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Plan Types and Basics

HMOs, PPOs, POS plans, major medical, HSAs, FSAs, dental, and cost containment. A foundation for everything else on the health exam.

Study questions and answers

Try each question first, then tap to check your answer.

1. In which type of plan does each member choose a primary care physician who acts as a gatekeeper for referrals?

  1. HMO
  2. PPO
  3. Indemnity plan
  4. HSA
Show answer
A. HMO
HMOs use a primary care physician to coordinate care and approve referrals to specialists.

2. An HMO that pays providers a fixed amount per member, regardless of how many services are used, is using:

  1. Coinsurance
  2. Fee for service
  3. Capitation
  4. Usual, customary, and reasonable charges
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C. Capitation
Under capitation, providers receive a set amount per member per period, which gives them an incentive to keep members healthy.

3. Which statement describes a PPO?

  1. It provides no out-of-network coverage
  2. Members can go out of network but pay more
  3. A primary care referral is always required
  4. Care is fully prepaid
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B. Members can go out of network but pay more
PPOs contract with providers at discounted rates and pay less for out-of-network care.

4. Which statement describes a point-of-service (POS) plan?

  1. It covers emergency care only
  2. It is a traditional indemnity plan
  3. It is part of Medicare
  4. It combines HMO and PPO features: a primary care physician coordinates care, and out-of-network care is covered at a higher cost
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D. It combines HMO and PPO features: a primary care physician coordinates care, and out-of-network care is covered at a higher cost
At the point of service, the member decides whether to stay in network or go out of network and pay more.

5. To contribute to a health savings account (HSA), a person must be covered by:

  1. A high-deductible health plan
  2. Medicare
  3. An HMO
  4. A flexible spending account
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A. A high-deductible health plan
HSA eligibility requires HDHP coverage and no disqualifying coverage, such as Medicare.

6. Which describes the tax treatment of a health savings account?

  1. Contributions are deductible, but withdrawals are always taxable
  2. Contributions are deductible, growth is tax free, and qualified withdrawals are tax free
  3. Only the growth is tax free
  4. There are no tax advantages
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B. Contributions are deductible, growth is tax free, and qualified withdrawals are tax free
HSAs are often called triple tax advantaged.

7. Usual, customary, and reasonable (UCR) charges refer to:

  1. A fixed schedule of payments per procedure
  2. A per-member monthly payment to providers
  3. The amount the insurer will pay, based on typical fees for the service in the area
  4. The insured's annual deductible
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C. The amount the insurer will pay, based on typical fees for the service in the area
Charges above UCR may not be covered, leaving the insured responsible for the difference.

8. Basic hospital expense coverage generally:

  1. Pays first-dollar benefits for room and board and other hospital expenses, with low limits
  2. Pays a fixed daily amount regardless of actual expenses
  3. Has a high deductible and high limits
  4. Covers only physician visits
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A. Pays first-dollar benefits for room and board and other hospital expenses, with low limits
Basic plans usually have no deductible but limited benefits.

9. Major medical insurance is characterized by:

  1. Coverage limited to hospital room and board
  2. First-dollar coverage with no deductible
  3. Benefits for accidents only
  4. High benefit limits, a deductible, and coinsurance
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D. High benefit limits, a deductible, and coinsurance
Major medical covers a broad range of medical expenses.

10. A comprehensive major medical plan:

  1. Supplements a basic plan
  2. Covers only catastrophic losses
  3. Combines basic coverage and major medical into a single plan
  4. Pays a fixed indemnity amount
Show answer
C. Combines basic coverage and major medical into a single plan
It usually has a single deductible and coinsurance arrangement.

11. Under supplemental major medical coverage, a corridor deductible is:

  1. A deductible that applies only to prescriptions
  2. The amount the insured pays after basic benefits run out and before major medical coverage begins
  3. The deductible paid on the basic plan
  4. The annual out-of-pocket maximum
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B. The amount the insured pays after basic benefits run out and before major medical coverage begins
A corridor deductible sits between the basic plan and the supplemental major medical plan.

12. A hospital indemnity policy pays:

  1. Actual hospital charges after a deductible
  2. A fixed amount per day of hospitalization, regardless of actual expenses
  3. Benefits only for accidents
  4. Only surgical expenses
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B. A fixed amount per day of hospitalization, regardless of actual expenses
Indemnity benefits can be used for any purpose.

13. A policy that pays benefits only for a named illness, such as cancer, is a:

  1. Comprehensive policy
  2. Major medical policy
  3. Hospital indemnity policy
  4. Specified disease (critical illness) policy
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D. Specified disease (critical illness) policy
Specified disease policies are limited policies that supplement other coverage.

14. Requiring approval from the insurer before a nonemergency hospital admission is called:

  1. Concurrent review
  2. Coordination of benefits
  3. Precertification
  4. Subrogation
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C. Precertification
Precertification is a cost containment tool used in managed care.

15. Reviewing a patient's hospital stay while it is happening to determine whether continued care is necessary is:

  1. Concurrent review
  2. Precertification
  3. Retrospective review
  4. Prospective review
Show answer
A. Concurrent review
Prospective review happens before care, concurrent during, and retrospective after.

16. A requirement that the insured get another doctor's opinion before elective surgery is a form of:

  1. Coinsurance
  2. Coordination of benefits
  3. Cost containment
  4. Probationary period
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C. Cost containment
Second surgical opinions help avoid unnecessary procedures.

17. A flexible spending account (FSA) is:

  1. An individual account that requires a high-deductible plan
  2. Funded only by the employer
  3. A type of long-term care policy
  4. An employer-sponsored account funded with pre-tax salary reductions, generally subject to use-it-or-lose-it rules
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D. An employer-sponsored account funded with pre-tax salary reductions, generally subject to use-it-or-lose-it rules
Employers may allow a short grace period or a limited carryover of unused funds.

18. A health reimbursement arrangement (HRA) is funded by:

  1. The employer only
  2. The employee only
  3. The federal government
  4. Both employer and employee
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A. The employer only
Employers fund HRAs to reimburse employees for qualified medical expenses.

19. Most dental plans cover preventive and diagnostic care, such as cleanings and exams, at:

  1. 0%
  2. 100%, often with no deductible
  3. 80% after the deductible
  4. 50% after the deductible
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B. 100%, often with no deductible
Restorative and major work usually have higher cost sharing.

20. When a dentist submits a treatment plan to the insurer before beginning expensive work, it is called:

  1. Proof of loss
  2. Precertification
  3. Predetermination of benefits
  4. Coordination of benefits
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C. Predetermination of benefits
Predetermination tells the patient what the plan will pay before treatment starts.

21. Individual health policies typically exclude injuries or illnesses that are:

  1. Covered by workers' compensation
  2. Treated in an emergency room
  3. Diagnosed after the policy is issued
  4. Caused by accidents
Show answer
A. Covered by workers' compensation
Other common exclusions include self-inflicted injuries, war, and cosmetic surgery.
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