Final Examination

NOTE to Department of Financial Services.  The following questions represent a bank of questions that we will use to compile a student's final exam.  We use a software package that creates a unique final examination 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. Obviously, the links, correct answers and rationale will not appear on the version of the final exam presented to students.

1.     Which of the following is NOT an ADL?
a. bathing   b. taking medication   c. transference   d. continance

ANS:     B
The six ADL's allowed in a tax-qualified LTC plan are bathing, eating, transference, continance, toileting and dressing.

 2.     An insured needs assistance with bathing and dressing, as well as help with light housework and laundry, but is not in need of around-the-clock assistance.  What level of care does this insured need?
a. custodial   b. supervisory   c. personal   d. acute

ANS:     C
Personal care provides assistance with basic living functions and household chores.

 3.     A widower, age 69 owns a home valued at $800,000 with no liens or mortgage.  He receives Social Security and a small pension from the Veteran's Administation.  If he were to apply to Medicaid for LTC, he would be:
a. ineligible, he has too much equity in his home   b. immediately eligible, his home is exempt and his income is low   c. might be ineligible, his income is too high   d. must obtain a reverse mortgage on his home and make up the difference in cost of care before Medicaid will pay

ANS:     A
Medicaid imposes a limit on hme equity ($500,000 or $750,000 depending on the state) unless a spouse or other family member lives in it.  In the case of this widower, his equity exceeds the threshold.

 4.     John is contemplating entering a nursing home.  John contacts his insurance agent and purchases an immediate fixed annuity.  Under which circumstances would this purchase of an annuity NOT be considered an asset transfer under Medicaid's look-back rules?
a. John names his wife as beneficiary of the annuity   b. The annuity payments are based on John's life expectancy   c. John names the state as a contingent beneficiary   d. all of the above would exempt the annuity from the asset transfer rules

ANS:     D
Annuities are not considered an asset transfer if the annuity payments are actuarily sound (based on the transferor's life expectancy), and if the state is named as a contingent beneficiary in case the transferor dies and leaves value in the annuity.  The state must be primary beneficiary, or in the case of a married transferor, a secondary beneficiary if the spouse is the primary beneficiary.

 5.     Under the DRA, Medicaid imposes a look back period on asset transfers of
a. 24 months   b. 36 months   c. 48 months   d. 60 months

ANS:     D
With transfers taking place since February 8, 2006, the look back period is 60 months.  The old rule (pre-2006) was 36 months for non-trust transfers, 60 months for transfers to a trust.

 6.     Asset transfers for less than fair market value (gifts, bargain sales, etc.) will be subject to which of the following under Medicaid's look back rules?
a. penalty period   b. disallowance of the transfer   c. 10% penalty on the difference between fair market value and transfer value   d. all of the above

ANS:     A
Transfers for less than fair market value will be suject to a penalty period, based on the average monthly private pay rate for nursing facility care.

 7.     Carla give $30,000 to each of her three children.  Carla then applies to Medicaid for assistance in paying for nursing home care.  The state's average nursing home costs are $4,500 per month.  Assuming Carla qualifies for Medicaid, Medicaid will pay Carla's long-term care costs:  
a. immediately   b. beginning in 6 months   c. beginning in 10 months   d. beginning in 20 months

ANS:     D
Medicaid imposes a disqualification or penalty period when assets are transferred for less than fair market value.  In this case, $90,000 was transferred below market value -- which represents 20 months of nursing home costs ($90,000 divided by $4,500).  Carla will have to pay for the first 20 months of nursing home care before Medicaid will begin to pay.

 8.     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.

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

 10.     States wishing to implement a LTC Partnership plan, must submit which of the following to the Centers for Medicare and Medicaid Services (CMS)
a. state plan amendment (SPA)   b. qualified state long-term care insurance partnership (QSLTCIP)   c. NAIC Model legislation   d. all of the above

ANS:     A
To set up a QSLTCIP (partnership plan)  the state must submit the SPA (state plan amendment) to the CMS.

 11.     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).

 12.     Which federal law permits the establishment of LTC Parternship plans nationwide?
a. OBRA   b. COBRA   c. HIPAA   d. DRA

ANS:     D
Four states implemented LTC Partnership plans -- but federal law precluded additional states from adopting the program.  The Deficit Reduction Act (DRA) lifted those restrictions in 2005.

