Chapter 9 Finance

Jackie pays $20 every time she visits her doctor. She is covered by a(n) a. HMO. b. IPA. c. PPO. d. indemnity plan. e. a, b, or c E
An Individual Practice Association differs from an HMO in that a. you have no choice of the physician. b. they are located in a central facility. c. associated doctors operate from their own offices. d. they are less likely to be found in small communities. e. none of these. C
The “O” in COBRA stands for which of the following words? a. Optical b. Opportunity c. Ordinary d. Omnibus e. Occupational D
If your employment is terminated, COBRA provides for a. cancellation of all group insurance benefits. b. continuation of group insurance benefits until you are reemployed. c. permanent continuation of group health insurance. d. temporary continuation of group insurance benefits; you pay premiums. e. temporary continuation of group insurance benefits; employer pays premiums. D
In recent years, which of the following groups paid the largest percentage of national health care expenditures? a. Households (consumers) b. Private businesses (employers) c. State and local governments d. Federal government A
Medicare provides health care coverage to persons age ____ and those who are ____. a. 55 and over; collecting disability under Social Security b. 60 and over; collecting disability under Social Security c. 65 and over; collecting disability under Social Security d. 60 and over; low income e. 65 and over; low income C
Medicare is a government-sponsored health care plan composed of Part A and Part B. Part A covers a. hospital expenses. b. doctor’s bills. c. custodial nursing home expenses. d. prescription drugs. e. all of the above. A
Which of the following statements is true about the means (income) testing for Medicare? a. there are strictly enforced income limits that are based on federal standards but may vary slightly by state. b. limits apply to the amount of counted assets individuals can have, but they are routinely overlooked. c. means testing is intended to ensure that only the truly needy get access to Medicare. d. there is an asset test and an income test. e. Medicare is not income tested. E
Medicare is a government-sponsored health care plan composed of Part A and Part B. Part B coverage includes a. hospital expenses. b. doctor’s bills. c. custodial nursing home expenses. d. prescription drugs. e. all of the above. B
. Gabe is 58 years old and has been dependent on a cane for a couple of years. Gabe fears that he may need long-term care services some day in the future. His net worth is $400,000 and he receives $50,000 per year in a pension. He considers himself to be in excellent health and has never had a serious health scare like a heart attack, stroke, or cancer. He eats lots of bran and exercises regularly. Which of the following policies would you recommend to Gabe? a. Gabe needs a disability income policy. b. Gabe should buy a long-term care policy with a long elimination period, lifetime benefits, and a COLA. c. Gabe should buy a long-term care policy with a five-year limit and short elimination period without a COLA. d. Gabe doesn’t need disability insurance and probably can’t qualify for long-term care insurance. e. Gabe can qualify for Medicaid if and when he needs long-term care services. B
Supplementary Medical Insurance (SMI) provides health care protection beyond basic hospital coverage for a. all Medicare recipients. b. all social security recipients. c. Medicare recipients who pay for SMI on a compulsory basis. d. Medicaid recipients. e. Medicare recipients who pay for SMI on a voluntary basis. E
Workers’ compensation is a state program that provides benefits for a. unemployed workers. b. workers injured on the job. c. any injury suffered by a worker at any time. d. workers who become ill from work-related causes. e. only b and d. E
Hospital indemnity policies would make payment for a. surgery. b. doctor’s office visits. c. private duty nursing care. d. prescriptions when not in the hospital. e. per-day hospital charges. E
Ben’s health coverage charges a low ($15) deductible each time he visits the doctor or hospital. Other than the low per-service deductible, there is very little cost sharing. However, Ben must go to the health care providers listed by the provider of the health coverage. If he goes to a provider that is not on the list, there is very little coverage. Which of the following types of entity most likely provides Ben’s health coverage? a. HMO b. Blue Cross/Blue Shield association c. Commercial insurer (major medical) d. PPO e. Fee-for-service indemnity plan A
Surgical expenses now generally are reimbursed on the basis of a. actual surgical expense. b. listed benefit schedules. c. specific percentage of actual surgical expense. d. average national cost of the surgery. e. usual, reasonable, and customary expenses. E
. Suppose a person has a health insurance policy with a $500 calendar-year deductible, a $2,000 out-of-pocket cap, and an 80% coinsurance provision. If this person suffers a $600 covered loss, how much will the insurance company pay? (Assume no previous losses have occurred.) a. $80 b. $100 c. $480 d. $600 e. Some other amount A
