Health and Disability Insurance
Domain 2 covers medical expense and disability income coverage. The exam asks two practical questions: how a claim flows through deductible, coinsurance, and out-of-pocket maximum, and whether a disability policy's definition of disability actually triggers a benefit.
Medical expense structure
- Indemnity plans reimburse; managed care controls utilization. HMOs use a closed panel and gatekeeper with no non-emergency out-of-network coverage; PPOs pay discounted in-network rates without referrals; POS plans blend the two.
- Claim math: deductible, then coinsurance (commonly 80/20), then the out-of-pocket maximum, after which the insurer pays 100% of covered in-network care.
- ACA marketplace plans use metal tiers (bronze 60%, silver 70%, gold 80%, platinum 90% actuarial value), guaranteed issue, no lifetime limits, and no-cost preventive care.
Disability income
- Own-occupation pays when the insured cannot perform their own occupation's duties - usually limited to about two years, then it converts to any-occupation. Any-occupation pays only if the insured cannot perform any job for which reasonably fitted.
- Key provisions: elimination period (longer means lower premium), benefit period, residual disability, presumptive disability, waiver of premium.
- Benefits typically replace 60–70% of income. Taxation follows the premium payer: employer-paid premiums produce taxable benefits; employee-paid premiums produce tax-free benefits.
- Social Security uses a strict substantial gainful activity standard and a five-month waiting period.
Worked example
A policy carries a $1,500 deductible, 80/20 coinsurance, and a $5,000 out-of-pocket maximum. A covered claim is $20,000. The insured pays the $1,500 deductible; 20% of the remaining $18,500 is $3,700, totaling $5,200 - capped at $5,000. The plan pays $15,000 and the insured pays $5,000.
Traps that cost marks
COBRA lasts 18 months, 36 months for divorce, death, or a dependent aging out, and 29 months for disability. HSA eligibility requires a qualifying high-deductible plan and no disqualifying coverage - enrolling in Medicare or a general-purpose FSA ends it. Group term coverage above $50,000 creates imputed income under the Table I rates.