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What is the difference between 'co-insurance' and a 'co-payment'?
- There is no difference
- Co-insurance is a percentage of the cost the insured pays after deductible (e.g., 20%); a co-payment is a fixed dollar amount per service (e.g., $30 per office visit) ✓
- Both are the same as deductibles
- Co-payments are paid annually
Cost-sharing in health insurance has three main components, often confused. Deductible: the amount the insured pays out of pocket before the plan begins to share costs (e.g., $1,500). Co-payment (copay): a fixed dollar amount paid per service (e.g., $30 for an office visit, $150 for an emergency roo…
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What is a 'pre-existing condition'?
- A condition not yet diagnosed
- A medical condition that existed before the policy's effective date — under the ACA, individual and small group policies cannot exclude or charge more for pre-existing conditions ✓
- A new condition during the policy year
- A condition that requires no treatment
A pre-existing condition is a medical condition (diagnosed or known) that existed before health coverage took effect. Historically, individual health policies excluded pre-existing conditions from coverage, charged higher premiums for them, or denied coverage entirely. The Affordable Care Act (ACA) …
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What is the main difference between individual and group health insurance underwriting?
- Group is always more expensive
- Group plans pool risk across all members of the group (often with limited or no individual medical underwriting); individual plans assess each applicant individually under modern ACA rules, though pre-existing conditions cannot be a basis for exclusion ✓
- Individual plans are illegal
- Group has worse coverage
Group health insurance pools risk across all members of a group (typically employees of a company) and historically has used minimal individual medical underwriting — anyone in the group qualifies based on employment. Premiums are based on the group's overall demographics and claims experience. Indi…
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What is an HMO (Health Maintenance Organization)?
- A government health program
- A managed care plan with a network of providers; members typically must use in-network providers (except emergencies) and need a primary care physician referral for specialists ✓
- An indemnity plan
- A type of dental plan
An HMO (Health Maintenance Organization) is a managed care health plan structured around a network of contracted providers. Characteristics: members must select a primary care physician (PCP) who coordinates their care; specialist visits require a PCP referral; care outside the network is generally …
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What is a PPO (Preferred Provider Organization)?
- Same as an HMO
- A managed care plan with a network of preferred providers; members can use out-of-network providers at higher cost, and do not need a primary care referral for specialists ✓
- A government program
- An exclusive in-network only plan
A PPO (Preferred Provider Organization) is a managed care plan with more flexibility than an HMO. Characteristics: a network of 'preferred' providers who have agreed to discounted rates with the insurer; members get lower cost-sharing when using in-network providers; out-of-network providers can be …
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What is an EPO (Exclusive Provider Organization)?
- Same as a PPO
- A managed care plan like a PPO but with no out-of-network coverage (except emergencies); usually no PCP referral required for specialists ✓
- An indemnity plan
- A government program
An EPO (Exclusive Provider Organization) is a hybrid between HMO and PPO. Like an HMO, it requires using in-network providers and does not cover out-of-network care (except emergencies). Like a PPO, it typically does not require a primary care physician or referrals for specialists. EPOs tend to hav…
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Who is eligible for Medicare?
- Anyone over 18
- Generally Americans age 65+ who have paid Medicare taxes for the required period, plus younger people with certain disabilities, ESRD, or ALS ✓
- Only veterans
- Only people with low income
Medicare is the federal health insurance program for Americans aged 65 and older who have paid Medicare taxes (or whose spouse has paid Medicare taxes) for at least 10 years (40 quarters). People under 65 may also qualify if they have received Social Security Disability Insurance (SSDI) benefits for…
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What does Medicare Part A cover?
- Doctor visits and outpatient care
- Inpatient hospital stays, skilled nursing facility care, hospice, and some home health services ✓
- Prescription drugs
- Eye care and dental
Medicare Part A is hospital insurance, covering: (1) Inpatient hospital stays — semi-private room, meals, general nursing, drugs received in hospital; (2) Skilled nursing facility care (limited, after a qualifying hospital stay); (3) Hospice care for terminally ill patients; (4) Some home health ser…
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What is the Affordable Care Act (ACA) and what does it require?
- It is a state program
- Federal law (2010) that established health insurance marketplaces, required most Americans to have qualifying coverage (individual mandate now $0 federal penalty), prohibits denying coverage for pre-existing conditions, requires coverage of essential health benefits, and provides premium subsidies to qualifying individuals ✓
- It only affects Medicare
- It is voluntary for insurers
The Affordable Care Act (ACA, also called Obamacare) is a federal law passed in 2010 that significantly reformed US health insurance. Key provisions: (1) Pre-existing condition protections — insurers in individual and small group markets cannot deny coverage or charge more based on health history; (…
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What are 'metal tiers' in ACA marketplace plans?