 13.     Which federal law clarified the tax-status of private LTC policies?
a. OBRA   b. COBRA   c. HIPAA   d. DRA

ANS:     C
The Health Insurance Portabiltiy and Accountability Act of 1996 (HIPAA) addressed the tax status of benefits payable under a long-term care policy, accelerated death benefits provision, viatical settlements -- among many other provisions.

 14.     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 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.

 15.     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
Reciprocity is a goal, but is not currently available in most states.  Indiana and Connecticut currently have a reciprocal arrangement.

 16.     An individual purchased a $100,000 PQ LTC policy in Indiana.  After three years in a nursing home, the individual exhausts the entire benefits under the policy and applies for Medicaid for future coverage. He continues to own his home valued at $950,000.  In the total asset approach, what level of this individual's assets will be shielded from Medicaid's asset tests?
a. $100,000   b. $150,000   c. $250,000   d. unlimited assets

ANS:     D
In the total asset approach (which is available only in Indiana and New York), the insured's total (unlimited) assets are excluded from Medicaid's eligibilty rules.  Had the question asked about a dollar-for-dollar approach, the answer would have been $100,000 -- the same amount as the policy benefits.

 17.     An individual purchased a $100,000 PQ LTC policy.  After three years in a nursing home, the individual exhausts the entire benefits under the policy and applies for Medicaid for future coverage. He continues to own his home valued at $950,000.  In the dollar-for-dollar approach, what level of this individual's assets will be shielded from Medicaid's asset tests?
a. $100,000   b. $150,000   c. $250,000   d. unlimited assets

ANS:     A
In  a dollar-for-dollar approach, the Medicaid will exclude an amount equal to amount of policy benefits paid by the private insurance -- in this case $100,000. This individual will still have at least $50,000 in assets ($150,000 home less the $100,000 in asset protection).

In the total asset approach (which is available only in Indiana and New York), the insured's total (unlimited) assets are excluded from Medicaid's eligibilty rules.

 18.     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).  The insured must still comply with Medicaid's income requirements.

 19.     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.

 20.     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.

 21.     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, 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.

 22.     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.

 23.     Under the Deficit Reduction Act of 2005 (DRA), a state that implements a LTC partnership plan may:
a. not impose any requirements on partnership qualified plans addition to those required by the DRA   b. impose requirements on partnership qualified plans addition to those required by the DRA, if the state also imposes the same requirements on non-partnership policies   c. impose requirements on partnership qualified plans addition to those required by the DRA, but does not have to impose the same requirements on non-partnership policies   d. none of the above are true

ANS:     B
States may impose additional restrictions or requirements on partnership policies, as long as the state imposes the same requirements on non-partnership policies.  The goal is to keep partnership and non-partnership policies as similar as possible to facilitate marketing and consumer awareness.

 24.     Which federal law effectively halted the expansion of LTC partnership plans?
a. OBRA   b. COBRA   c. HIPAA   d. DRA

ANS:     A
The Omnibus Budget Reconcilation Act of 1993 imposed estate recovery rules on new states' partnership plans.  This law effectively curtailed new partnership plans -- allow the original four states could continue their partnership programs.  The Deficit Reduction Act of 2005 reversed the 1993 Act and allowed for the current expansion of partnership plans.
 

25.     All of the following 70-year-olds are a good prospects for a reverse mortgage EXCEPT:

a. Dana, who is in poor health   b. Martin, who has limited financial means   c. Tom and Linda, who plan on resideing in their home for the rest of their lives   d. Molly, who is planning to move in the near future

ANS:     D
A reverse mortgage is most effective if the homeowner is planning to reside in the property for a long-time.  The health or financial well-being of the homeowner is relatively unimportant.  The payments are based primarily on the value of the home, the homeowner's age and interest rates.

 26.     All of the following are ways to obtain cash from the insurer of a life insurance policy EXCEPT:
a. viatical settlements   b. accelerated benefits provisions   c. cash surrender   d. policy loans

ANS:     A
Insurers can provide a life insurance policyholder through surrender of the policy, policy loans, and accelerated benefits provisions.  A viatical settlement is the sale of a life insurance policy to a third party.

 27.     Which of the following sources of cash requires repayment:
a. reverse mortgage   b. home equity loan   c. life insurance policy loan   d. all of the above

ANS:     B
Reverse mortgages need not be repaid unless the homeowner moves or sells the home.  Life insurance policy loans do not need to be repaid -- although interest accrues on the loan and will be deducted from eventual death proceeds.  Home equity lines of credit, like regular mortgage, must be repaid.

