HS 311 flashcards

34 cards. Read the term and the definition here. The deck at the top of this page is optional.

Adverse selection

The tendency of individuals with higher-than-average expected claims to seek or retain coverage, which raises the pool's loss ratio unless offset by underwriting, waiting periods, or rating adjustments.

Law of large numbers

Statistical principle holding that as the number of similar independent exposure units grows, actual losses converge on expected losses, making future claim costs more predictable for the insurer.

Moral hazard

Behavior change after insurance is purchased, such as using more services because the insurer pays, controlled through deductibles, coinsurance, and policy limits.

Indemnity principle

Health benefits reimburse actual loss rather than create profit; payment cannot exceed the expense incurred unless the policy specifies a fixed benefit amount.

Loss ratio

Incurred claims divided by earned premium, expressed as a percentage; a key measure of underwriting performance and a driver of rate changes.

HMO gatekeeper model

A closed-panel arrangement in which a primary care physician coordinates care and must authorize referrals to specialists; care outside the network is generally not covered except emergencies.

Capitation

A fixed per-member-per-month payment to a provider regardless of how many services the member uses, shifting utilization risk to the provider and encouraging preventive care.

Metal tiers

ACA Marketplace actuarial value levels: Bronze about 60 percent, Silver 70 percent, Gold 80 percent, and Platinum 90 percent of covered costs paid by the plan.

Premium tax credit

Subsidy that caps a household's required contribution as a percentage of income and is calculated against the benchmark Silver plan; it may be paid in advance to the insurer.

Coordination of benefits

Rules determining which plan pays first when a person has two coverages; the primary plan pays its benefit and the secondary pays the lesser of remaining expense or its own benefit.

Stop-loss limit

A cap on the insured's coinsurance outlay; once the specified amount is reached, the insurer pays 100 percent of covered expenses for the remainder of the period.

Internal limits

Caps on reimbursement for specific services, such as a fixed daily room-and-board amount, distinct from the policy's overall maximum benefit.

Own-occupation definition

Disability definition that pays benefits when the insured cannot perform the duties of their own occupation, typically for a stated period; less restrictive than any-occupation.

Elimination period

The waiting time between the onset of disability and the start of benefit payments, commonly 30 to 365 days; a longer period reduces premium.

Residual disability benefit

A partial benefit paid when the insured returns to work at reduced income, usually calculated as a proportion of the lost earnings relative to prior income.

Presumptive disability

Provision that pays full benefits for specified catastrophic losses, such as loss of sight in both eyes, without requiring the elimination period to be satisfied.

AD&D principal sum

The amount payable for accidental death under an accidental death and dismemberment policy; the capital sum for a covered dismemberment is typically a percentage of it.

Hospital indemnity policy

Policy paying a fixed daily or per-admission benefit regardless of actual expenses incurred; benefits are paid to the insured and may be used for any purpose.

Critical illness insurance

Coverage paying a lump sum upon diagnosis of a listed condition such as cancer, heart attack, or stroke, with payment not tied to actual medical expenses.

ADL benefit trigger

Long-term care benefits activate when the insured cannot perform at least two of six activities of daily living, or has cognitive impairment requiring substantial supervision.

LTC elimination period

A waiting period stated in days of service before long-term care benefits begin; it functions like a deductible and a longer period lowers the premium.

Inflation protection rider

Long-term care rider that increases the daily benefit over time, either by simple or compound percentage, to offset rising care costs during retirement.

Medicare Part A

Hospital insurance covering inpatient stays, skilled nursing facility care after a qualifying stay, hospice, and some home health; most enrollees pay no premium because of payroll taxes.

Medigap standardization

Federal rules require Medigap policies to follow standardized benefit plans lettered A through N, so identical letters offer identical core benefits across insurers.

Dual-eligible beneficiary

A person enrolled in both Medicare and Medicaid; Medicaid may pay Medicare premiums and cost sharing and can cover long-term custodial care.

Medicare Part D

Outpatient prescription drug benefit delivered through private stand-alone plans or Medicare Advantage prescription drug plans, with formulary tiers and a coverage gap phase.

COBRA continuation

Federal law requiring employers with 20 or more workers to offer continued group coverage after a qualifying event, generally 18 months, with the beneficiary paying up to 102 percent of premium.

Experience rating

Group rating method that sets premium largely from the group's own past claims history, in contrast to community rating, which uses the experience of the whole pool.

Group conversion privilege

Right allowing a person leaving a group plan to convert to an individual policy without evidence of insurability, typically exercised within 31 days of termination.

Self-funded group plan

Employer plan paying claims from its own funds, often with administrative services only; governed by ERISA and generally exempt from state insurance mandates.

Incontestability clause

Provision barring the insurer from contesting the policy for misstatements after it has been in force two years, except for fraud in some states.

Grace period

Time after a premium due date during which coverage remains in force: commonly 7 days for weekly, 10 days for monthly, and 31 days for other payment modes.

Entire contract clause

Provision stating the policy, attached application, and endorsements constitute the whole agreement, and that only authorized officers may modify its terms.

Legal actions provision

Clause limiting the time within which the insured may sue the insurer to recover benefits, typically three years from the date proof of loss is filed.