Nebraska Life & Health Insurance Exam — All Questions

In a disability income policy, the 'elimination period' refers to:

• a.The period during which the insurer can cancel the policy
• b.The time the applicant has to return the policy for a refund
• c.The maximum length of time benefits will be paid
• d.A waiting period after a disability begins before benefit payments start✓

The elimination period is a waiting period, measured from the start of a covered disability, that must pass before the insured begins receiving benefit payments; it functions like a time deductible and a longer elimination period lowers the premium. The maximum time benefits are paid is the benefit period, a different concept. The insurer's ability to cancel relates to renewability provisions. The time to return the policy for a refund is the free-look period. Only the elimination period delays the start of benefits.

In a major medical plan, 'coinsurance' most accurately describes:

• a.A flat dollar amount the insured pays at each doctor visit
• b.The amount the insured must pay before the plan pays anything
• c.The most the plan will ever pay in a lifetime
• d.The percentage split of covered costs between the insurer and the insured after the deductible is met✓

Coinsurance is the sharing of covered expenses on a percentage basis (for example, the insurer pays 80% and the insured pays 20%) after the deductible has been satisfied. A flat dollar amount per visit is a copayment, not coinsurance. The amount the insured pays before the plan pays is the deductible. The most the plan will ever pay is a maximum benefit limit. Coinsurance specifically refers to the proportional cost split, and it stops once the insured reaches the out-of-pocket maximum (stop-loss).

The term 'morbidity' as used by health insurers refers to:

• a.The percentage of premium spent on commissions
• b.The interest rate credited to reserves
• c.The incidence and severity of sickness and disability in a given group✓
• d.The rate at which people in a group die

Morbidity measures the frequency and severity of illness, injury, and disability within a defined population, and health insurers use morbidity tables to price coverage. Mortality, by contrast, measures the rate of death and is used mainly for life insurance pricing. Morbidity is not an interest or investment measure, nor is it a marketing or commission figure. Understanding the morbidity-versus-mortality distinction is fundamental: health insurance risk is about getting sick or disabled, while life insurance risk is about dying.

The two broad categories of health insurance are:

• a.Property coverage and casualty coverage, a separate branch of insurance entirely
• b.Fixed coverage and variable coverage
• c.Life insurance and annuities
• d.Medical expense coverage and disability income coverage✓

Health insurance divides into medical expense coverage, which pays for care such as hospital, physician, and surgical services, and disability income coverage, which replaces part of the income lost when the insured cannot work. Life insurance and annuities are separate product lines. Property and casualty is a different branch of insurance entirely. Fixed and variable describe how certain life and annuity products are invested, not health insurance categories. Recognizing these two purposes, paying medical bills versus replacing income, frames all health coverage.

Basic medical expense coverage differs from major medical coverage mainly because basic coverage typically:

• a.Provides first-dollar benefits with no deductible but has relatively low limits✓
• b.Is designed for catastrophic costs, which is actually the role of major medical rather than basic coverage
• c.Carries very high lifetime limits
• d.Requires a large annual deductible

Basic medical expense plans historically paid 'first dollar' benefits, meaning they began paying with little or no deductible, but they had relatively low benefit limits for specific services. Major medical, by contrast, provides broad, high-limit protection after a deductible and coinsurance, and is meant to handle large or catastrophic costs. So basic coverage is characterized by low limits and first-dollar payment, not high limits or a large deductible. The two are often combined so basic pays first and major medical covers the excess.

A 'calendar-year' deductible in a medical plan means the insured must satisfy the deductible:

• a.Once during each year, after which the plan begins paying its share✓
• b.Only once in the insured's entire lifetime, after which it would never apply again
• c.Fresh at the start of every month
• d.Separately for each different illness

A calendar-year (or annual) deductible must be met once during each year; once the insured's covered costs reach that amount, the plan pays its share for the rest of the year, and the deductible resets the following year. A deductible applied to each separate illness is a per-cause deductible. It is not a one-time lifetime deductible, and it does not reset monthly. The calendar-year structure is the most common deductible design in medical expense plans.

A 'family deductible' provision in a medical plan generally:

• a.Requires every family member to meet a separate deductible with no overall cap, no matter how many of them have already met their own deductibles
• b.Doubles the plan's coinsurance percentage
• c.Eliminates the out-of-pocket maximum entirely
• d.Caps the total deductible a family must meet, often once two or three members have each met the individual deductible✓

A family deductible sets an aggregate limit so that once a specified number of family members (commonly two or three) have each satisfied the individual deductible, the family deductible is considered met and no further deductibles apply for the year. It does not require every member to meet a full deductible with no cap, does not change coinsurance, and does not remove the out-of-pocket maximum. The provision protects larger families from stacking up multiple full deductibles.