 28.     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.

 29.     Agents must deliver an "Outline of Coverage":
a. at the time of application   b. after the application is submitted to the underwriters   c. upon delivery of the policy   d. only if requested by the applicant

ANS:     A
Outlines of Coverage must be delivered at the time of application.

 30.     In most LTC policies, benefits will be payable when:
a. a physcian determines the insured needs long term care   b. family members can no longer care for the insured   c. the insured is discharged from the hospital and needs follow-up care   d. the insured is deemed "chronically ill"

ANS:     D
Since the passage of HIPAA, the benefit trigger has been a "chronic illness" -- that is, the inability to perform at least two activities of daily life, or suffer a cognitive impairment that requires care to protect the insured  -- certified by a licensed health care provider..

 31.     When issuing an individual LTC policy, the insurer may require which of the following from the applicant?
a. blood and urine sample   b. an application requiring disclosure of medical history   c. attending physician's statement (APS)   d. all of the above

ANS:     D
All individual applicants for LTC will be asked questions about their medical history and current physical condition.   Individual underwriting may include medical reports including an attending physician's statement, as well as follow up interviews.

 32.     When issuing an group LTC policy, the insurer may require which of the following from the proposed insured?
a. blood and urine sample   b. an application requiring disclosure of current medical condition   c. attending physician's statement (APS)   d. all of the above

ANS:     B
Group underwriting of LTC occurs on a number of levels:  modified guaranteed issue (MGI) policies will ask a series of basic questions -- such as are you currently unable to perform any ADL?  If the answer is yes, that applicant is rejected, all others are accepted.  In simplified or short-form underwriting, the application may lead to follow-up questions from the underwriters.  Some companies engage in full underwriting of group applicants -- in which full medical reports and follow-up interviews may be required.  The one choice required in all group underwriting is an application.

 33.     Which of the following policy features will have the largest impact on the premium the LTC policyholder pays?
a. elimination period   b. guaranteed renewability   c. guaranteed issue   d. guaranteed purchase option

ANS:     A
The applicant may choose the length of the elimination (deductible) period of the policy.  The longer the elimination period, the lower the premium the policyholder will pay.  The other policy features will not have a significant impact on the policy's premium rate.

 34.     Which inflation protecton provison will result in the lowest premium cost to the policyholder?
a. 5% simple rate    b. 5% compound rate   c. 5% guaranteed purchase option   d. there is no difference in the premium cost of these options

ANS:     C
The premium will be highest on the option that provides the greatest level of protection.  The simple and compound rate will automatically adjust benefits upwards -- the compound rate providing greater protection than the simple rate.  The guaranteed purchase provision allows the policyholder to increase benefits at his or her option. This option will be the least expensive -- but provide the least amount of protection.

 35.     Which of the following nonforfieture options is provided on a LTC policy at no additional premium cost?
a. cash surrender   b. return of premium   c. shortened benefit period   d. contingent nonforfieture benefits

ANS:     D
All of the choices presented are nonforfeiture options -- but only the "contingent" option is available at no extra premium.  The others may add significantly to the cost of the policy.

 36.     A free look provision on a long-term care policy must be at least
a. 10 days   b. 30 day   c. 60 days   d. 10 days but varies from state to state

ANS:     B
Federal legislation, HIPAA, requires tax-qualified LTC policy to offer applicants a 30 day free look.  Most LTC policies are tax-qualified.

 37.     A terminally ill insured needing assistance bathing, dressing and eating would most likely rely on:
a. custodial care   b. hospice care   c. respite care   d. home health care

ANS:     B
Hospice care is designed to especially address the needs of terminally ill persons.

 38.     Janelle owns a LTC policy with a nursing home benefit of $150 per day with a maximum benefit period of one year.  Home health care is covered at 50%.  Janelle needs home health care, she will be covered for:
a. $0, as she is not confined to a nursing home   b. one year   c. two years   d. one or two years depending on the policy's language

ANS:     D
Older policies, with daily benefit limits and maximium benefit periods, can be written in a number of different ways.  Some will cover the same number of days regardless of whether care is given in a facility or at home (in this case, one year) and limit home health care to 50% of the full benefit rate.  Other policies may offer two days of home health care or one day of nursing home care as a "day of care" (keeping the same 2:1 ratio) -- in this case two years of home health care.  It is important that an agent read the policy carefully.

