Finc 355 and Finc 430 Quizzes

Quiz 8

NAME ____________________________ Due Date: July 27, 2014 (in assignment folder)

Please provide name above and provide answers in the chart below and submitting homework in MS Word in assignment folder for Quiz 8. (I’ll deduct points if you don’t).

1. Which of the following are the major categories of postpaid health care plans?

(1) health maintenance organization

(2) basic plan

(3) major medical plan

(4) comprehensive plan

A. (1) only

B. (1) and (2) only

C. (1) (2) and (3) only

D. (2) (3) and (4) only

2. Most major medical plans cover routine doctor visits.

A. True

B. False

3. Under the Affordable Care Act, all of the following are considered essential benefits, except

A. preventive and wellness services

B. emergency care services

C. prescription drugs

D. hearing care services and devices

E. mental health and substance abuse disorder services

4. Which of the following is normally a cost containment feature of most HMOs?

A. co-payments

B. coinsurance percentage

C. stop loss limit

D. expense reimbursement

5. HMOs try to control costs by emphasizing preventative care.

A. True

B. False

6. Disadvantages of an HMO include

A. except for certain emergencies, HMO subscribers must receive care from physicians who are part of the HMO

B. an HMO is more costly if employees are relatively young

C. HMOs offer fewer health care services than traditional health insurance

D. A and B

E. B and C

7. HMOs differ from commercial health insurance in that

A. commercial health insurance contracts directly with health care providers

B. HMOs are more cost effective if the workforce is relatively older

C. commercial health insurance premiums vary based on employee use of the plan

D. HMO costs are paid in advance of service

E. commercial health insurance limits coverage to a set of preselected physicians

8. Which of the following terms are used to describe the potential gap between the maximum contribution level and the maximum out-of-pocket limit of a combined HSA plan and high-deductible insurance plan?

A. doughnut-hole

B. FSA gap

C. HSA exclusion limit

D. cookie-cutter plan

9. Some health economists argue that offering an HSA as an alternative to traditional health insurance will eventually increase premiums for traditional health insurance because

A. older employees will tend to use the HSA

B. employees that are younger and healthier will want to have coverage under a traditional plan

C. healthy, high-income employees will select the HSA, leaving relatively sicker and older employees in the traditional health plan

D. premiums of the traditional plan will go up with inflation, but HSA costs are fixed by long-term contract

E. distributions from an HSA are included in employee income and taxed, while the proceeds from traditional insurance is not, increasing demand for traditional health coverage

10. Under which of the following situations must health care coverage under COBRA be continued for 29 months (no more and no less)?

A. termination due to disability

B. termination due to gross misconduct

C. divorce

D. entitlement to Medicare benefits

11. A Health Reimbursement Arrangement (HRA) is advantageous for a closely held business where family members are the primary or only employees

A. True

B. False

12. Which of the following is not an advantage of long-term care coverage?

A. it is relatively inexpensive

B. it covers nursing home expenses

C. it can cover spouses and dependents

D. premiums and benefits are nontaxable to the employee

13. Subject to an age-based limitation, a self-employed person can deduct 100% of premiums for a qualified long-term care contract.

A. True

B. False

14. Which of the following is true for a short-term disability plan from an employer with 25 or more employees?

A. pregnancy-related disabilities may not be excluded

B. pregnancy-related disabilities may be excluded

C. employees are not allowed to pay all or part of the cost of the plan

D. benefits received are never taxable to the employee

15. Disability benefits are subject to federal income tax withholding if paid directly by employer.

A. True

B. False

16. Generally, sick pay or short-term disability payments do not extend beyond about _____ months.

A. 2

B. 3

C. 4

D. 6

E. 9

17. Harriet Jacobs earns $140 per day as an associate manager at Praxton Manufacturing. Harriet has accumulated 5 days of unused sick pay. Praxton also pays premiums on short-term disability insurance for all employees. The short-term disability insurance pays 80% of earnings from 10 business days after onset of illness or injury until the return to work or 6 months, whichever occurs first. Harriet works Monday – Friday but last month, Harriet was in an auto accident and broke both legs and her left arm. She was unable to work for three full weeks. How much income will Harriet receive while she is unable to work? [long question – not really that difficult]

A. $420

B. $560

C. $1,260

D. $1,680

E. $2,100

18. Which of the following definitions of disability is considered to be the most liberal?

A. Social Security definition

B. qualified for definition

C. own occupation definition

D. modified own occupation definition

19. Employer payment of premium for long-term disability insurance on an employee is taxable to that employee in the year the payment is made.

A. True

B. False

20. Mosher Gahn’s employer, Ace Accounting and Bookkeeping Services, provides long-term disability insurance for employees. Ace pays 70% of the premium and the employee pays 30%. Last year, Mosher had a serious heart attack and could not work at all for nine months. Then he returned to work on a part-time basis for a couple of months before returning full time almost a year after the heart attack. He received long-term disability benefits during this year. Which of the following is true?

A. Mosher will be taxed on the entire benefit

B. Mosher will pay income tax on 30% of the benefits received

C. Mosher will pay income tax on 70% of the benefits received

D. Mosher will pay no income tax on the benefits received

E. As long as Mosher cannot work, he does not pay tax on benefits earned. Once he begins working again, however, he must pay income tax on the entire benefit received