Health Insurance Basics and Tax Deductions

Questions and Answers

What are the tax ramifications of health insurance premiums paid by Lorenzo, who is self-employed with an S corporation?

100% of his health insurance costs can be deducted from his gross income

How are premiums paid by the insured for personally owned disability income insurance treated for tax purposes?

Not tax-deductible

Which of the following is considered to be a point of service (POS) plan?

Exclusive Provider Organization (EPO)

Preferred Provider Organization (PPO)

Health Maintenance Organization (HMO)

Managed-care plan (correct)

What is a requirement for any change in an insurance application?

Change must be initialed by the applicant Signup and view all the answers

What is the gatekeeper's role when used by an HMO?

Obtaining referrals to specialists from primary care physicians Signup and view all the answers

Which of the following is considered a tax-deductible medical expense under the IRS rule allowing deduction of medical expenses that exceed 7.5% of adjusted gross income?

Long-Term care insurance premiums Signup and view all the answers

What happens when an insurance policy is backdated?

The policy's effective date is earlier than the present Signup and view all the answers

What is the difference between pre-certification and concurrent review?

Pre-certification occurs before the treatment is provided Signup and view all the answers

What is the insurer's liability when an insured is injured as an innocent bystander during a felony?

Liable for the loss Signup and view all the answers

What is the appropriate tax consequence when XYZ Corp pays the tax-deductible insurance premiums for a key employee disability policy?

Benefits are fully taxable Signup and view all the answers

Study Notes

Health Underwriting Overview

Self-employed individuals with S corporations can deduct 100% of health insurance premiums from gross income.
Disability income insurance premiums paid by the insured are not tax-deductible.
Point of Service (POS) plans function as managed-care plans, blending features of HMO and PPO models.

Insurance Application Changes

Any alterations to an insurance application must be initialed by the applicant to be valid.

HMO Gatekeeper Role

In a Health Maintenance Organization (HMO), the gatekeeper (primary care physician) is responsible for obtaining specialist referrals.

Tax Deductions for Medical Expenses

The IRS allows taxpayers to deduct medical expenses exceeding 7.5% of their adjusted gross income, which includes long-term care insurance premiums.

Backdating Insurance Policies

Backdating an insurance policy means its effective date is set to a time before the date of application.

Pre-Certification vs. Concurrent Review

Pre-certification is the process that occurs prior to the treatment, ensuring medical necessity and policy compliance.

Liability for Insured Incidents

Insurers are liable for losses incurred by insured individuals, even if they are innocent bystanders in a felony situation.

Key Employee Disability Insurance Tax Implications

When a corporation pays tax-deductible premiums on a disability policy for a key employee, the benefits received by the employee are fully taxable.

Description

Test your knowledge on health insurance concepts, including tax deductions for health premiums and the roles within various insurance plans. This quiz covers essential topics related to self-employed individuals, HMO structures, and the handling of insurance applications.