 39.     Janelle owns a LTC policy using a pool of money approach with a nursing home benefit of $200 per day with a maximum lifetime benefit of one year.  Home health care is covered at 50%.  Janelle needs home health care, she will be covered for:
a. $0, as she is not confined to a nursing home   b. one year   c. two years   d. one or two years depending on the policy's language

ANS:     C
Newer policies, with lifetime maximum benefit limits operate on a pool of money principle:  the daily benefit is multiplied by the length of the benefit period to find the total amount payable under the policy -- in this case 365 days x $200 per day = $73,000.  This is the maximum benefit payable under the policy. This policy covers home health care at $100 per day (50% of the nursing home benefit of $200). So $73,000 divided by $100 per day, yields 730 days of home health care, or 2 years (730 days divided by 365 days per year).

 40.     What is the maximum benefit period allowable under a NAIC Model Act policy?
a. one year   b. three years   c. five years   d. unlimited

ANS:     D
Some policies have an unlimited lifetime benefit -- these are called lifetime policies.

 41.     What is the minimum benefit period allowable under a NAIC Model Act policy?
a. one year   b. three years   c. five years   d. unlimited

ANS:     A
NAIC policies must provide at least 12 months of benefits (and some states require two or three years as a minimum).

 42.     Which of the following is an example of community based care?
a. respite care   b. home health care   c. adult day care   d. assisted living residences

ANS:     C
There are three levels of care: home, community and residential.  Home health care and respite care is usually provided in the individual's private residence.  Residential care is given in a congregate living facility such as a nursing home or assisted living facility.  Community based care is care given temporarily outside the individual's residence -- such as in adult day care centers.

 43.     Which of the following properly lists levels of care from most to least intensive?
a. acute, supervisory, skilled, personal   b. supervisory, acute, skilled , personal   c. skilled, acute, personal, supervisory   d. personal, supervisory, skilled, acute

ANS:     A
Acute care -- such as care given in a hospital to treat a curable disease or injury is typically the most intensive (but for the shortest period of time).  The other levels of care are for chronic conditions.  Supervisory care provides close supervision of cognitively impaired person to ensure his or her safety.  Skilled care is provided by professional and nonprofessional on an ongoing, but not constant basis.  Personal care provides assistance with basic living fundtions and household chores.

 44.     Joann has been caring for her aged parents and has become exhausted.  Her physician recommends that she take a break from caregiving. What type of care is most appropriate?
a. custodial care   b. personal care   c. respite care   d. assisted living facilities

ANS:     C
Respite care is short-term care that allows primary caregivers to take a break.

 45.     All of the following are true regarding tax treatment of LTC policies EXCEPT:
a. individuals may include LTC premiums in their itemized medical deductions   b. benefits can be received tax free   c. there are age limits on the deductibilty of individual LTC premiums   d. all LTC policies qualify for federal tax deduction

ANS:     D
Policies must meet HIPAA requirements to qualify for tax-deductible premiums and tax-free benefit payments.  A portion of LTC premiums can be included in a taxpayers itemized medical expenses, depending on his or her age.

 46.     Which of the following are true regarding Medicare Supplement (Medigap) policies?
a. Medigap pays for nursing home care beyond the 100 covered by Medicare   b. Medigap pays co-pays and deductibles Medicare imposes   c. Medigap pays for care in more expensive facilities or those not Medicare certified   d. Medigap pays for types of care Medicare won't cover, e.g., personal care

ANS:     B
Medigap policies cover expenses that are "Medicare-approved" but that are not covered by Medicare, namely copays and deductibles.  Medigap policies do NOT expand nursing home care (the policies do increase the insured's lifetime days of hospitalization, not nursing home care).

 47.     Approved nursing home expenses will be paid by Medicare:
a. 0% for the first 20 days, all except $100 for the next 80 days, 100% of trhe last 20 days   b. 100% for the first 20 days, all except copay for the next 80 days, 0% beyond 100 days   c. all except the daily copay for the first 20 days, 100% of the next 80 days   d. all except the daily copay for the first 80 days, 100% of remaining days

ANS:     B
Medicare will fully pay the first 20 days of approved nursing home care expenses, for the next 80 days Medicare will apply a sizable copay -- and nothing after 100 days.