- Required precious metal investments
- Bronze, Silver, Gold, and Platinum tiers indicating the plan's actuarial value (the percentage of healthcare costs the plan covers on average) — 60%, 70%, 80%, 90% respectively ✓
- Brand names
- Annual fees
ACA marketplace plans are organized into four metal tiers based on actuarial value (AV) — the percentage of total healthcare costs the plan covers on average for a typical population. Bronze: ~60% AV (insurer pays 60%, members pay 40% through deductibles, copays, co-insurance); Silver: ~70% AV; Gold…
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What is the difference between short-term and long-term disability insurance?
- Only the price differs
- Short-term disability typically pays for 3-12 months after a brief elimination period (1-14 days); long-term disability pays after a longer elimination period (30-180 days) and can continue for years or until retirement age ✓
- There is no difference
- Long-term pays a lump sum
Disability income insurance replaces a portion of the insured's income when they cannot work due to illness or injury. Short-term disability (STD) covers shorter periods: elimination period of 1-14 days (waiting period before benefits start), benefit period of 3-12 months. Long-term disability (LTD)…
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What is long-term care (LTC) insurance designed to cover?
- Hospital stays
- Custodial care for activities of daily living (bathing, dressing, eating, toileting, transferring, continence) — typically in nursing homes, assisted living, adult day care, or at home — for those who cannot care for themselves ✓
- Doctor visits
- Prescription drugs
Long-term care insurance covers custodial care — help with activities of daily living (ADLs) — that health insurance and Medicare do not. The six standard ADLs are bathing, dressing, eating, toileting, transferring (moving from bed to chair), and continence. Benefits typically trigger when the insur…
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What is COBRA and what coverage does it provide?
- A type of HMO
- Federal law that allows employees losing group health coverage (due to job loss, reduction in hours, etc.) to continue the same coverage for a limited time (typically 18-36 months) by paying the full premium plus a 2% admin fee ✓
- Medicare for federal employees
- A pension benefit
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) is a federal law allowing employees who lose group health coverage from an employer with 20+ employees to continue the same coverage temporarily by paying the full premium (employee + employer share) plus up to a 2% administrative fee. C…
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What is a 'waiting period' in health insurance?
- A period before benefits begin after enrolling — limited to 90 days for new employees under ACA rules ✓
- The time between doctor visits
- The annual renewal period
- Time to find a doctor
A waiting period in group health insurance is the time between starting employment (or other eligibility) and when health benefits begin. Under ACA rules, employer-sponsored health plans cannot have waiting periods longer than 90 days for eligible employees. Some employers offer immediate coverage; …
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What is an 'out-of-pocket maximum'?
- The minimum the insurer pays
- The maximum amount the insured will pay for covered services in a plan year (including deductibles, copays, co-insurance); after reaching it, the plan pays 100% of covered services for the rest of the year ✓
- An optional payment
- The premium amount
The out-of-pocket maximum (OOP max) is the total amount the insured can pay for covered services in a plan year. Once the insured reaches this limit (through deductibles, copays, and co-insurance combined), the plan pays 100% of covered services for the rest of the year. Premiums do not count toward…
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What is 'coordination of benefits' (COB)?
- Choosing the best plan
- Rules for determining which insurer pays first (primary) and which pays second (secondary) when an insured has coverage under multiple plans ✓
- Adding extra benefits
- Choosing a beneficiary
Coordination of benefits (COB) rules determine the order of payment when a person is covered under more than one health plan (e.g., spouse's plan plus their own). Standard rules: (1) Employee's own plan is primary for the employee; (2) For dependent children, the 'birthday rule' applies — the parent…
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What is a Health Savings Account (HSA) and what plan must accompany it?
- Any savings account
- A tax-advantaged savings account paired with a High Deductible Health Plan (HDHP); contributions are tax-deductible, growth is tax-free, withdrawals for qualified medical expenses are tax-free ✓
- An HMO requirement
- A government benefit
A Health Savings Account (HSA) is a tax-advantaged savings account available only to people enrolled in a High Deductible Health Plan (HDHP). Triple tax advantages: (1) Contributions are tax-deductible (or pre-tax through payroll); (2) Growth is tax-free; (3) Withdrawals for qualified medical expens…
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Under HIPAA, what is the primary protection for individuals changing jobs?
