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Questions and Answers

What is the maximum fine a producer can receive for engaging in unfair practices regarding a Medicare Supplement policy?

  • $5,000
  • $1,000
  • $10,000
  • $2,500 (correct)

    • What type of media is excluded from advertising?

  • Television
  • Print media
  • Social media
  • Internal company communications (correct)

    • What is the total out-of-pocket cost to the insured in the scenario described?

  • 16,000
  • 16,500 (correct)
  • 5,000
  • 500

    • Why must producers complete continuing education?

    <p>To sell LTC insurance</p> Signup and view all the answers

    What is the minimum number of hours of continuing education required for producers selling LTC insurance?

    <p>6 hours</p> Signup and view all the answers

    How long can handicapped children remain on their family's health insurance plan?

    <p>For as long as the disability prevents them from being self-sufficient</p> Signup and view all the answers

    What is prohibited in advertising for accident and health policies?

    <p>Making false statements</p> Signup and view all the answers

    Who is the primary insurer for a child with multiple coverage through both parents?

    <p>The parent whose birthday comes first in the calendar year</p> Signup and view all the answers

    How long must advertisements for accident and health policies be kept on file?

    <p>Until the insurer's next regular examination</p> Signup and view all the answers

    What is the advantage of Health Savings Accounts (HSAs)?

    <p>They are portable and available to almost any person</p> Signup and view all the answers

    What is the purpose of establishing minimum standards for individual policies?

    <p>To establish standards for benefits provided by accident and health policies</p> Signup and view all the answers

    How are benefits received by employees from employer-paid group premiums taxed?

    <p>They are tax-free</p> Signup and view all the answers

    What type of communication is excluded from the definition of advertising?

    <p>Personal communications</p> Signup and view all the answers

    What is the main difference between an HMO and a PPO?

    <p>The method of reimbursement to physicians</p> Signup and view all the answers

    What is the purpose of a Health Savings Account (HSA)?

    <p>To offset unreimbursed medical expenses</p> Signup and view all the answers

    What happens to contributions in a Health Savings Account (HSA) if they are not used?

    <p>They carry over from year to year, subject to maximum limits</p> Signup and view all the answers

    What happens to non-qualified withdrawals from a Health Savings Account (HSA) before age 65?

    <p>They are taxed as income with a 20% penalty tax</p> Signup and view all the answers

    What is the minimum age at which children can remain on their family's health insurance plan under the Federal Patient Protection and Affordable Care Act?

    <p>26</p> Signup and view all the answers

    What happens to a person whose license is revoked or whose application is denied?

    <p>They are ineligible to apply for any license for three years after the revocation or denial</p> Signup and view all the answers

    What must be established when premiums are held for 15 days or more before they’re remitted to insurers?

    <p>A Premium Fund Trust Account (PFTA)</p> Signup and view all the answers

    What is the consequence of misappropriating, misusing, or commingling premiums with personal funds?

    <p>A Class A misdemeanor</p> Signup and view all the answers

    Who must act with a high degree of trust when handling the monies of the public?

    <p>A fiduciary</p> Signup and view all the answers

    How long must all books and records for a calendar or fiscal year be maintained?

    <p>At least seven years</p> Signup and view all the answers

    What must be posted no less than every 30 days?

    <p>All transactions and receivables</p> Signup and view all the answers

    What is required for an insurance policy?

    <p>The name of the producer, representative or firm</p> Signup and view all the answers

    What happens to a licensee who has had a license suspended, revoked, or denied?

    <p>They cannot be employed by or contracted with an insurer</p> Signup and view all the answers

    What must be delivered to the Director in person or by mail once a license is suspended or revoked?

    <p>The license</p> Signup and view all the answers

    What is the consequence of a repeat offense of misappropriating, misusing, or commingling premiums with personal funds?

    <p>A Class 4 felony</p> Signup and view all the answers

    What is the term used to describe the expenses consisting of producer commissions, company profits, and administrative costs?

    <p>Loading</p> Signup and view all the answers

    What is the purpose of the Statement of Continued Good Health?

    <p>To collect premium prior to delivery</p> Signup and view all the answers

    What is the minimum number of days for the free-look period?

    <p>10 days</p> Signup and view all the answers

    What is the result if an application is submitted without premium payment?

    <p>The application is referred to as a Trial Application</p> Signup and view all the answers

    What is the effective date of coverage in a Trial Application?

    <p>The policy delivery date</p> Signup and view all the answers

    What is the purpose of the producer reviewing the policy provisions?

    <p>To explain the policy to the person insured</p> Signup and view all the answers

    What is the result if the client's health has changed during the application process?

