Employee Benefits Group Life and Health Insurance Coverages

Chapter 21 - Employee Benefits: Group Life and Health Insurance Coverages 1) All of the following statements about the characteristics of group insurance are true EXCEPT A) Many people are covered under a single contract. B) The cost of group insurance may be lower than the cost of individual insurance. C) The actual experience of a large group is a factor in determining the premium that is charged. D) Individual evidence of insurability is usually required. Answer: D 2) Which of the following statements about group insurance underwriting principles is (are) true? I. If a plan is contributory, 100 percent of the eligible employees must be covered. II. Employees should be allowed to determine their own level of benefits. A) I only B) II only C) both I and II D) neither I nor II Answer: D 3) Which of the following statements about group insurance underwriting principles is true? A) Employees should be required to remit premiums directly to the insurance company. B) The average age of the group should ideally increase over time. C) A group should be formed for the specific purpose of obtaining insurance. D) The employer should ideally share in the cost of a group insurance plan. Answer: D 4) Reasons for having a minimum participation requirement before a group is eligible for insurance include which of the following? I. To lower the expense rate per unit of insurance. II. To minimize the possibility of insuring a group which consists largely of unhealthy individuals. A) I only B) II only C) both I and II D) neither I nor II Answer: C 1 5) All of the following statements about the eligibility requirements for group insurance are true EXCEPT A) Most plans cover both full-time and part-time employees. B) An employee must be actively at work on the day the employee's group life insurance becomes effective. C) An employee can sign-up for insurance during an eligibility period without furnishing evidence of insurability. D) One purpose of a probationary period is to lower administrative costs by eliminating coverage on transient workers. Answer: A 6) The period of time during which an employee can sign up for group insurance coverage without furnishing evidence of insurability is called a(n) A) probationary period. B) noninsurability window. C) waiting period. D) eligibility period. Answer: D 7) Which of the following statements about group term life insurance is true? A) It usually is written in the form of 5-year level term insurance. B) An employee who leaves the group can usually convert the coverage to an individual term life insurance policy. C) Many employers provide a reduced amount of coverage on retired employees. D) It represents only about 5 percent of the group life insurance in force. Answer: C 8) High deductible group health insurance plans have all of the following characteristics EXCEPT A) health savings accounts or health reimbursement accounts B) high dollar deductibles C) low coverage limits D) major medical insurance Answer: C 2 9) Which of the following statements about group accidental death and dismemberment (AD&D) insurance is (are) true? I. The principal sum is paid if the employee dies in an accident. II. The employer usually pays at least 50 percent of the cost of voluntary AD&D coverage. A) I only B) II only C) both I and II D) neither I nor II Answer: A 10) All of the following statements about group universal life insurance are true EXCEPT A) Interest rates credited to a policy vary over time but are subject to a minimum guarantee. B) Premiums can be varied as long as the cash value is sufficient to pay current mortality and expense charges. C) Coverage is issued on a guaranteed basis up to certain limits with no evidence of insurability. D) At retirement, an employee must begin liquidating his or her cash value in the form of an annuity. Answer: D 11) Which of the following statements about Blue Cross Plans is (are) true? I. They typically provide service benefits rather than cash benefits to members. II. They usually provide very limited benefits for hospital charges. A) I only B) II only C) both I and II D) neither I nor II Answer: A 12) What is the purpose of stop-loss insurance that is used with self-insured group medical expense plans? A) to require employees to buy insurance for losses in excess of some specified amount B) to have a commercial insurer pay claims that exceed a specified limit C) to obtain administrative services from a commercial insurer D) to exempt self-insured plans from state insurance laws that require mandated benefits Answer: B 13) All of the following are reasons why employers self-insure medical expense plans EXCEPT A) to reduce certain costs, such as premium taxes and commissions. B) to provide mandated state benefits. C) to retain funds until needed to pay claims. D) to eliminate the need to comply with separate state laws. Answer: B 3 14) All of the following statements about group basic medical expense insurance are true EXCEPT A) Benefits under surgical expense insurance may be based on the reasonable and customary charge for the medical procedure. B) Benefits are usually provided for diagnostic X-ray and laboratory benefits. C) Benefits are designed to cover the cost of catastrophic medical expenses. D) Benefits are provided for nonsurgical care provided by a physician. Answer: C 15) Which of the following statements about supplemental group major medical insurance is (are) true? I. Most plans have a lifetime limit of $50,000 to $100,000. II. Most plans contain an out-of-pocket maximum that places a dollar limit on the maximum amount an individual must pay out of his or her own pocket. A) I only B) II only C) both I and II D) neither I nor II Answer: B 16) A deductible that must be satisfied after the benefits of a basic medical expense plan are exhausted and before supplemental major medical benefits are payable is called a(n) A) calendar-year deductible. B) prospective deductible. C) straight deductible. D) corridor deductible. Answer: D 17) Which of the following is (are) characteristics of HMO managed care plans? I. Unlimited choice of physicians and hospitals II. Emphasis on controlling the cost of covered services A) I only B) II only C) both I and II D) neither I nor II