- Guaranteed promotions
- Portability rules limiting pre-existing condition exclusions and ensuring access to coverage; HIPAA also established privacy and security rules for health information ✓
- Wage protections
- Vacation guarantees
HIPAA (Health Insurance Portability and Accountability Act of 1996) has two main pillars: (1) Portability — limited pre-existing condition exclusions, prohibited discrimination based on health factors in group coverage, and certificates of creditable coverage to reduce pre-ex exclusions when changin…
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What is Medicaid and how does it differ from Medicare?
- They are the same program
- Medicaid is a joint federal-state program providing coverage to low-income individuals and families based on financial need; Medicare is federal coverage based on age (65+) or disability, regardless of income ✓
- Medicaid is only for veterans
- Medicaid covers only children
Medicaid and Medicare are easily confused but serve different populations. Medicaid is a joint federal-state program (states administer with federal matching funds) providing health coverage to low-income individuals and families, based on income and family size. Eligibility rules and benefits vary …
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When are disability insurance benefits typically taxable as income?
- Always taxable
- If the policy was paid for with pre-tax dollars (employer-paid premium), benefits are taxable; if paid with after-tax dollars (employee-paid premium), benefits are generally tax-free ✓
- Never taxable
- Only if income exceeds a threshold
Disability income benefit taxation depends on who paid the premium and with what dollars. If the employer paid the premium (or the employee paid with pre-tax payroll deductions): benefits are taxable as ordinary income. If the employee paid the premium with after-tax dollars: benefits are received t…
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What is a 'rider' on a health insurance policy?
- A driver of the policy
- An optional addition (with extra premium) that modifies coverage — examples include accident-only coverage, hospital indemnity, prescription drug coverage, or specific-disease (cancer) riders ✓
- A required attachment
- A type of beneficiary
A rider in health insurance is an optional add-on that modifies or supplements the base policy, typically for additional premium. Common health insurance riders: hospital indemnity (pays a flat daily amount during hospital stays); accident-only (pays for accident-related medical expenses); critical …
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What is 'utilization review' in managed care?
- A type of accounting
- The process by which insurers evaluate the medical necessity and appropriateness of services — prospective (prior authorization), concurrent (during treatment), or retrospective (after treatment) ✓
- Annual policy renewal
- A type of audit
Utilization review is the process insurers use to evaluate whether requested or provided medical services are medically necessary, appropriate, and consistent with care guidelines. Three types: (1) Prospective (prior authorization) — review before services are provided, with the provider seeking app…
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Under the ACA, what is the 'open enrollment period' for marketplace coverage?
- Year-round
- An annual period (typically November 1 through January 15 federally, varying by state) when individuals can enroll in or change marketplace plans without a qualifying life event ✓
- Only during summer
- Lifetime enrollment
ACA marketplace plans have an annual open enrollment period, typically November 1 through January 15 in states using the federal exchange (HealthCare.gov). State-based exchanges may set different periods. During open enrollment, anyone can enroll in or change plans without restriction. Outside open …
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Under ACA, employers with how many full-time employees are required to offer affordable health coverage or face a penalty?
- 1+ employees
- 50+ full-time equivalent (FTE) employees — the 'Applicable Large Employer' threshold for the employer mandate ✓
- 100+ employees
- 500+ employees
The ACA's employer mandate (also called 'pay or play') applies to Applicable Large Employers (ALEs) — those with 50 or more full-time equivalent employees in the prior year. ALEs must offer affordable health coverage that meets minimum value standards to full-time employees (30+ hours per week) or p…
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What is 'guaranteed renewable' in a health insurance policy?
- A guarantee the policy will never change
- A provision that the insurer must renew the policy each year as long as premiums are paid, though rates can change for the entire class — common in individual disability and long-term care policies ✓
- Free coverage forever
- Discounted renewal
Guaranteed renewable is a policy provision that obligates the insurer to renew the policy each year if the insured pays the premium, regardless of changes in the insured's health or claims experience. However, the insurer can raise premiums for the entire class of policyholders (not for individuals)…
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What is the ACA 'open enrollment period'?