    <p>The policy may not be issued</p> Signup and view all the answers

    What are the two elements of consideration required for an application to be complete?

    <p>Completed application and premium payment</p> Signup and view all the answers

    What must be provided to an applicant when replacing an accident and health policy?

    <p>A notice signed by the applicant, urging them to consider certain factors</p> Signup and view all the answers

    What is the liability of the prior group carrier when a group plan is discontinued or replaced?

    <p>The prior carrier remains liable only to the extent of its accrued liabilities and extensions of benefits</p> Signup and view all the answers

    What must the succeeding carrier do for individuals who are totally disabled on the date of discontinuance?

    <p>extend their benefits as per the prior carrier's plan</p> Signup and view all the answers

    What is a requirement for the succeeding carrier's plan of benefits?

    <p>It must have the same or overlapping benefits as the prior carrier's plan</p> Signup and view all the answers

    Why must a notice be provided to an applicant when replacing an accident and health policy?

    <p>To urge the applicant to consider certain factors before replacing the policy</p> Signup and view all the answers

    What is true about the extension of benefits for totally disabled individuals?

    <p>It cannot be terminated because the person becomes covered under the succeeding carrier's contract</p> Signup and view all the answers

    What is a requirement for the succeeding carrier's plan?

    <p>It must not individually underwrite members within a group</p> Signup and view all the answers

    What is true about the credit for deductible expenses?

    <p>It only applies for the first 90 days</p> Signup and view all the answers

    Study Notes

    Deductible, Co-Insurance, and Stop Loss

    • $500 deductible, 20% of bill until $5,000, then insurer pays 100% of remaining bill
    • $16,000 (20% of $80,000) + $500 deductible = $16,500 total without stop loss

    Coverage for Dependent Children

    • Covered at birth, regardless of birth defects
    • Can remain on family Accident & Health plan until age 19, or age 23 if a full-time college student
    • Handicapped children can remain on family plan for as long as disability prevents them from being self-sufficient
    • If child has multiple coverage through both parents, the parent whose birthday comes first in the calendar year is primary
    • If parents are divorced, then the primary is the parent with custody
    • Federal Patient Protection and Affordable Care Act increased the age to 26 in medical plans, regardless of dependent or marital status

    Taxation of Medical Plans

    • Employer-paid group premiums are deductible to the employer
    • Benefits are received tax-free by employee since they’re not considered income
    • Individual premiums are not deductible
    • Reimbursements/benefits are not taxable since they’re not considered income
    • For individual plans, if premiums and other non-reimbursed medical expenses exceed 10% of adjusted gross income, the excess is deductible

    HMOs and PPOs

    • Alternative health care providers that provide comprehensive health care
    • Combine health care delivery with prepaid financing (e.g., prepaid premiums)
    • Emphasize preventive care and provide emergency services
    • Physicians are employed by the HMO
    • Referral is needed by primary care physician (PCP) to see specialists
    • PCP is the gatekeeper and insured subscriber needs permission to go outside of the network

    Health Savings Accounts

    • Personal savings accounts that are designed to offset unreimbursed medical expenses
    • Must be used with High Deductible/Low Premium health insurance policies
    • Benefits are portable
    • Available to almost any person
    • Employers may contribute funds

    Medical Savings Account

    • Contributions are tax-deductible to both employee and employer
    • Growth is tax-deferred
    • Contributions carry-over from year-to-year; subject to maximum limits
    • Earnings and “qualified” withdrawals are tax-free

    Contract Delivery

    • Producer responsibilities: review person insured, beneficiaries, coverage amount, premium and premium mode, policy provisions, exclusions and riders
    • Important time frame begins on the policy delivery date
    • 10-day free-look (minimum can be longer)
    • For senior policies, the free-look may be 30 days

    Fiduciary Duties

    • A fiduciary is a person who must act with a high degree of trust when handling the monies of the public
    • Any premiums being handled by an insurance producer, limited lines producer, temporary licensee, business entity, or surplus lines producer must be held in a fiduciary capacity
    • A Premium Fund Trust Account (PFTA) must be established when premiums are held for 15 days or more before they’re remitted to insurers
    • Funds collected or deposited in a premium trust account cannot be misappropriated, misused, or commingled with personal funds

    Additional Illinois Law

    • Commissions: individuals must be licensed to receive commissions, service or brokerage fees, or other considerations
    • Felony convictions: any licensee convicted of a felony must report it and provide any relevant documents to the Director within 30 days
    • Disclosure regulations: all insurance policies must identify the name of the producer, representative or firm

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