HIA cheat sheet

Risk pooling spreads individual loss costs across a group; the premium equals expected claims plus expenses, reserves, and margin.

Insurable risk requires a large number of similar exposure units, accidental and measurable loss, and losses that are not catastrophic to the insurer.

Indemnity principle: benefits restore the insured to approximate pre-loss financial position, not profit; this underlies benefit limits and coordination.

Adverse selection occurs when higher-risk individuals buy more coverage; underwriting, waiting periods, and exclusions are common countermeasures.

Moral hazard is behavior change caused by having coverage; deductibles and coinsurance shift cost to the insured to reduce it.

Premium = pure premium (expected claims) + expense loading + risk/contingency margin; loss ratio = incurred claims divided by earned premium.

Law of large numbers: as group size grows, actual loss experience converges toward expected experience, improving rate predictability.

Reinsurance transfers catastrophic or excess risk from a primary insurer to a reinsurer; it does not directly insure the individual member.

Entire contract clause: the policy plus attached endorsements and the application constitute the whole agreement; agents cannot orally modify it.

Incontestability: after the policy has been in force typically two years, the insurer cannot void coverage for misstatements except fraudulent ones or nonpayment.

Grace period: premium may be paid after due date without lapse; typically 7 days (weekly), 10 days (monthly), or 31 days (other modes).

Reinstatement provision restores a lapsed policy on evidence of insurability and payment of overdue premium; new contestable period may apply to statements.

Free-look provision allows the policyholder to return the policy within a stated period (commonly 10-30 days) for a full premium refund.

Coordination of benefits determines order of payment when a person is covered by multiple plans; the primary plan pays first, the secondary pays the balance.

Pre-existing condition limitation restricts coverage for conditions treated or diagnosed before the effective date; HIPAA limits its use for creditable coverage groups.

Claim provisions require written proof of loss within a stated period (often 90 days) and payment within a stated period (often 30-45 days) after proof.

Indemnity (fee-for-service) plans pay a percentage of covered charges after deductible; insured may use any provider but bears balance billing.

HMO: closed panel, gatekeeper primary care, capitation-style provider payment, generally no out-of-network coverage except emergencies.

PPO: network of contracted providers with discounted rates; in-network care costs less, out-of-network allowed with higher cost sharing.

POS plan blends HMO and PPO features: in-network care managed by a PCP, out-of-network care permitted with referral and higher cost sharing.

HDHP paired with an HSA requires minimum deductible and maximum out-of-pocket limits set annually; HSA funds are tax-advantaged and portable.

Disability income insurance replaces a percentage of income (commonly 50-70%); own-occupation is broader than any-occupation definition.

Long-term care covers custodial care for chronic conditions; benefit triggers typically include inability to perform 2 of 6 ADLs or cognitive impairment.

Critical illness and accident policies pay lump sums on defined events; they are supplemental and do not coordinate like major medical coverage.

Medicare Part A covers inpatient hospital, skilled nursing facility, hospice, and some home health; financed through payroll taxes.

Medicare Part B covers physician and outpatient services; Part C (Medicare Advantage) delivers A and B benefits through private plans; Part D covers prescriptions.

Medicare eligibility generally begins at age 65 with sufficient work history, or through disability after 24 months of Social Security disability benefits.

Medicaid is jointly funded by federal and state governments, state-administered, and income/asset tested; eligibility varies by state.

CHIP provides coverage to low-income children whose family income exceeds Medicaid thresholds but is below state limits.

TRICARE provides health coverage to active duty, retired military members, and eligible dependents; VA covers eligible veterans separately.

COBRA allows continuation of group coverage after a qualifying event for up to 18 months (29 months if disabled), with the individual paying full premium.

HIPAA guarantees portability of group coverage, limits pre-existing condition exclusions for creditable coverage, and protects health information privacy.

Underwriting classifies risk using age, gender, health history, occupation, and lifestyle; the goal is to place applicants in homogeneous rating classes.

Field underwriting is the agent's role: complete the application accurately, report known material facts, and collect the initial premium if required.

Attending physician statement, medical exam, and prescription history are common underwriting tools for individual health applications.

Community rating charges the same rate to all members of a pool regardless of health status; experience rating adjusts rates to a group's own claims.

Manual (class) rating uses published rates by class; experience rating and retrospective rating modify rates based on actual group loss experience.

Loss ratio = incurred losses divided by earned premiums; a combined ratio above 100% indicates underwriting loss.

Rate components include expected claims, administrative expense, commissions, taxes, and a risk/profit margin.

Guaranteed renewable policies require renewal at the insured's option with premium increases allowed only by class, not individual health.

Claim process: notice of claim, proof of loss, benefit determination, and payment; timely filing limits are stated in the policy.

Deductible is the amount the insured pays before benefits begin; coinsurance is the insured's percentage share after deductible.

Out-of-pocket maximum caps the insured's cost sharing for covered in-network services in a benefit period.