- A period when anyone can get a job in insurance
- The specific annual window during which individuals can enrol in or change health insurance plans through the ACA marketplace without a qualifying life event ✓
- A time when deductibles reset
- The period for renewing commercial health plans
Open Enrollment Period (OEP) for ACA marketplace plans runs November 1 through January 15 in most states (some state-based marketplaces have slightly different dates). Outside of OEP, individuals can only enrol or make changes if they have a Special Enrollment Period (SEP) triggered by a qualifying …
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What is the difference between an HMO and a PPO?
- HMOs are government plans; PPOs are private
- HMO requires a primary care physician (PCP) and referrals to see specialists within a network; PPO allows direct access to any provider (in or out of network) at different cost levels ✓
- HMO is for individuals only; PPO is for groups
- HMOs cover prescriptions; PPOs do not
HMO (Health Maintenance Organization): requires insured to choose a PCP; must get referrals from PCP to see specialists; only in-network providers covered except emergencies; lower premiums; less flexibility. PPO (Preferred Provider Organization): no PCP requirement; no referrals needed; can see any…
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An insured has a $2,000 deductible, a 20% coinsurance rate, and an $8,000 out-of-pocket maximum. They incur $15,000 in covered medical bills. How much does the insured pay?
- $3,000
- $5,000
- $8,000 ✓
- $15,000
Step 1: Insured pays first $2,000 (deductible). Remaining: $13,000. Step 2: Insured pays 20% coinsurance on next $30,000 — but the out-of-pocket maximum caps total. After $2,000 deductible, insured pays 20% × $13,000 = $2,600 in coinsurance. Total so far: $2,000 + $2,600 = $4,600. This is under the …
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How long can a former employee continue COBRA coverage after leaving their job voluntarily?
- 30 days
- 90 days
- 18 months ✓
- 36 months
Under COBRA (Consolidated Omnibus Budget Reconciliation Act), employees who voluntarily leave their job, are laid off (except for gross misconduct), or have their hours reduced can continue group health coverage for up to 18 months. Qualifying events for 36-month continuation: death of the covered e…
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Medicare Part B covers which type of healthcare?
- Hospital stays
- Outpatient medical services — physician visits, preventive services, durable medical equipment, outpatient surgery, lab tests ✓
- Prescription drugs
- Long-term nursing home care
Medicare Part A: hospital insurance — inpatient hospital care, skilled nursing facility care (post-hospital), hospice, some home health. Medicare Part B: medical insurance — physician services, outpatient hospital services, preventive screenings, durable medical equipment (wheelchairs, walkers), lab…
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What is the 'elimination period' in a disability income policy?
- A period when disability coverage is terminated
- The waiting period between onset of disability and when benefits begin paying — similar to a time-based deductible ✓
- The period after which claims are no longer accepted
- A pre-existing condition exclusion period
The elimination period (EP) is the 'deductible' measured in time rather than money. If your EP is 90 days, you must be continuously disabled for 90 days before receiving your first benefit check. Common elimination periods: 30, 60, 90, 180, 365 days. Longer EP = lower premium. Most individual disabi…
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What are 'ADLs' in long-term care insurance?
- Annual Dollar Limits on benefits
- Activities of Daily Living — the functional tasks (bathing, dressing, eating, transferring, continence, toileting) that LTC policies use to determine benefit eligibility ✓
- Actual Dollar Losses from disability
- Advanced Diagnosis Letters
Activities of Daily Living (ADLs) are the fundamental self-care tasks adults perform daily. Long-term care insurance policies typically trigger benefits when the insured cannot perform a specified number of ADLs independently (usually 2 of 6). The six standard ADLs: BATHING (washing body); DRESSING …
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What is 'experience rating' for group health insurance?
- A discount for healthy employees
- Setting the group's premium rate based on the group's own claims history rather than community-wide data — groups with better claims experience pay less ✓
- Rating based on years of experience in the industry
- A rating for the insurance agent's performance
Experience rating sets group premiums based on the group's own historical claims data. Large groups (100+ employees) are typically experience-rated — their premium directly reflects their own utilization. Small groups (under 50-100 employees) are typically community-rated — their premium reflects th…
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What are the four ACA 'metal tiers' and what do they represent?
- Gold, Silver, Bronze, Platinum — marketing names only
- Bronze (60/40), Silver (70/30), Gold (80/20), Platinum (90/10) — the percentage split between insurer and insured for covered costs after the deductible ✓
- They represent the level of network access
- They determine eligibility for subsidies
ACA metal tiers define actuarial value — the expected percentage of costs the plan pays for an average enrollee. BRONZE (60/40): insurer pays 60%, insured pays 40%; lowest premium, highest out-of-pocket. SILVER (70/30): 70/30 split; medium premium; Silver plans are the benchmark for premium tax cred…
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What is the difference between 'own-occupation' and 'any-occupation' disability definitions?
