please read the instructions carefully.
ip7o
assignment_7_ch15.docxAssignment 7, Chapter 15 NAME _______________________________
FIN 3610
1. a. Explain the various definitions of disability that are found in disability-income insurance. Not sure about the answer
The definition of total disability is stated in the policy. There are several definitions of total disability:
(1) Inability to perform all duties of the insured’s own occupation
(2) Most insurers today use a modified own occupation definition of total disability. Because of injury or sickness, you are unable to perform the material and substantial duties of your own occupation, and are not engaged in any other occupation.
(3) Inability to perform the duties of any occupation for which the insured is reasonably fitted by education, training, and experience
(4) Inability to perform the duties of any gainful occupation
(5) Loss-of-income test in some companies
Some individual disability income policies have a two-part definition. For some initial period of disability, such as two to five years, total disability is defined in terms of your own occupation. After the initial period of disability expires, the any occupation definition of disability is applied.
b. Briefly explain the following disability-income insurance provisions: Residual disability, Benefit period, Elimination period, Waiver of premium. Not sure about the answer
(1) Residual disability means that a pro rata disability benefit is paid to an insured whose earned income is reduced because of an accident or sickness.
(2) The benefit period is the length of time that disability benefits are payable after the elimination period is met.
(3) An elimination period is a waiting period during which time benefits are not paid. Insurers offer a range of benefit periods, such as 30, 60, 90, 180, or 365 days.
(4) Most policies include a waiver-of-premium provision. The insured must meet the definition of disability stated in the policy. If the insured is totally disabled for 90 days, future premiums will be waived as long as the insured remains disabled.
2. Identify five major provisions of the Affordable Care Act that will have an impact on individuals and families. Document your source and attach a copy of your information.
Need plz Document your source and attach a copy of your information.
Plz look for website about these info.
Provisions in the Affordable Care Act that will affect individuals and families include the following:
Individual mandate. Beginning in 2014, most citizens in the United States and legal residents must have qualifying health insurance or pay a financial penalty.
Preexisting conditions exclusions prohibited. Children under age 19 with a preexisting condition cannot be denied coverage or rated up because of a preexisting condition. Beginning in 2014, adults cannot be denied coverage or rated up because of a preexisting condition.
Retention of coverage until age 26. The new law allows young adults to remain on their parents’ policy until age 26.
Guaranteed access to health insurance. Effective January 1, 2014, policies in the individual and small group markets will be able to purchase qualifying health insurance from a state Affordable Insurance Exchange. The insurance will be sold on a guaranteed issue basis and is guaranteed renewable. Applicants cannot be denied coverage or rated up because of their health.
Premium credits to eligible individuals and families. Refundable premium tax credits are available to eligible individuals and families with incomes between 133 percent and 400 percent of the federal poverty level, which will enables them to purchase qualified health insurance through a state Affordable Insurance Exchange. The tax credits are based on income and are designed to limit the amount spent on health insurance from 2 percent to a maximum of 9.5 percent of income, which makes the insurance affordable.
Preexisting Condition Insurance Plan. The new law created a temporary high-risk program, which provides affordable and subsidized health insurance to individuals with preexisting conditions until the Affordable Insurance Exchanges begin operating in 2014. The program is called the Preexisting Condition Insurance Plan (PCIP) and is funded entirely by the federal government.
3. a. Describe the basic characteristics of individual medical insurance.
A typical individual medical insurance plan has certain basic characteristics:
(1) Major medical benefits
(2) Broad range of benefits
(3) Calendar year deductible
(4) Coinsurance and copayments
(5) Annual out-of-pocket limits
(6) Exclusions
b. Why are deductibles and coinsurance used in medical expense policies?
A deductible is used to eliminate small claims and reduce administrative expenses. As a result, premiums are lower, and the policy is more affordable. The purposes of coinsurance are to reduce premiums and prevent over utilization of policy benefits.
4. Briefly explain the major characteristics of a health savings account (HSA).
Federal legislation allows all eligible persons under age 65 to establish health savings accounts and receive favorable income tax treatment. A health savings account (HSA) is a tax-exempt or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who is covered under a high-deductible health insurance plan. Health savings accounts have two components: (1) a high deductible health insurance policy that covers catastrophic medical bills, and (2) an investment account from which the account holder can withdraw money tax-free to pay for medical costs.
5. Identify the optional benefits that can be added to a disability-income policy.
Several optional benefits include a cost-of-living rider, an option to purchase additional insurance, a Social Security rider, and a return-of-premium rider.
6. Explain the following renewal provisions that may appear in individual health insurance policies:
a. Guaranteed renewable
Under this type of policy, the insurer guarantees to renew the policy to some stated age. The policy cannot be canceled, and renewal of the policy is at the insured’s sole discretion. However, the insurer has the right to increase premium rates for the underwriting class in which the insured is placed.
b. Noncancellable
Under a noncancellable policy, the insurer cannot change, cancel, or refuse to renew the policy as long as premiums are paid on time. In addition, the insurer cannot change the premiums or rate structure specified in the policy.
c. Conditionally renewable
7. James, age 28, is insured under an individual medical expense policy that is part of a preferred provider organization (PPO) network. The policy has a calendar-year deductible of $1000, 75/25 percent coinsurance, and an annual out-of-pocket limit of $2000. James recently had outpatient arthroscopic surgery on his knee, which he injured in a skiing accident. The surgery was performed in an outpatient surgical center. James incurred the following medical expenses. (Assume that the charges shown are the charges approved my James’s insurer and that all providers are in the PPO network.)
· Outpatient X-rays and diagnostic tests $800
· Covered charges in the surgical center $12,000
· Surgeon’s fee $3000
· Outpatient prescription drugs $400
· Physical therapy expenses $1200
In addition, James could not work for two weeks and lost $2000 in earnings.
a. Based on the above information, how much of the expenses will be paid by the insurance company?
Total covered medical expenses are $17,400. James must pay a deductible of $1000. He must also pay 25 percent of the amount exceeding the deductible up to the maximum annual out-of-pocket limit. Because of the annual out-of-pocket limit, James pays only $2000 plus the deductible of $1000. As such, the insurer pays $14,400.
b. How much of the expenses will James have to pay? Explain your answer.
As noted above, James pays $2000 plus the deductible. The policy does not cover the loss of earnings.
c. Assume that a surgeon who is not in the PPO network actually performed the surgery. Will James’s policy cover this fee? Explain your answer.
Yes. Care outside the network is covered. However, the policyholder must pay substantially higher deductible and coinsurance charges.
