Health Insurance: Cost Sharing, Eligibility, and Disability Income
What the exam tests
Health questions reward precision about who pays what and when coverage begins or ends. Master these cost-sharing terms: deductible (insured's first-dollar outlay, usually per calendar year), copay (flat dollar amount), coinsurance (percentage split after the deductible), and out-of-pocket maximum (cap on covered in-network cost sharing). Distinguish HMO (gatekeeper, in-network only except emergencies), PPO (network discounts, out-of-network allowed at higher cost), and POS (hybrid with a primary care referral).
Coverage and continuation
Medicare: Part A hospital, Part B medical, Part C Medicare Advantage, Part D drugs; Medigap supplements Original Medicare and cannot be paired with Advantage. Medicaid is income-tested. COBRA continuation generally runs 18 months for termination or reduced hours, 29 months for disability, and 36 months for divorce, death, or Medicare eligibility; employers with 20+ employees are covered. Long-term care benefits trigger when the insured cannot perform 2 of 6 ADLs or has cognitive impairment. Disability income policies use an elimination period (waiting time) and a benefit period; own-occupation definitions usually convert to any-occupation after a stated number of years.
Traps
- Confusing elimination period (days before benefits start) with benefit period (how long they last) - and probationary period (time before a condition is covered at all).
- Forgetting that employer-paid disability premiums make benefits taxable, while employee-paid premiums make them tax-free.
- Forgetting that Social Security or workers' compensation benefits may offset a policy benefit.
- Assuming Medicare pays for custodial long-term care - it does not.
Worked example
$1,000 deductible, 80/20 coinsurance, $10,000 covered claim. Insured pays $1,000 + 20% of $9,000 = $2,800; insurer pays $7,200.
Rule of thumb: apply the deductible first, then the coinsurance percentage, then test the result against the out-of-pocket maximum.