Usual, reasonable, and customary (URC) limits payment to prevailing charges in a geographic area; charges above URC may be balance billed.

Coordination of benefits order: the plan covering the person as employee is primary over the plan covering them as dependent; birthday rule applies to dependent children.

Subrogation allows the insurer to recover paid benefits from a third party responsible for the loss.

Appeals: internal appeal review by the insurer, then external independent review; ERISA and ACA rules set timelines for group health plans.

Explanation of benefits (EOB) itemizes charges, allowed amounts, insurer payment, and patient responsibility; it is not a bill.

McCarran-Ferguson Act leaves insurance regulation primarily to the states; state insurance departments license insurers, agents, and enforce market conduct.

State guaranty associations protect policyholders if an insurer becomes insolvent, subject to statutory coverage limits.

Producer licensing requires prelicensing education, a state exam, and continuing education; a producer must be licensed in the state where the risk is located.

Fiduciary duty: premiums collected on behalf of an insurer are held in trust; commingling with personal funds is prohibited.

Twisting is misrepresentation that induces a policyholder to lapse or surrender coverage; churning is replacement solely to generate commissions.

Rebating-offering part of the commission or anything of value not in the policy as inducement-is prohibited in most states.

NAIC model regulations guide state rules on advertising, replacement, privacy, and unfair trade practices but are not federal law.

Unfair claim settlement practices include misrepresenting policy provisions, unreasonable delay, and failing to investigate claims promptly.

Copayment is a fixed dollar amount per service; coinsurance is a percentage; both are forms of cost sharing distinct from the deductible.

A rider or endorsement modifies the base policy; it must be attached and is part of the entire contract.

Waiting (elimination) period is the time before benefits begin after the effective date or after a loss occurs.

Reserves are funds set aside for incurred but not reported (IBNR) claims and future obligations; adequacy affects solvency.

Risk retention means the insured keeps part of the loss exposure (e.g., deductible); risk transfer shifts it to the insurer via premium.

Change of beneficiary provisions allow the policyholder to change the beneficiary unless irrevocable designation applies.

Legal actions provision sets the minimum time (often 60 days) after proof of loss before the insured may sue the insurer.

Time limit on certain defenses limits the insurer's ability to contest statements after a stated period, reinforcing incontestability.

Payment of claims provision directs how and to whom benefits are paid, including facility or provider payment where applicable.

Insuring clause states the insurer's promise to pay covered benefits in exchange for premium.

Consideration clause states the premium and the statements in the application as the basis of the contract.

Exclusive provider organization (EPO) covers only network providers except emergencies; no referral is required.

Group health plans are employer-sponsored and typically guarantee issue during open enrollment; individual plans are medically underwritten in many states.

Short-term medical plans offer limited duration coverage with exclusions for pre-existing conditions; they are not ACA-compliant major medical.

Hospital indemnity and specified disease policies pay fixed benefits and are not substitutes for comprehensive major medical coverage.

Medicare supplement (Medigap) plans fill gaps in Original Medicare cost sharing; plans are standardized by letter in most states.

Attained-age rating increases premium as the insured ages; issue-age rating sets premium based on age at purchase and does not increase with age.

Experience modification adjusts a group's manual premium based on its own loss history relative to expected losses.

Premium rate must be adequate (cover losses and expenses), not excessive, and not unfairly discriminatory among similar risks.

Risk classification must be based on objective, verifiable factors; arbitrary or unfair discrimination among like risks is prohibited.

Occupational classification rates higher-risk jobs; avocations and hazardous hobbies may also affect underwriting.

Incurred but not reported (IBNR) claims are estimated liabilities for losses that occurred but have not yet been submitted.

Precertification (prior authorization) requires insurer approval before non-emergency services; failure may reduce benefits.

Concurrent review monitors ongoing care to determine medical necessity and continued benefit eligibility.

Case management coordinates care for high-cost or chronic conditions to improve outcomes and control costs.

Benefit period and calendar year are distinct accumulation periods; deductibles and out-of-pocket maximums usually reset each calendar year.

ERISA governs employer-sponsored benefit plans and preempts many state laws; it sets fiduciary and reporting standards.

ACA market reforms include guaranteed issue, prohibition of pre-existing condition exclusions, and essential health benefits for individual and small group markets.

State insurance department market conduct exams review claims practices, advertising, and producer conduct.

An agent must not commingle premium funds, must remit premiums promptly, and must disclose commissions and conflicts where required.

Privacy rules (HIPAA) limit use and disclosure of protected health information by covered entities and their business associates.

Medicare Part B premiums are income-related; higher-income beneficiaries pay income-related monthly adjustment amounts (IRMAA).

Medicare Advantage plans must provide at least the same benefits as Original Medicare and may offer extra benefits.

Medicaid eligibility is based on modified adjusted gross income under ACA expansion in participating states.

Workers' compensation provides medical and disability benefits for work-related injuries and is state-regulated.

Social Security disability insurance (SSDI) provides income benefits and can lead to Medicare eligibility after the waiting period.