Chapter 4 Review Questions

NOTE to Department of Financial Services.  The following questions represent a bank of questions that we will use to compile this chapter's review questions.  We use a software package that creates a unique review for each student, scrambles choices and question order.  This bank is presented in its current format to allow the Department to see the text references for these questions.  Simply click on the question link to see the text reference. The software package provides feedback to the student -- the correct answer and the rationale.

All state partnership LTC policies must be:
a. federally tax qualified   
b. non-tax qualified   
c. tax-qualified at the option of the state   
d. tax-qualified at the option fo the insured

ANS:     A
All partnership LTC policies must meet HIPAA's qualifications -- i.e., they must be tax qualified.

 Agents soliciting LTC policies must complete:
a. 8 hours of initial LTC training and 8 hours of continuing LTC Partnership training every compliance period   
b. 4 hours of initial LTC training and 4 hours of continuing LTC Partnership training every compliance period   
c. 8 hours of initial LTC training, including LTC Partnership training, and 4 hours of continuing LTC training every compliance period thereafter   
d. 8 hours of  LTC training, including LTC Partnership training, every compliance period

ANS:     C
The NAIC model's training requirement is for an initial 8 hours of training, and 4 hours of continuing education in each subsequent continuing education compliance period.

What is required of a state that wishes to implement an LTC Partnership program?
a. amendment of state insurance laws to exempt certain assets equal to LTC benefits from Medicaid eligibility requirements   
b. amendment of Medicaid laws to exempt certain assets equal to LTC benefits from Medicaid eligibility requirements   
c. amend state laws to permit the sale of tax qualified LTC policies within that state   
d. all of the above

ANS:     B
To implement a state partnership plan, the state must change its Medicaid eligibility rules to exclude assets equal in value to benefits paid by private insurance policies for LTC costs.  All states permit the sale of tax-qualified LTC plans (in fact most LTC policies sold today are tax-qualified).

 All of the following are reasons for expanding the LTC Partnership Program EXCEPT:
a. educating consumers about the need, risk and cost of LTC   
b. curb insurance spending by Medicaid on LTC expense   
c. provide tax deductions for purchasers of qualified LTC policies   
d. encourage the private LTC insurance industry

ANS:     C
The state partnership plans do not offer any special tax deductions.  They encourage consumers to buy private LTC as a way to cover the initial costs of nursing home care and reduce state expenditures through Medicaid.

Which of the following is true regarding reciprocity of benefits under the LTC Partnership plans?
a. nationwide reciprocity is a goal, but is not currently available   
b. the four original states currently enjoy reciprocity, but not with other states   
c. only those states that have implemented partnership plans enjoy reciprocity   
d. none of the states currently has any reciprocal benefits

ANS:     A
Nationwide reciprocity is a goal, but is not currently available in most states.  Only Indiana and Connecticut currently have a reciprocal arrangement.

 A partnership LTC policy will "shield" the insured from:
a. Medicaid's asset requirements   
b. Medicaid's income requirement   
c. Medicaid's estate recovery rules   
d. a and c

ANS:     D
LTC partnership policies are designed to protect the insured's assets -- during the insured's lifetime (protection from asset requirements)  and after his or her death (estate recovery).  Prior to the passage of the DRA in 2005, Medicaid could impose estate recovery on partnership policies, but that is no longer the case. The insured must still comply with Medicaid's income requirements.

 Which of the following applicants must include "automatic inflation protection" as part of his or her LTC Partnership policy?
a. Chris, age 56   
b. Pat, age 67   
c. Lou, age 74   
d. all partnership LTC plans must include automatic inflation protection

ANS:     A
All partnership policies must offer the applicant some form of inflation protection.  The Deficit Reduction Act requires automatic inflation protection for applicants age 60 or younger.  Those between ages 60 and 76 must include some form of inflation of protection -- but it need not be "automatic".  For applicants age 76 or older, the offer must be made, but inflation protection is not a requirement.

