendar year to be carried over into the new year if needed to satisfy the deductible for the next year.

Which of the following health insurance coverages is BEST suited for meeting the expenses of catastrophic illness?

Major Medical

In Major Medical Expense policies, what is the intent of a Stop Loss provision?

Limits an insured’s out-of-pocket medical expenses

Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT?

If the employee paid for qualified medical expenses, the reimbursements may be tax-free Under a Health Reimbursement Arrangement, reimbursements may be tax free if the employee paid for qualified medical expenses.

Which of the following medical expenses does Cancer insurance NOT cover?


T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition?

Insurer will likely treat as a pre-existing condition which may not be covered for one year

The phrase "This policy will only pay for a semi-private room" is an example of a(n)

internal limit Certain types of expenses may have limits placed on the dollar amount of certain services or on the type of service provided.

What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?

Dread disease insurance

C was injured while deep sea diving and requires a hospital stay. C has a Major Medical policy with a 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered medical expenses are $2000?

In this situation, $400 deductible + 20% of the remaining medical bill = $720.

A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered EXCEPT for

experimental and investigative services

Which of these options can an individual use their medical flexible spending account to pay for?

Prescription drugs

Which of the following situations does a Critical Illness plan cover?


Which of the following is NOT a limited benefit plan?

life insurance policies

M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2,200 claim for an eligible medical expense, how much will M receive in payment for this claim?

In this situation, $2,200 – $200 deductible x 80% = $1,600.

Which of the following individual health insurance policies will provide the broadest protection?

Major Medical

A characteristic of Preferred Provider Organizations (PPOs) would be:

The correct answer is "Discounted fees for the patient". Under Preferred Provider Organizations, patient fees are discounted in return for using listed providers.

Basic Medical Expense insurance

has lower benefit limits than Major Medical insurance

Which of the following types of health coverage frequently uses a deductible?

Major Medical policy

M is insured under a basic Hospital/Surgical Expense policy. A physician performs surgery on M. What determines the claim M is eligible for?

Determined by the terms of the policy Under a basic hospital/surgical expense policy, the amount of the patient’s claim payment will be based on the terms of the policy.

Which of the following statements BEST describes dental care indemnity coverage?

Services are reimbursed after insurer receives the invoice Dental care indemnity plans reimburse services only after the carrier receives the bill.

The first portion of a covered Major Medical insurance expense that the insured is required to pay is called the

The correct answer is "initial deductible". A provision that requires the insured to pay the first portion of covered expenses before Major Medical coverage applies is called an initial deductible.

A Health Reimbursement Arrangement MUST be established

by the employer HRAs are employer-established benefit plans that must be funded by the employer.

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