Answer: B 4 18) Which of the following statements about HMO managed care plans is (are) true? I. There is an emphasis on controlling costs. II. They usually have high deductibles. A) I only B) II only C) both I and II D) neither I nor II Answer: A 19) An HMO physician who determines if medical care from a specialist is necessary is called a(n) A) capitator. B) internist. C) network facilitator. D) gatekeeper. Answer: D 20) An HMO that contracts with two or more independent group practices to provide medical services to covered members is called a(n) A) group model HMO. B) network model HMO. C) staff model HMO. D) independent practice association HMO. Answer: B 21) Which of the following statements about preferred provider organization (PPO) health plans is (are) true? I. A PPO plan contracts with health care providers to provide medical services to members at reduced fees. II. Plan members are given a financial incentive to use PPO providers rather than other providers. A) I only B) II only C) both I and II D) neither I nor II Answer: C 5 22) A managed care plan under which members can receive medical care from non-network providers at higher out-of-pocket costs is an example of a(n) A) group practice plan. B) individual practice plan. C) exclusive provider organization. D) point-of-service plan. Answer: D 23) All of the following statements about HMOs are true EXCEPT A) They organize and deliver health care services. B) HMOs place a heavy emphasis on controlling the cost of covered services. C) Comprehensive coverage is provided even when a subscriber is outside the area served by the HMO. D) The selection of physicians is usually limited to physicians affiliated with the HMO. Answer: C 24) All of the following are criticisms of managed care plans EXCEPT A) The quality of care may be reduced because of the emphasis on cost control. B) Preventive care is unlikely to be provided. C) Restrictions may be placed on physicians' abilities to treat patients. D) Network physicians may have a financial conflict of interest between providing high-quality medical care and holding down costs. Answer: B 25) Which of the following statements regarding the Health Insurance Portability and Accountability Act is true? A) It guarantees the availability of group health insurance to small employers. B) It requires employers to provide at least a minimum level of health benefits prescribed by law. C) It requires giving credit for previous coverage with respect to any preexisting conditions exclusion found in a new health plan. D) It limits preexisting conditions exclusions to 90 days. Answer: C 26) Under the Health Insurance Portability and Accountability Act, what is the maximum length of a preexisting conditions exclusion if an employee enrolls when initially eligible? A) 60 days B) 6 months C) 1 year D) 2 years Answer: C 6 27) Some employers offer employees a choice of health care plans which are designed to make employees more sensitive to health care costs, to provide an incentive to avoid unneeded care, and to seek low-cost health care providers. Such plans are called A) employee assistance plans. B) consumer-directed health plans. C) cafeteria plans. D) preferred provider organization (PPO) plans. Answer: B 28) Maria is covered under a group medical expense plan as an employee. She is also covered under her husband's plan as a dependent. If Maria is hospitalized, how will each plan respond to her medical bills if both plans have the typical coordination-of-benefits provision? A) Maria's plan is primary, and her husband's plan is excess. B) Her husband's plan is primary, and Maria's plan is excess. C) Her husband's plan will pay its benefits, and Maria's plan will deny coverage. D) Both plans will pay benefits on a pro rata basis. Answer: A 29) Under one type of HMO, the physicians are employees of the HMO and are paid a salary and sometimes an incentive bonus to hold down costs. This type of HMO is called a(n) A) individual practice association (IPA). B) staff model. C) group model. D) network model. Answer: B 30) Which of the following statements about the continuation of group health insurance under COBRA is true? A) A continuation of coverage must be made available even if an employee voluntarily terminates employment. B) The length of the continuation of coverage is 90 days. C) The option to continue coverage applies to minor children only, not to adults. D) The employer must pay the entire cost of coverage during the continuation period. Answer: A 7 31) HBM Company offers three health plans to its employees. The "Gold Plan" costs $500 per month and provides generous benefits. The "Silver Plan" costs $350 per month and provides more limited benefits. The "Bronze Plan" is quite limited and costs $250 per month. HBM contributes $250 per month for each employee's health care benefits. Employees who desire broader coverage are free to contribute additional money to fund the coverage. Based on the description, HBM's health plan is a A) preferred provider health plan. B) point-of-service health plan. C) defined contribution health plan. D) high-deductible health plan. Answer: C 32) All of the following statements about cost controls in dental insurance plans are true EXCEPT A) The coinsurance percentage used may vary by type of dental service. B) Cosmetic dental work is usually excluded. C) The limit on benefits may be expressed as an annual limit or as a lifetime limit for certain types of dental services. D) To eliminate small claims, there is no coverage for routine oral examinations, X-rays, or cleaning teeth. Answer: D 33) Which of the following statements about group short-term disability income plans is true? A) Most plans pay benefits for a period of 3 to 5 years. B) Most plans cover occupational disabilities only. C) Most plans provide benefits for total disabilities only. D) Most plans have a 90-day elimination (waiting) period. Answer: C 34) All of the following statements about group short-term disability income plans are true EXCEPT A) Most plans have a short elimination period for accidents but cover sickness from the first day of disability. B) Disability is usually defined in terms of the employee's own occupation. C) The amount of disability income benefits typically is equal to some percentage of