Nick has a comprehensive health care policy with a $250 per-calendar-year deductible, an 80% co-insurance provision, and a $1,000 copayment cap per calendar year. In January, Nick had a $600 claim for which the insurance company paid $280. Nick experiences another unrelated claim in October resulting in total bills of $5,000. How much will Nick have to pay for the second claim? a. $5,000 b. $3,930 c. $1,800 d. $930 e. None of the above D
Major medical plans are characterized by deductibles, internal limits, and a. benefit levels. b. participation or coinsurance. c. illness or injury frequency limits. d. maximum surgical medical benefits. e. sliding or decreasing premiums. B
Given a $250 annual deductible, an 80% co-insurance provision, and a $5,000 copayment cap, how much of a $27,500 medical bill will be paid by the insured? a. $250 b. $5,000 c. $5,450 d. $5,250 e. $5,700 D
A characteristic of dental insurance is a. high cost. b. dentist financing. c. high deductible limits. d. lack of orthodontic coverage. e. low maximum limits. E
Miscellaneous sources of health care coverage include a. homeowners insurance. b. automobile insurance. c. veterans benefits. d. all of the above. e. none of the above. D
____ are required by many insurance plans to reduce the number of unnecessary surgeries. a. Deductibles b. Waiting periods before the surgery is performed c. Second opinions d. Meetings with company surgical committees e. Approval by hospital surgical committees C
Terms of payment under your health insurance are governed by a. policy limits. b. deductibles. c. coordination of benefits. d. set maximums for types of services. e. all of the above. E
A “coordination of benefits” provision in a health insurance policy may possibly provide which of the following benefits? a. Allows the policy holder to be double-covered for the same loss. b. Provides broader coverage than a policy without such provision. c. Often results in lower-cost insurance premiums. d. Drops pre-existing conditions clauses from a policy. e. All of the above C
Which of the following best describes a “pre-existing condition”? a. An exclusion b. Cancer, heart condition, or other serious diseases c. An injury that results from an accident d. Something not covered by the insurance policy e. A physical or mental problem you had at the time you bought the policy E
Your right to continue a health insurance policy if you choose is known as a. policy exclusions. b. persons covered. c. continuation. d. duration of benefits. e. renewability. E
The insurance designed to help with nursing home or in-home care due to chronic illness is called a. Medicare b. major medical insurance c. comprehensive major medical insurance d. nursing home care insurance e. long-term care insurance E
Which of the following statements is true about a guaranteed renewable long-term care policy? a. benefits are taxable. b. premiums are never tax deductible. c. the policy is noncancelable. d. premiums cannot be increased by the insurer unless they are increased for the entire rating class. e. premiums cannot increase for any reason. D
One drawback of long-term care insurance is its a. high annual premiums. b. overlap with Medicare. c. inability to cover custodial care. d. relatively high deductible. e. relatively high coinsurance requirement. A
Activities of daily living (ADLs) are important in determining ____ for long-term care insurance. a. type of care b. services covered c. waiting period d. eligibility e. benefit duration D
Which of the following is not a desirable feature in a long-term care policy? a. inflation protection b. optional renewability clause c. duration of benefits of 6 years d. coverage for Alzheimer’s disease e. coverage for preexisting conditions B
Which of the following best describes a custodial care facility? a. a place that provides meals, housekeeping, and personal care services. b. a place that provides limited medical attention and supervision, largely by nonmedical professionals. c. a place with licensed medical professionals that assist residents regularly with medically necessary care. d. a place that provides regular assistance with chronic health conditions that are acute in nature. e. a hospital wing where surgical facilities are always available nearby. A
Bob and Barbara Castle are each 39 years old and have sought your advice with regard to their financial affairs. Bob is a school administrator making $75,000 per year and Barbara is not employed outside of the home. The Castles’ net worth is approximately $190,000. They have three kids, ages 6, 10, and 14. You have determined that the Castles currently have adequate life, health, auto, and homeowner’s insurance. Which of the following forms of insurance is likely to fulfill their highest-priority remaining risk-management need? a. supplemental major medical insurance b. disability income insurance c. critical illness insurance d. long-term care insurance e. additional life insurance B