- Own-occ pays more; any-occ pays less
- Own-occ: disabled if unable to perform the duties of YOUR specific occupation. Any-occ: disabled only if unable to perform ANY occupation for which you're qualified by education and experience — a much stricter standard ✓
- Own-occ is only for doctors and lawyers
- They are the same standard with different names
The disability definition is the most important policy provision in a disability income contract. OWN-OCCUPATION ('own occ'): if a surgeon loses fine motor control and cannot perform surgery, they are 'totally disabled' under own-occ even if they could work as a teacher — their specific occupation i…
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What is the main feature of a Health Maintenance Organization (HMO) plan?
- You can see any provider with no referrals
- Care is coordinated through a primary care physician (PCP) who provides referrals to specialists; coverage is generally limited to in-network providers (except emergencies) ✓
- No premiums are required
- It only covers dental care
HMO (Health Maintenance Organization): A managed care plan emphasizing coordinated care and cost control. KEY FEATURES: Requires choosing a PRIMARY CARE PHYSICIAN (PCP) who coordinates care; REFERRALS from the PCP usually required to see specialists; coverage generally LIMITED TO IN-NETWORK provider…
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In health insurance, what is the difference between a copayment, coinsurance, and a deductible?
- They are all the same
- Deductible = amount you pay before insurance starts paying; copayment = a fixed dollar amount per service; coinsurance = a percentage of the cost you pay after the deductible ✓
- Copay is a percentage; coinsurance is fixed
- Deductible is the monthly premium
HEALTH INSURANCE COST-SHARING TERMS: DEDUCTIBLE: The amount you pay OUT OF POCKET before insurance begins to pay (e.g., $2,000 deductible — you pay the first $2,000 of covered care); COPAYMENT (copay): A FIXED DOLLAR amount you pay for a specific service (e.g., $25 per doctor visit, $15 per prescrip…
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What is a High Deductible Health Plan (HDHP) paired with a Health Savings Account (HSA)?
- A plan with no deductible
- An HDHP has a higher deductible and lower premium; it can be paired with an HSA — a tax-advantaged account for paying qualified medical expenses with pre-tax dollars ✓
- A plan that only covers emergencies
- A dental-only plan
HDHP + HSA: HIGH DEDUCTIBLE HEALTH PLAN (HDHP): Has a HIGHER deductible and LOWER premium than traditional plans; the insured pays more out of pocket before coverage kicks in, in exchange for lower monthly premiums; must meet IRS minimum deductible thresholds to qualify; HEALTH SAVINGS ACCOUNT (HSA)…
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In a PPO (Preferred Provider Organization) plan, what happens if the insured uses an out-of-network provider?
- No coverage at all
- Coverage is still provided but typically at a HIGHER out-of-pocket cost (lower reimbursement, higher coinsurance/deductible) than for in-network providers — PPOs allow out-of-network use at a higher cost ✓
- Coverage is exactly the same
- The provider must be the PCP
PPO (Preferred Provider Organization) OUT-OF-NETWORK: PPOs offer FLEXIBILITY — the insured CAN use out-of-network providers, but at a HIGHER out-of-pocket cost. IN-NETWORK: Lower cost (negotiated rates, lower coinsurance/deductible); OUT-OF-NETWORK: Still covered, but the insured pays more (higher c…
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What is the difference between Medicare and Medicaid?
- They are the same program
- Medicare is a FEDERAL program primarily for people 65+ (and certain younger people with disabilities); Medicaid is a JOINT federal-state program providing coverage for low-income individuals and families based on need ✓
- Medicare is for low-income only
- Medicaid is only for seniors
MEDICARE vs MEDICAID: MEDICARE: FEDERAL health insurance program primarily for: people 65 and OLDER; certain younger people with DISABILITIES; people with End-Stage Renal Disease/ALS; based on AGE/disability (not income); PARTS: A (hospital), B (medical), C (Medicare Advantage), D (prescription drug…
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What is a 'pre-existing condition' and how does the ACA address it?
