NORTH CAROLINA INSURANCE LICENSE PRACTICE

Flashcards based on lecture notes about Health Insurance

What is Medical Expense Insurance?

It covers the cost of medical care from accidents or sickness (hospital, surgical, and medical services).

What is Basic Medical Expense Insurance also called?

First-dollar coverage — because it usually pays without a deductible.

What’s the downside of Basic Medical Expense coverage?

Coverage is limited and may not fully cover all medical costs.

How does Major Medical Expense insurance differ?

It uses reimbursement, and usually requires a deductible, but offers broader coverage.

What does Basic Hospital Expense Coverage include?

Room and board, x-rays, lab fees, meds, and other hospital charges (while you're admitted).

Is there a deductible for Basic Hospital Expense Coverage?

No deductible

What happens if hospital costs are more than the plan covers?

You pay the difference.

What is Basic Medical Expense Coverage?

Pays for nonsurgical doctor services (like office visits), but mostly in the hospital

Are there limits in Basic Medical Expense Coverage?

Yes — may limit how many visits, how long per visit, or hospital stay.

What other things can Basic Medical Expense policies cover?

Emergency care, maternity, mental health, hospice, home care, and more — but with strict limits.

What does Basic Surgical Expense Coverage pay for?

Surgeon fees, anesthesia, and operating room costs (in or out of hospital).

Is there a deductible for surgical expense coverage?

No deductible, but coverage is limited.

What is a Surgical Schedule?

A list of surgeries and the max benefit the policy pays for each one.

What is the 'Relative Value' approach?

Each surgery is given points (e.g., 1,000 for open-heart surgery, 200 for appendix) × a conversion factor (e.g., 10) = benefit paid.

What is Major Medical Expense Insurance?

It offers broad coverage for serious, high-cost medical events that go beyond basic insurance limits.

What does Major Medical cover?

Hospital services, Nursing & physician care, Catastrophic expenses, Long-term illness or injury

Does Major Medical have deductibles and coinsurance?

Yes — deductibles, coinsurance, and higher benefit limits than basic plans.

What are the two types of Major Medical policies?

1. Supplementary Major Medical 2. Comprehensive Major Medical

What is a Supplementary Major Medical Policy?

It kicks in after the basic plan pays and covers what's left over.

What is a deductible?

A set amount the insured must pay before insurance starts paying for claims.

What happens when your deductible is higher?

Your premium is lower, but you pay more out of pocket before coverage kicks in.

What is an annual deductible?

Paid once per year, no matter how many claims you file.

What is an individual vs. family deductible?

Individual: You pay your own deductible. Family: One larger deductible covers multiple family members

What is a flat or per occurrence deductible?

You pay the deductible for each claim, which could mean multiple deductibles per year.

What is the common accident provision?

If multiple family members are hurt in one accident, you only pay one deductible.

What is an integrated deductible?

Combines basic and major medical expenses to meet one deductible total.

What is a carry-over provision?

If you don’t meet your deductible this year, expenses from the last 3 months can carry over into next year.

What is a time deductible?

Found in disability insurance — it’s the elimination period (a wait period before benefits start).

What is a corridor deductible?

Paid after basic coverage ends but before major medical coverage begins.

What is coinsurance in health insurance?

It’s the cost-sharing split between the insured and the company after the deductible is paid (e.g., 80/20).

Who pays the deductible?

The insured.

Who pays coinsurance?

Both the insured and the company share the remaining cost.

What is a stop loss?

A limit on how much the insured pays out-of-pocket. After that, the insurer pays 100%.

What happens when a claim hits the stop-loss amount?

The insurer pays 100% of the remaining eligible costs for the year.

What is comprehensive major medical insurance?

It combines basic and major medical coverage into one policy with broad protection and coinsurance.

What is a hospital indemnity plan?

A policy that pays a fixed amount per day while you're in the hospital, regardless of total cost.

What does hospital indemnity not cover?

It doesn't cover lost income or full medical bills — just pays a set amount per day.

What is managed care?

A health system designed to control costs through set rules and limited access to providers.

What are the 5 features of managed care?

Controlled access, case management, preventive care, risk sharing, high quality care.

What is an HMO?

Health Maintenance Organization — provides care from network providers, often prepaid.

What is a staff model HMO?

HMO employs the doctors directly.

What is a closed panel vs. open panel HMO?

Closed = doctors only serve HMO patients; Open = doctors have private practices but see HMO members too.

What is the limitation of an HMO service area?

You must live within a set geographic area to join or get care.

What is the HMO’s provider limitation?

You can only see approved HMO providers — limited choice.

What is an HMO copayment?

A flat fee ($5–$25) for visits — no deductible required.

What does 'prepaid basis' mean in an HMO?

The HMO gets a monthly fee per member, whether or not services are used.

What is the main focus of an HMO?

Preventive care — to catch illness early and lower costs.

What is a Primary Care Physician (PCP)?

The doctor who manages your care and referrals in an HMO (also called a gatekeeper).

What is a gatekeeper in an HMO?

The PCP — they control access to specialists and treatments.

What care do HMOs cover in emergencies?

They must cover emergency care, even out of area, and try to return the patient to the service area.

What is a PPO?

Preferred Provider Organization — more flexible than HMO, lets you choose doctors in or out of network.

What’s the difference between PPOs and HMOs?

PPOs are not prepaid. You pay fees per service, and you don’t need referrals.

What is a benefit of choosing in-network PPO providers?