Disability income insurance provides benefits that are designed to a. pay for hospital care costs from injuries. b. substitute for lost income. c. cover hospital care costs from illness. d. substitute for social security disability benefits. e. supplement retirement income for the elderly. B
Which of the following changes would tend to increase the premium on a disability policy? a. a shorter elimination period b. use of “any occupation” definition of disability instead of “own occupation to which one is reasonably suited” c. decreasing the benefit level from 66% to 50% of prior earnings d. decreasing the payment period from until age 65 to a maximum of 2 years e. none of the above A
An elimination period in disability income insurance is most closely analogous to which of the following cost-sharing provisions in health insurance? a. deductible b. coinsurance c. limit d. cap A
All of the following except a ____ are highly recommended for a long-term disability income policy. a. guaranteed renewable clause b. cost-of-living adjustment c. long duration of benefit d. short waiting period e. waiver of premium D
Suppose Janet, a skilled neurosurgeon, became unable to perform surgery because of severe arthritis. Which of the following is true? a. If Janet has a disability policy with an “own occupation” definition of disability, she will probably collect some benefits. b. If Janet has a disability policy with an “own occupation” definition of disability, the insurer will provide coverage only if Janet would not be able to perform another type of job such as teaching or consulting. c. If Janet has a disability policy with an “any occupation for which reasonably suited” definition of disability, the insurer will attempt to determine if there is another job for which Janet is suited and is still able to perform. d. If Janet has a disability policy with a presumptive disability clause for loss of hands, she will probably collect some benefits. e. ​Both a and c are true. E
Disability income insurance will provide income to a disabled or ill person a. without a waiting period. b. with unlimited funds for years. c. with a waiting period before income is received. d. with payments made to the recipient for up to age 70. e. none of the above. C
Disability income policies usually have ____ that is a time delay from the date of the issuance of the policy until benefit privileges are activated. a. waiting periods b. probationary periods c. elimination periods d. internal limit periods e. outer limits B
When trying to determine your disability income needs, you should consider available sick leave, income needs, and a. social security benefits. b. surgical expense protection. c. Medicare. d. life insurance. e. income tax bracket. A
In order to qualify for disability insurance under social security, a person must be a. unable to carry out the duties of the current job. b. unable to carry out the duties of any job. c. ill for at least two years. d. willing to undergo rehabilitation. e. none of these B
Which of the following is characteristic of social security disability income coverage? a. There is a one-year waiting period. b. It uses the “own occupation” definition of disability. c. Benefits are payable only if the disability is expected to last one year or be fatal. d. a and b e. a, b, and d C
Most people do not need protection against a. the loss of income because of time spent away from work. b. a specific dread disease. c. medical and rehabilitation expenses. d. nursing home costs. e. in hospital services. B
Which of the following is a public assistance program that provides health insurance benefits only to those who are unable to pay for healthcare? a. Medicare b. Medicaid c. Blue Cross/Blue Shield d. Social Security disability benefits e. Worker’s compensation B
Joe has a disability income policy that pays a monthly benefit of $1,200. Joe has been disabled for 30 days, but he only received a check in the amount of $600 from his disability insurance. What is probably the reason that he only received $600? a. The policy has a deductible of $600. b. The elimination period is 15 days. c. The policy has a 50% coinsurance clause. d. Joe is considered to be only 50% disabled. e. Joe has only owned the policy for 6 months. B
Medicare Advantage supplemental benefits include all of the following except a. Vision b. Dental c. General checkups d. Hospitalization e. Wellness programs D
Medicare Advantage policies require payment from the policyholder in the form of a a. Deductible b. Co-insurance c. Copayment d. Excess charge e. a and b C
About ___ of Americans lack health insurance. a. 10% b. 13% c. 20% d. 35% e. 50% B
The United States spends about ___ the average of other rich economies on health care. a. half b. the same as c. twice d. three times e. four times C
The Affordable Care Act’s expenditures are financed by a. an 0.9% additional Medicare tax on high earnings. b. an excise tax on certain “Cadillac” policies. c. a 3.8% net investment tax. d. all of these. e. none of these. D
The Affordable Care Act requires insurance companies to set premiums based on all of the following except a. family size. b. where you live. c. tobacco use. d. gender. e. age. D

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