- A condition that develops after coverage starts
- A health condition that existed before the coverage began; under the ACA, health insurers generally cannot deny coverage or charge more based on pre-existing conditions ✓
- A condition that is never covered
- A condition only for seniors
PRE-EXISTING CONDITION: A health condition (illness, injury) that EXISTED BEFORE the new health coverage began (e.g., diabetes, asthma, prior cancer). HISTORICAL PROBLEM: Before the ACA, insurers could DENY coverage, EXCLUDE the condition, or CHARGE MORE based on pre-existing conditions; ACA PROTECT…
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What is the 'elimination period' (waiting period) in a disability income insurance policy?
- The period after which the policy expires
- The time between the onset of a disability and when benefit payments begin — the insured must be disabled for this period before benefits start, functioning like a time-based deductible ✓
- The period to pay premiums
- The maximum benefit period
ELIMINATION PERIOD (waiting period) in DISABILITY INCOME insurance: The time between when a disability begins and when BENEFIT PAYMENTS START. The insured must remain disabled throughout this period before benefits begin — it functions like a TIME-BASED DEDUCTIBLE; COMMON LENGTHS: 30, 60, 90, 180 da…
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What does 'COBRA' allow?
- A new type of HMO
- Eligible employees (and dependents) to CONTINUE their group health coverage for a limited time after losing it due to certain qualifying events (like job loss), usually by paying the full premium themselves ✓
- Free lifetime health coverage
- Coverage only for retirees
COBRA (Consolidated Omnibus Budget Reconciliation Act): Allows eligible employees and their dependents to CONTINUE their employer-sponsored GROUP HEALTH COVERAGE for a LIMITED TIME after they would otherwise lose it due to a QUALIFYING EVENT. QUALIFYING EVENTS: Job loss (voluntary or involuntary, ex…
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In health insurance, what is 'coordination of benefits' (COB)?
- Choosing a doctor
- A provision used when a person is covered by more than one health plan, determining which plan pays first (primary) and which pays second (secondary), to prevent duplicate payment exceeding the actual cost ✓
- A type of deductible
- A government subsidy
COORDINATION OF BENEFITS (COB): A provision/process used when a person is covered by MORE THAN ONE health plan (e.g., their own employer plan and a spouse's plan). PURPOSE: Determines the ORDER of payment — which plan is PRIMARY (pays first) and which is SECONDARY (pays second) — and prevents the to…
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What are the basic parts of Medicare?
- Just one single plan
- Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage — private plans combining A/B and often D), and Part D (prescription drug coverage) ✓
- Parts A and B only, with no drug coverage available
- Parts that only cover dental
THE PARTS OF MEDICARE: PART A — HOSPITAL INSURANCE: Inpatient hospital stays, skilled nursing facility, hospice, some home health; most pay no premium (earned through work history); PART B — MEDICAL INSURANCE: Doctor visits, outpatient care, preventive services, medical equipment; requires a monthly…
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What is the purpose of a 'probationary period' or 'waiting period' for certain conditions in some health policies?
- To deny all claims
- A specified period after the policy begins during which certain conditions or services are not covered — used by insurers to manage risk; note ACA-compliant major medical plans generally cannot impose pre-existing condition waiting periods ✓
- To increase premiums forever
- To provide free coverage
PROBATIONARY/WAITING PERIOD for conditions: A specified period at the START of a policy during which certain conditions or services are NOT covered. HISTORICAL/CERTAIN POLICIES: Used by insurers to manage adverse selection and risk (e.g., a waiting period before maternity or certain conditions are c…
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What is an 'out-of-pocket maximum' in a health insurance plan?
- The premium amount
- The most an insured will have to pay for covered services in a plan year (including deductible, copays, and coinsurance); after reaching it, the plan pays 100% of covered services for the rest of the year ✓
- The deductible only
- The insurer's maximum payment
OUT-OF-POCKET MAXIMUM (OOP max): The MOST an insured will have to pay for COVERED services in a plan year. INCLUDES: deductible + copayments + coinsurance for covered, in-network services; DOES NOT include: premiums, out-of-network charges (in many plans), balance billing, or non-covered services; O…
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What is the main purpose of long-term care (LTC) insurance?
- To cover hospital surgery costs
- To cover the costs of long-term care services — such as nursing home care, assisted living, or in-home care — needed when a person cannot perform activities of daily living, which standard health insurance and Medicare largely do not cover ✓
- To replace lost income
- To cover dental work
LONG-TERM CARE (LTC) INSURANCE: Covers the costs of LONG-TERM CARE SERVICES that standard health insurance and Medicare largely DON'T cover. COVERS: Nursing home care; assisted living facilities; in-home care (home health aides); adult day care; care needed when a person cannot perform ACTIVITIES OF…
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What is a key difference between group health insurance and individual health insurance?
