Chartered Life Underwriter (CLU) Health, Disability, and Long-Term Care Insurance Flashcards

24 sample cards from the Health, Disability, and Long-Term Care Insurance deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. What is the maximum continuation period under COBRA for a covered employee who is terminated (non-gross-misconduct) or has reduced hours?

   18 months.

2. Under COBRA, what is the maximum continuation period for the spouse/dependents due to a qualifying event like divorce, death of the employee, or Medicare entitlement?

   36 months.

3. What size employers are subject to COBRA continuation requirements?

   Employers with 20 or more employees on more than 50% of typical business days in the prior calendar year (counting both full- and part-time).

4. How much may a plan charge for COBRA continuation coverage?

   Up to 102% of the full premium cost (the full group cost plus a 2% administrative fee). During an 11-month disability extension, up to 150% may be charged.

5. Under COBRA, how long can the 18-month period be extended if a qualified beneficiary is determined disabled by Social Security?

   An additional 11 months, for a total of 29 months.

6. What are the six Activities of Daily Living (ADLs) used to trigger LTC benefits?

   Bathing, Continence, Dressing, Eating, Toileting, and Transferring (moving in/out of bed or chair).

7. Under a tax-qualified LTC policy, what benefit trigger based on ADLs must be met?

   The insured must be unable to perform at least 2 of the 6 ADLs for at least 90 days, OR require substantial supervision due to severe cognitive impairment, as certified by a licensed health practitioner.

8. What is the difference between a reimbursement (expense-incurred) and an indemnity (cash) LTC benefit model?

   Reimbursement pays actual covered expenses up to the daily/monthly maximum. Indemnity pays the full stated daily/monthly amount regardless of actual costs incurred, giving more flexibility.

9. What is an inflation protection rider in an LTC policy, and name a common type.

   It increases the daily/monthly benefit over time to keep pace with rising care costs. A common type is 5% compound annual inflation (or simple inflation, or CPI-linked).

10. What is the elimination period in an LTC policy?

    A deductible measured in days of care needed before benefits begin (e.g., 30, 60, 90 days); the insured pays for care during this period. Longer elimination periods lower premiums.

11. What does the "pool of money" / maximum benefit concept mean in LTC policies?

    Total lifetime benefit = daily/monthly maximum x benefit period. The insured can draw from this pool until exhausted; using less than the daily max extends how long the pool lasts.

12. How are benefits from a tax-qualified LTC contract taxed, and what is the per diem limit concept?

    Qualified LTC benefits are generally received income-tax-free. Reimbursement benefits are fully excludable; per diem/indemnity benefits are tax-free up to an IRS-indexed daily limit (excess over that limit is taxable unless actual costs are higher).

13. How are premiums for a tax-qualified LTC policy treated for individual income tax purposes?

    Premiums count as deductible medical expenses (itemized), subject to age-based dollar limits and the AGI threshold for medical deductions.

14. What is a hybrid/combination LTC product?

    A life insurance policy or annuity with an LTC rider that lets the owner accelerate the death benefit/account value to pay for LTC. If LTC is never needed, beneficiaries receive a death benefit, avoiding the "use-it-or-lose-it" concern of standalone LTC.

15. Under what tax provision can a life insurance or annuity policy with a qualified LTC rider provide tax-free LTC benefits, and what about 1035 exchanges?

    The Pension Protection Act allows tax-free acceleration of life/annuity value for qualified LTC, and permits tax-free 1035 exchanges of life or annuity contracts into qualified LTC or hybrid contracts.

16. What does Medicare Part A cover, and how is it typically funded?

    Part A is hospital insurance: inpatient hospital, skilled nursing facility (post-hospital), home health, and hospice. It is funded by payroll (FICA/Medicare) taxes and is generally premium-free for those with sufficient work history (40 quarters).

17. What does Medicare Part B cover, and how is it funded?

    Part B is medical insurance: physician services, outpatient care, durable medical equipment, and preventive services. It is funded by monthly premiums (income-adjusted via IRMAA) and general revenue; it is optional.

18. What is the Medicare Part A benefit period and the role of the deductible?

    A benefit period begins on hospital admission and ends after 60 consecutive days without inpatient/SNF care. A new Part A deductible applies for each new benefit period (a patient can have multiple per year).

19. What is Medicare Part C (Medicare Advantage)?

    A private alternative to Original Medicare in which an approved insurer provides Part A and B benefits (usually with Part D and extra benefits), typically through HMO/PPO networks. Enrollees must keep paying their Part B premium.

20. What does Medicare Part D provide, and what was the historical "donut hole"?

    Part D is prescription drug coverage offered through private plans. The "donut hole" was a coverage gap between initial coverage and catastrophic coverage where beneficiaries paid more out of pocket; recent law added an annual out-of-pocket cap.

21. What is the Medicare Part B late enrollment penalty?

    A 10% premium surcharge for each full 12-month period the person was eligible but did not enroll (without qualifying creditable coverage); the penalty is permanent and added to the monthly premium for life.

22. What is a Medicare Supplement (Medigap) policy designed to cover?

    It fills gaps in Original Medicare (Parts A and B) such as deductibles, coinsurance, and copayments. Medigap works only with Original Medicare, not with Medicare Advantage.

23. What is the Medigap open enrollment period and its guaranteed-issue protection?

    A 6-month period beginning when the person is age 65+ AND enrolled in Part B. During this window, insurers must sell any offered Medigap policy on a guaranteed-issue basis without medical underwriting or preexisting-condition exclusions.

24. Why are Medigap plans standardized by letter (e.g., Plan G, Plan N), and what is a key restriction for newer enrollees?

    Plans are standardized (lettered A-N) so benefits are identical across insurers, making them comparable. Newer Medigap plans (for those newly eligible on/after Jan 1, 2020, e.g., Plans C and F) may no longer cover the Part B deductible.

What this deck covers

Health, Disability, and Long-Term Care Insurance flashcards FAQ