Lower out-of-pocket costs.

What happens if you go out-of-network with a PPO?

You pay more of the cost yourself.

Do PPOs require a primary care physician?

No — you can go directly to specialists or any provider.

What is a dread disease policy?

Pays a set amount for serious illnesses like cancer or heart disease — not full coverage.

What is a travel accident policy?

Covers injury or death during paid travel (e.g., airplane, bus) — only if the accident happens while traveling.

What is the Waiver of Premium Rider?

Waives the premium if the insured becomes totally disabled. Stays in force until they can work again. Often includes a 6-month waiting period.

What is the Waiver of Monthly Deduction Rider?

Pays only monthly deductions (not full premium) while insured is disabled, after a 6-month waiting period. Common in Universal and Variable Universal Life policies.

What do Monthly Deductions include?

Costs like insurance charges, expense charges, and any added rider fees, which are taken from the account value.

What is the Payor Benefit Rider?

Used with juvenile life policies. If the payor (usually a parent) becomes disabled for 6+ months or dies, premiums are waived until the child reaches a certain age (like 21).

What is Disability Income Insurance?

Replaces lost income when someone becomes disabled and can’t work.

What is Total Disability?

Can be based on “any occupation” or “own occupation.” “Own occupation” is easier to qualify for.

What is Partial Disability?

Inability to do some (not all) job duties. Pays around 50% of the total disability benefit.

What is Residual Disability?

Covers income loss when a person returns to work but earns less. Benefit is a % of income lost.

What is Presumptive Disability?

Automatically qualifies the insured for full benefits (e.g., loss of sight, limbs, or hearing).

What is Recurrent Disability?

If a disability returns within a certain time (3–6 months), it’s treated as a continuation — no new waiting period.

What is the Elimination Period?

Waiting period before benefits start. Measured in days, not dollars (e.g., 30–180 days).

What is the Probationary Period?

Another waiting period (10–30 days). Only applies to sickness, not accidents.

What is the Benefit Period?

How long benefits will be paid (e.g., 1, 2, 5 years, or lifetime).

What is Injury?

Unexpected, unintentional physical damage.

What is Sickness?

Illness that appears 30+ days after policy starts.

What are Benefit Limitations?

Usually around 66% of the insured’s past income.

What is Social Insurance Supplement (SIS)?

Provides benefits when: Waiting for Social Security benefits, Denied Social Security, Social Security pays less than the rider

What are Exclusions (Not Covered)?

War, Military service, Self-inflicted injuries, Overseas residence, Crimes/felonies

What is Key Person Disability?

Business buys policy on a key employee. Business is owner, payor, and beneficiary.

What is Disability Buy-Sell Agreement?

Pays a lump sum so business partners can buy out a disabled partner.

What is Business Overhead Expense (BOE)?

Reimburses business costs (rent, salaries, etc.) if the owner becomes disabled. Doesn’t cover owner’s salary.

What are the differences between Group Disability Income and Individual Disability Income?

Group: % of income, Individual: Flat amount, Short-term group plans: Max 13–52 weeks, Long-term group plans: 2+ years, Group plans: Often supplement workers comp, Group plans: May only cover non-occupational disability, Group plans: Have participation requirements (like 30–90 days of employment)

What is required for Qualifying for Disability Benefits?

Must have a loss of income or inability to do job duties — physician verification required.

What is Cost of Living Adjustment (COLA)?

Increases monthly benefit to keep up with inflation after claim starts.

What is Guaranteed Insurability Rider?

Allows increases in coverage without proof of insurability at ages 25, 28, 31, 34, 37, 40 or life events like marriage/kids.

What does Accidental Death & Dismemberment pay for?

Loss of limbs, sight, etc. Principal sum: Full benefit for accidental death, Capital sum: % of principal for dismemberment

What does the ACA stand for?

Patient Protection and Affordable Care Act (PPACA), also called the Affordable Care Act (ACA).

When was the ACA signed into law?

March 23, 2010.

What is the main purpose of the ACA?

To increase access to affordable health insurance and preventive care.

What are the key goals of the ACA?

Create a private health insurance market, Hold insurers accountable and eliminate pre-existing condition exclusions, Reduce the federal deficit, Extend coverage to dependents up to age 26

Who is eligible for the ACA Marketplace?

U.S. citizens or lawful residents, Must live in the U.S., Cannot be incarcerated

Can someone with Medicare use the ACA Marketplace?

No, individuals with Medicare are not eligible.

What can a group health plan NOT base eligibility on?

Health status, medical conditions, claims history, genetic info, disability, or receipt of health care.

What 4 things can affect premium rates under ACA?

1. Geographic rating area 2. Family composition 3. Age 4. Tobacco use

What are Essential Benefits?

Hospitalization, maternity, emergency care, wellness, chronic disease management, etc.

What is Guaranteed Issue?

Insurers must accept all eligible applicants.

What is Guaranteed Renewability?

Insurers must allow renewal at the policyholder's discretion.

What are pre-existing condition protections?

Insurers cannot deny coverage due to a pre-existing condition.

What is required if an insurer rescinds coverage?

They must give 30 days' advance notice for appeal.

Until what age can children be covered under a parent’s plan?

Age 26, regardless of marital or financial status.

What are Lifetime and Annual Limits rules under ACA?

Insurers cannot limit dollar value on essential benefits.

What must emergency care cover?

Emergency care must be covered even if out-of-network.

What are preventive benefit rules?

Must be covered 100% without cost-sharing.