a worker's normal earnings. D) Most short-term plans cover nonoccupational disability only. Answer: A 8 35) All of the following statements about group long-term disability income plans are true EXCEPT A) The definition of disability becomes less restrictive after a worker has been disabled for 2 years. B) Coverage is provided for both occupational and nonoccupational disabilities. C) Benefits are reduced if a worker is eligible for Social Security or workers compensation benefits. D) Maximum monthly benefits under long-term disability income plans are higher than the benefits paid under short-term disability income plans. Answer: A 36) Which of the following statements about cafeteria plans is (are) true? I. Unspent flexible spending account balances are refunded to the employee, tax-free, at yearend. II. Cafeteria plans enable employees to select benefits that meet their specific needs. A) I only B) II only C) both I and II D) neither I nor II Answer: B 37) Advantages of cafeteria plans include all of the following EXCEPT A) simplicity of benefit administration. B) employees can select benefits that best match their needs. C) reduced taxes for employees. D) greater employer control over increasing benefit costs. Answer: A 38) Which of the following statements is (are) true concerning high deductible health plans? I. An employee can withdraw money tax-free from a health savings account or health reimbursement account to pay covered medical costs. II. There is a cap on an employee's out-of-pocket expenses under the plan. A) I only B) II only C) both I and II D) neither I nor II Answer: C 9 39) Tracy had continuous group health insurance coverage at her previous employer for 6 years. Tracy decided to change jobs. Under federal law, if Tracy changes jobs, the new employer or group health plan must give her credit for previous and continuous health insurance coverage. This characteristic is called A) renewability. B) vesting. C) portability. D) convertibility. Answer: C 40) John and Jane Smith were just divorced. Jane was awarded custody of the couple's child, Maggie. John was born on March 18, 1979. Jane was born on January 24, 1980. John and Jane are each covered under generous employee benefit plans at work. The plans also cover the spouse and children of the worker. Assuming there is no court decree specifying responsibility for Maggie's health care expenses, which of the following is true regarding coverage of Maggie's health care expenses? A) Coverage under John's plan is primary, and coverage under Jane's plan is excess. B) Each plan will pay one-half of the expenses. C) Coverage under Jane's plan is primary, and coverage under John's plan is excess. D) Each plan will pay its pro rata share of any claims. Answer: C 41) Turner Company self-insures its group life and group health insurance plans. Turner entered into an agreement with ABC Insurance through which ABC handles the plan design, claims processing, and record keeping for Turner. The agreement between Turner and ABC is called a(n) A) preferred provider agreement. B) administrative services only contract. C) exclusive provider agreement. D) point-of-service contract. Answer: B 42) Med Profs is a group of 18 doctors. These doctors work out of their own offices and treat patients on a fee-for-service basis. In addition, Med Profs doctors also agree to treat HMO members at reduced fees. The type of HMO that uses organizations like Med Profs is called a(n) A) group model plan. B) closed panel plan. C) individual practice association plan. D) network model plan. Answer: C 10 43) Nancy's employer provides an interesting employee benefit plan. Each employee is given 250 employee benefit credits to spend. A wide array of benefits are available, and the employee uses benefit credits to select the benefits that he or she wants. This type of employee benefit plan is called a(n) A) defined benefit plan. B) cafeteria plan. C) employee selection plan. D) contributory plan. Answer: B 44) Marv is covered by a group health insurance plan at work. His employer funds the entire cost of the group health insurance. Because of this characteristic, the group health insurance plan can be described as A) defined benefit. B) contributory. C) defined contribution. D) noncontributory. Answer: D 45) Doris started a business 2 years ago. The business has been successful, and Doris is thinking about starting to offer some employee benefits for her workers. She plans to offer a group term life insurance benefit. All of the following are usual eligibility requirements for participation in a group life insurance plan EXCEPT A) full-time employment. B) be actively at work when insurance becomes effective. C) apply for insurance during the eligibility period. D) satisfy a 2-year probationary period. Answer: D 46) ABC Company provides a group health insurance plan for its employees. The plan is a basic medical expense plan with supplemental major medical. While the basic plan provides firstdollar coverage, employees must pay a deductible once the basic insurance limit is met and before the supplemental major medical plan begins to provide benefits. This deductible is called a(n) A) franchise deductible. B) corridor deductible. C) straight deductible. D) calendar-year deductible. Answer: B 11 47) Which of the following statements is (are) true with regard to group life insurance? I. Most group life insurance is whole life coverage. II. Most group life insurance plans allow a modest amount of life insurance on the employee's spouse and dependent children. A) I only B) II only C) both I and II D) neither I nor II Answer: B 48) HMOs typically pay network physicians or medical groups a fixed annual or monthly payment for each member, regardless of the frequency or type of service provided. This payment is called a(n) A) pro-rata charge. B) persistency bonus. C) capitation fee. D) corridor payment. Answer: C 49) Which of the following statements about managed care plans is (are) true? I. Even though managed care plans emphasize cost control, total health benefit costs continue to increase. II. Many physicians are critical of managed care plans because of restrictions placed upon their freedom to treat patients. A) I only B) II only C) both I and II D) neither I nor II Answer: C 12