The 'coordination of benefits' (COB) provision in group health insurance is designed to prevent:

• a.The insured from ever filing a claim
• b.The insurer from paying any benefits at all whenever a person happens to be enrolled under more than one group plan
• c.The plan from covering preventive services
• d.The insured from collecting more than 100 percent of covered expenses when covered by two plans✓

Coordination of benefits applies when a person is covered by more than one group plan; it establishes which plan pays first (primary) and which pays second (secondary) so that the total reimbursement does not exceed 100 percent of the actual covered expenses. It does not bar filing claims, block preventive care, or stop the insurer from paying. COB exists to prevent duplicate payment and the profit motive that could arise from being over-reimbursed by multiple plans.

Individual disability income policies typically limit the benefit to roughly 60 percent of the insured's earned income in order to:

• a.Comply with Medicare requirements
• b.Preserve the insured's incentive to return to work and avoid overinsurance✓
• c.Match the way property insurance works
• d.Reduce the insurer's advertising costs, which has nothing to do with how benefit limits are set

Disability income benefits are capped at a portion of income (often around 60 percent) because disability benefits are generally received income-tax-free when the individual paid the premiums, so replacing too much income could leave the insured better off not working, creating a moral hazard. The limit is not about advertising costs, Medicare, or property insurance. Keeping the benefit below full pay maintains the insured's motivation to recover and return to work.

Under a 'presumptive disability' provision in a disability income policy, the insured is automatically presumed totally disabled upon:

• a.The loss of sight, hearing, speech, or the use of two limbs✓
• b.Catching a common cold
• c.Voluntarily changing employers for a better-paying position
• d.Missing a single day of work

A presumptive disability provision automatically deems the insured totally disabled, and pays full benefits without the usual proof, upon certain severe losses such as loss of sight, hearing, speech, or the loss of use of two limbs, even if the insured could technically still work. Missing one day of work, a minor illness like a cold, or changing jobs do not qualify. The provision recognizes that these catastrophic losses are so serious that disability is presumed as a matter of course.

A 'recurrent disability' provision in a disability income policy determines:

• a.The amount of any death benefit
• b.Whether a return of the same disability soon after recovery is treated as a continuation of the prior claim rather than a new one✓
• c.How the policy's premiums are calculated at issue, based on the insured's age, occupation, and health, none of which this provision addresses
• d.The length of the free-look period

A recurrent disability provision states that if the insured recovers and then suffers the same disability again within a short specified time (often six months), it is treated as a continuation of the original disability, so a new elimination period does not have to be served. It has nothing to do with premium calculation, the free-look period, or a death benefit. The provision protects an insured from having to satisfy a fresh waiting period when the same condition quickly returns.

A residual (partial) disability benefit pays when the insured:

• a.Is totally and permanently disabled and cannot work at all in any occupation for the rest of their life
• b.Returns to work but earns less because of the disability, in proportion to the income lost✓
• c.Has fully recovered and returned to full earnings
• d.Chooses to retire early with no disability

A residual disability benefit applies when the insured can work but, due to the ongoing effects of the disability, earns less than before; the benefit is generally paid in proportion to the percentage of income lost. It is not for total permanent disability (which pays full benefits), not for full recovery with no lost income, and not for voluntary retirement. The residual benefit bridges the gap between total disability and full recovery by covering a partial loss of earnings.

To be eligible to contribute to a Health Savings Account (HSA), an individual must be covered by:

• a.A qualified high-deductible health plan (HDHP)✓
• b.Any health plan at all
• c.Medicare Part A and Part B
• d.An HMO that has no deductible of any kind whatsoever

An HSA must be paired with a qualified high-deductible health plan; the higher deductible lowers the premium, and the HSA lets the individual set aside tax-advantaged money to pay for care. It cannot be paired with just any plan, a no-deductible HMO, or Medicare (enrolling in Medicare actually ends HSA eligibility). The HDHP pairing is the defining requirement, which is why HSAs and HDHPs are always discussed together.

Contributions to a Health Savings Account (HSA) generally receive which federal tax treatment?

• a.They are tax-deductible or pre-tax, grow tax-free, and are tax-free when used for qualified medical expenses✓
• b.They are forfeited at the end of each year
• c.They can never be carried over to a future year, which is actually a limitation of a flexible spending account rather than a health savings account
• d.They are always fully taxable when contributed

HSAs offer a rare triple tax advantage: contributions are deductible or made pre-tax, the account grows tax-free, and withdrawals for qualified medical expenses are tax-free. Contributions are not taxable when made, the balance does carry over year to year, and funds are not forfeited at year-end. This favorable treatment, combined with the balance being the owner's to keep, makes the HSA a powerful savings tool alongside a high-deductible plan.