- Group insurance is always worse
- Group insurance covers members of a group (typically employees of an employer) under one master policy, often with lower per-person cost and simplified underwriting; individual insurance is purchased by a person directly and individually underwritten/rated ✓
- Individual insurance has no premiums
- They are identical
GROUP vs INDIVIDUAL HEALTH INSURANCE: GROUP INSURANCE: Covers members of a GROUP (typically employees of an employer, or members of an association) under one MASTER POLICY held by the employer/group; ADVANTAGES: often LOWER per-person cost (risk spread over the group, employer often pays part of the…
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What does 'guaranteed renewable' mean in a health or disability insurance policy?
- The premium can never change
- The insurer must RENEW the policy (cannot cancel it) as long as the insured pays premiums, though the insurer CAN change premiums for an entire class of policyholders — providing renewal security to the insured ✓
- Coverage is free
- The policy expires each year
GUARANTEED RENEWABLE: A renewal provision where the insurer MUST RENEW the policy (cannot cancel or refuse to renew) as long as the insured pays the premiums — but the insurer CAN INCREASE PREMIUMS for an entire CLASS of policyholders (not single out an individual). KEY POINTS: The insured has the R…
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What is the purpose of a 'deductible' in a health insurance plan?
- A monthly fee to keep the policy active
- The amount the insured must pay out of pocket for covered services before the insurer begins to pay ✓
- A payment the insurer makes to the insured
- The maximum the insurer will ever pay
A deductible is the amount an insured must pay out of pocket for covered health services within a plan period before the insurer starts paying its share. For example, with a $1,000 deductible, the insured pays the first $1,000 of covered costs before coverage kicks in (some services may be covered b…
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What is the difference between a copayment and coinsurance?
- They are the same thing
- A copayment is a fixed dollar amount the insured pays for a covered service, while coinsurance is a percentage of the cost the insured pays after the deductible ✓
- A copayment is paid by the insurer
- Coinsurance is always 100%
A copayment (copay) is a fixed dollar amount the insured pays for a specific covered service — for example, $25 for a doctor visit. Coinsurance is a percentage of the cost of a covered service that the insured pays, usually after meeting the deductible — for example, the plan pays 80% and the insure…
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What is the defining feature of a Health Maintenance Organization (HMO)?
- It allows any provider with no referrals
- It typically requires members to use a network of providers and to select a primary care physician (PCP) who coordinates care and provides referrals to specialists ✓
- It has no network restrictions
- It only covers out-of-network care
An HMO is a managed-care plan that generally requires members to receive care from a defined network of providers (except in emergencies) and to choose a primary care physician (PCP) who coordinates their care and provides referrals to specialists. HMOs typically have lower premiums and out-of-pocke…
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How does a Preferred Provider Organization (PPO) differ from an HMO?
- A PPO requires a PCP and referrals like an HMO
- A PPO offers more flexibility — members can see providers in or out of network (paying more out of network) and generally do not need referrals to see specialists ✓
- A PPO covers no out-of-network care
- A PPO has no network at all
A PPO is a managed-care plan that contracts with a network of preferred providers but allows members to use out-of-network providers as well, at a higher cost-share. Unlike an HMO, a PPO generally does not require members to select a primary care physician or obtain referrals to see specialists, giv…
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What is Medicare, and who is it primarily designed to cover?
- A program only for low-income individuals
- A federal health insurance program primarily for people age 65 and older, and for certain younger people with disabilities or end-stage renal disease ✓
- A private employer plan
- A program only for children
Medicare is a federal health insurance program primarily for people age 65 and older, and also for certain younger individuals with qualifying disabilities or end-stage renal disease. It has parts: Part A (hospital insurance), Part B (medical insurance for physician and outpatient services), Part C …
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How does Medicaid differ from Medicare?
- Medicaid is only for those over 65
- Medicaid is a joint federal-state program providing coverage primarily for low-income individuals and families, with eligibility based on income and other factors, whereas Medicare is age- or disability-based ✓
- They are the same program
- Medicaid is private insurance
Medicaid is a joint federal-state program that provides health coverage primarily to low-income individuals and families, with eligibility based on income and other factors (and rules that vary by state, since states administer their own programs within federal guidelines). Medicare, by contrast, is…
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What is a key difference between group health insurance and individual health insurance?