Which of the following provisions is the main difference between partnership qualified (PQ) LTC policies and non-PQ policies?
a. inflation protection   
b. guaranteed renewability    
c. free look provision   
d. tax free benefit payments

ANS:     A
Most LTC policies issued today comply with HIPAA's requirements -- and therefore are tax-qualified (benefits are paid tax free), guaranteed renewable and have a 30-day free look provision.  In addition, PQ (partnership qualified) policies must have some form of inflation protection.  This is not required under HIPAA.

 Abby Normal purchased a long-term care policy twenty years ago when she was 56.  Today, she wishes to have the asset protection affored by her state's LTC partnerhip program. Which of the following courses of action will NOT provide Abby with that protection?
a. surrender the old policy for a new PQ policy   
b. request an endorsement on the old policy for inflation protection and new issue date   
c. continue to hold the old policy -- and as long as it has inflation protection, it is automatically partnership qualified   
d. either a or b

ANS:     C
Older policies are not automatically afforded with PQ status -- even if they meet all the criteria.  The older policy must be lapsed and reissued, or an endorsement make to include the PQ criteria.  Only claims paid on a policy issued after the state enacted the partnership plan will qualify for the asset protection.

In order to enjoy the benefits of a partnership qualified LTC policy, all of the following are required EXCEPT:
a. the policy must be tax-qualified under HIPAA   
b. the policy must contain consumer protections based on the NAIC Model LTC Policy   
c. the insured must be a resident of the state when he or she collects policy benefits   
d. the policy must be issued after the date the state partnership plan becomes effective  in the insured's state of residence

ANS:     C
Partnership qualified plans must be tax-qualified (that is, comply with HIPAA's criteria), contain the consumer protections provided in the NAIC Model Policy (also a HIPAA requirement), and be issued after the plan becomes effective in the state.  The insured must be a resident of the state when the policy is first issued, but the insured could move and receive benefits under a reciprocity agreement if LTC services are provided out-of-state.

  Martina bought a partnership policy at age 65.  Her policy must provide:
a. compound inflation protection   
b. some level of inflation protection   
c. simple inflation protection   
d. no inflation protection is required, but the policy can be sold

ANS:     B
Applicants between age 60 and 76 must select some form of inflation protection (automatic, guaranteed purchase option, or other).  Policies sold to those age 60 or younger must have annual compound inflation protection.

Post-claims underwriting is:
a. required under NAIC Model legislation   
b. a method to deny payment of claims   
c. only used when issuing group policies   
d. none of the above

ANS:     B
Post-claims underwriting is the practice of accepting applications without adequate information about health history with the intent to use "mistakes" on the application as a way to deny claims.  It is prohibited by NAIC Model legislation.

Jake has a $100,000 partnership LTC policy.   He has been in a nursing home for two years and the policy has paid $90,000 in benefits.  He applies for Medicaid benefits in anticipation of exhausting his policy's benefits in a couple of months.  What level of asset protection will Jake enjoy?
a. $90,000   
b. $100,000   
c. depends on when Medicaid processes his application   
d. Jake cannot apply for Medicaid benefits before his policy is exhausted

ANS:     A
Jake can apply for Medicaid benefits at any time -- but the level of asset protection is based on the benefits actually paid by the partnership policy at the time the application is made.

Juanita has a partnership qualified LTC policy and wishes to change the level of coverage from comprehensive coverage to a facilities-only plan as a way to reduce premium costs.  Under the Deficit Reduction Act, such a change:
a. is permitted, by the policy loses is partnership status   
b. is permitted, provided inflation protection is retained   
c. is not permitted, although a change from facilities-only to comprehensive plan would be   
d. is not permitted

ANS:     B
Under federal law, such changes in plans are permitted and will retain partnership status as long as the new plan includes partnership requirements such as inflation protection.  States may impose their own requirements on any plan changes

The original four demonstation partnership programs in New York, California, Indiana, and Connecticut operate on one of two models: dollar-for-dollar or total asset protection.  New states implementing partnership programs may use:
a. either dollar-for-dollar or total asset protection   
b. total asset protection only   
c. dollar-for-dollar only   
d. reimbursement plans only

ANS:     C
New state plans may allow for benefit payments on a reimbursement, disability or indemnity basis -- but new states may only use the dollar-for-dollar asset protection model.