Unlike a Flexible Spending Account (FSA), unused funds in a Health Savings Account (HSA) at year-end:

• a.Are forfeited under a use-it-or-lose-it rule, which is how a flexible spending account instead works
• b.Roll over and remain the account owner's money, even if the owner changes jobs✓
• c.Are taxed at a flat fifty percent rate
• d.Automatically revert to the employer

HSA balances roll over indefinitely and belong to the account owner, who keeps them even when changing employers or health plans, so the account can grow over many years. An FSA, by contrast, is generally subject to a use-it-or-lose-it rule. HSA funds do not revert to the employer and are not taxed at a flat penalty rate simply for remaining in the account. Portability and rollover are key advantages of the HSA over the FSA.

The term 'usual, customary, and reasonable' (UCR) charge refers to:

• a.The amount a plan treats as appropriate for a service based on the prevailing fees charged in that geographic area✓
• b.The flat copayment due at a visit
• c.The plan's annual deductible
• d.The monthly premium the insured pays for the coverage, a fixed cost unrelated to how a plan decides a reasonable charge for a service

A UCR charge is the amount an insurer considers reasonable for a given service, determined by the usual fee the provider charges, the customary fees of similar providers in the same area, and what is reasonable for the situation; the plan bases reimbursement on this figure, and the insured may owe amounts a provider bills above it. UCR is not the deductible, premium, or copay. UCR limits how much a plan will recognize for out-of-network or fee-for-service charges.

A managed care 'preauthorization' (precertification) requirement means the insured or provider must:

• a.File a police report before treatment
• b.Obtain the plan's approval before certain services, such as a non-emergency hospital admission, to ensure coverage✓
• c.Wait a full year before receiving benefits
• d.Pay the entire bill up front before any care is delivered, which is not what obtaining advance approval for a service means

Preauthorization (precertification) requires that the plan review and approve certain non-emergency services, such as a planned hospital stay or a costly procedure, before they are provided, both to confirm medical necessity and to ensure the service will be covered. It is not a requirement to pay the full bill first, to wait a year, or to file a police report. Managed care plans use preauthorization to control costs and steer care to appropriate settings.

Under a 'capitation' payment arrangement, an HMO pays a network physician:

• a.A fixed amount per enrolled member per month, regardless of how many services the member uses✓
• b.Nothing until the patient files a claim
• c.A payment only at the end of the calendar year
• d.A separate fee for each individual service performed, which describes fee-for-service rather than capitation

Under capitation, the HMO pays the physician a set amount for each enrolled member per month (per capita), whether or not that member seeks care, which shifts some financial risk to the provider and encourages efficient, preventive care. It is the opposite of fee-for-service, which pays per service. It is not a claim-triggered or year-end-only payment. Capitation is a hallmark of the HMO managed care model.

In an HMO, the primary care physician often serves as a 'gatekeeper,' which means the physician:

• a.Sets the plan's annual deductible amount and the coinsurance percentage members owe
• b.Coordinates the member's overall care and provides referrals to specialists✓
• c.Owns and operates the HMO
• d.Collects the plan's monthly premiums

As a gatekeeper, the primary care physician manages the member's overall care and must generally provide a referral before the member sees a specialist, which helps the HMO control costs and avoid unnecessary services. The gatekeeper does not collect premiums, own the HMO, or set the deductible. The gatekeeper model is a defining feature of traditional HMOs and a key difference from PPOs, which usually let members self-refer to specialists.

A Point-of-Service (POS) health plan is best described as:

• a.A hybrid that blends HMO features with the option to go out of network at a higher cost✓
• b.A pure fee-for-service indemnity plan with no network
• c.A plan that provides no coverage outside a fixed network under any circumstances whatsoever
• d.A plan identical in every way to a standard HMO

A POS plan combines HMO and PPO characteristics: members typically choose a primary care physician and use the network for the lowest cost, but they may also go outside the network at the point of service by paying more. It is not a pure indemnity plan, not identical to an HMO (it allows out-of-network use), and it does provide some out-of-network coverage. The 'point of service' name reflects that the member decides in or out of network each time care is needed.

Many disability income policies include a waiver of premium feature that:

• a.Doubles the monthly benefit amount
• b.Shortens the elimination period to zero days so benefits begin immediately, which is not what this premium-related feature does
• c.Adds a lump-sum death benefit
• d.Stops premium payments while the insured is disabled, usually after a waiting period, keeping the policy in force✓

The waiver of premium feature in a disability income policy relieves the insured of paying premiums once they have been disabled for a specified period (often 90 days), and coverage continues without payment while the disability lasts. It does not eliminate the elimination period, double the benefit, or add a death benefit. The feature protects the policy from lapsing at the very time the disabled insured may struggle to pay premiums.