- Group coverage is always more expensive
- Group health insurance covers a group of people (such as employees) under one master contract, often with simplified or no individual underwriting, while individual insurance is purchased by and underwritten for a single person or family ✓
- Individual insurance requires an employer
- Group insurance covers only one person
Group health insurance is issued to a group — most commonly employees of an employer — under a single master contract, with individual members receiving certificates of coverage. Group plans often feature simplified underwriting or guaranteed issue (covering members regardless of health) because the…
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What is the purpose of disability income insurance?
- To pay medical bills directly
- To replace a portion of the insured's income if they become unable to work due to a covered illness or injury ✓
- To cover property damage
- To pay a death benefit
Disability income insurance replaces a portion of an insured's earned income (commonly around 50–70%) if they become unable to work because of a covered illness or injury. Unlike health insurance, which pays for medical treatment, disability income insurance addresses the lost paycheck. Key features…
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What does long-term care (LTC) insurance cover?
- Only hospital surgery
- Services needed by people who cannot perform activities of daily living independently — such as nursing home, assisted living, or in-home custodial care — generally not covered by standard health insurance or Medicare long-term ✓
- Only prescription drugs
- Only emergency room visits
Long-term care insurance covers the cost of services for people who can no longer perform activities of daily living (such as bathing, dressing, eating, transferring) on their own, or who need supervision due to cognitive impairment. Covered settings can include nursing homes, assisted living facili…
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What is the purpose of a 'coordination of benefits' (COB) provision when a person is covered by more than one health plan?
- To pay double benefits
- To determine the order in which multiple plans pay so that total reimbursement does not exceed the actual expenses (preventing the insured from profiting) ✓
- To cancel one of the policies
- To increase the premium
A coordination of benefits (COB) provision applies when a person is covered under more than one health plan (for example, their own and a spouse's). COB rules establish which plan is 'primary' (pays first) and which is 'secondary' (pays remaining eligible costs), so that the combined payments do not…
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What does COBRA generally allow in the context of group health insurance?
- It cancels coverage at termination
- It generally allows eligible employees and dependents to continue group health coverage for a limited period after a qualifying event (such as job loss), usually by paying the full premium themselves ✓
- It provides free lifetime coverage
- It applies only to individual policies
COBRA (the federal Consolidated Omnibus Budget Reconciliation Act) generally allows eligible employees and their covered dependents to temporarily continue their group health coverage after a qualifying event — such as job loss, reduction in hours, or certain family changes — that would otherwise en…
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What is 'open enrollment' in health insurance?
- A period when premiums are free
- A designated period during which individuals can enroll in, or make changes to, health insurance coverage, outside of which enrollment is generally limited to qualifying life events (special enrollment) ✓
- A time when claims are paid faster
- A period only for group plans
Open enrollment is a designated period during which individuals can sign up for health insurance or make changes to their coverage (such as switching plans). Outside of open enrollment, a person generally can enroll or change coverage only if they experience a qualifying life event — such as marriag…
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What is the role of a 'formulary' in a health or prescription drug plan?
- A list of in-network doctors
- A list of prescription drugs covered by the plan, often organized into tiers that determine the insured's cost-share for each drug ✓
- A claim form
- The plan's deductible amount
A formulary is the list of prescription drugs that a health or drug plan covers. Formularies are commonly organized into tiers — for example, generic drugs in a low-cost tier and brand-name or specialty drugs in higher-cost tiers — which determine the copayment or coinsurance the insured pays for ea…
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What does 'guaranteed issue' mean in health insurance?
- Coverage is guaranteed to be cheap
- A requirement that an insurer issue coverage to an applicant regardless of health status, without denying coverage based on pre-existing conditions ✓
- The insurer can decline anyone
- It applies only to life insurance
Guaranteed issue means an insurer must offer coverage to an eligible applicant regardless of their health status or medical history, and cannot decline them or charge more based on pre-existing conditions. This consumer protection is a feature of various group plans and, under the Affordable Care Ac…
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What is the function of an 'out-of-pocket maximum' in a health plan?
- It is the premium amount
- It is the most an insured will have to pay for covered services in a plan period; after reaching it, the plan generally pays 100% of further covered, in-network costs ✓
- It is the deductible doubled
- It is the maximum the insurer pays
The out-of-pocket maximum is the most an insured will have to pay for covered, in-network services during a plan period through deductibles, copayments, and coinsurance combined. Once the insured's spending reaches this cap, the plan generally pays 100% of additional covered, in-network costs for th…