 48.     Which of the following is true about the pre-existing condition exclusion in LTC policy?
a. HIPAA allows policies to exclude benefits up to 6 months for an condition manifasting itself within 6 months of application   b. most policies exclude benefits up to 6 months for any condition manifasting itself prior to application   c. most policies exclude benefits up to 3 months for an condition manifasting itself within 3 months of application   d. most policies no longer exclude benefits for pre-existing conditions

ANS:     A
HIPAA limits pre-existing condition exclusions to conditions that were diagnosed or treated within 6 months of application.  Exclusions may be imposed up to 6 months after an LTC policy is issued.

49.     What are contingent nonforfeiture benefits?
a. the only nonforfeiture benefit available at no additional cost   b. in is a nonforfeiture required in some states   c. is available only if the premium rate is significantly increased   d. all of the above

ANS:     D
The contingent nonforfeiture option allows the policyholder to exercise a nonforfeiture option if premiums are raised significantly.  This option is available at no additional premium (unlike other non-forfeiture options) and some states require it.

50.     Which feature has the greatest impact on the premium the policyholder of a LTC will pay?
a. elimination period   b. daily benefit amount   c. survivor benefit   d. inflation protection

ANS:     B
Of the choices made by the applicant, the benefit amount normally has the greatest impact on the amoun fot he premium.  In general there is a direct proportional relation -- a daily benefit of $120 is 20% more expensive than a daily benefi of $100, and a daily benefit of $80 costs 20% less.

51.     Which of the following is NOT a required disclosure when selling LTC policies?
a. Outline of Coverage   b. Buyer's Guide   c. History of Rate Increases   d. A.M. Best's rating of the insurer

ANS:     D
Agents must provide applicants with an Outline of Coverage, Buyer's (or Shopper's) Guide as well as any rate increases the insurer has imposed on this or similar policies.

52.     A high deductible health plan is central feature of which of the following?
a. Medical Saving Account   b. tax-qualified LTC policies   c. HIPAA eligible LTC policy   d. PQ LTCI

ANS:     A
Medical Savings Accounts are tax-advantaged methods to save for medical expenses.  They require accountholders to have a high deductible medial plan to defray serious medical expenses.

53.     Bernadette, a recently widowed 60-year old, applied for a LTC policy.  She might be entitled to a premium discount due to all fo the following reasons EXCEPT:
a. her membership in a service club   b. her three sisters also applied for coverage   c. a widow's discount   d. her excellent health

ANS:     C
Discounts are available through group policies offered by employers, associations such as service clubs or financial institutions.  Insurers offer discounts when multiple members of family apply -- especially a husband a wife as they based on the concept that they will be able to care for each other.  Preferred rates are available for those in good health.

54.     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.

55.     A life settlement is closely related to:
a. policy surrender   b. policy loans   c. accelerated benefits   d. viatical settlements

ANS:     D
Viatical settlements are the sale of life insurance policy by a terminally ill insured.  Life settlements are also sales of a life policy, but there is no requirement that the insured by terminally ill.

56.     All of the following are customer protections afforded by the NAIC Model legislation on LTC policies EXCEPT
a. guaranteed renewability   b. no pre-existing condition exclusions   c. third party notification of policy lapse   d. incontestability clause

ANS:     B
Policies may impose exclusions on benefits for pre-exisiting conditions up to 6 months following the policy's issuance.

57.     Your client has the option of selecting a "service day" or "calendar day" methods to count the elimination period.  Which method will result in a higher premium?
a. service day   b. calendar day   c. both will result in the same premium   d. it depends on other policy provisions

ANS:     B
An elimination period measured in "calendar days" will result is earlier payment of benefits -- and therefore costs more.

58.     What period is also known as the deductible period?
a. elimination period   b. benefit period   c. probationary period   d. accumulation period

ANS:     A
The elimination period is also known as the deductible or waiting period.

59.     The expense-incurred model of benefit payments is another name for the:
a. reimbursement model   b. disability model   c. cash model   d. indemnity model

ANS:     A
The reimbursement model is sometimes called the expense-insured model.  This model will pay benefits based on long-term care costs actually incurred.


60.     Which benefit model will pay benefits regardless of the amount of long-term care expenses actually incurred by the insured?
a. disability model   b. indemnity model   c. cash model   d. all of the above

ANS:     D
The reimbursement (or expense-incurred) model bases benefit payments on actual costs incurred. The other methods -- disabilty (or cash) model and indemnity model -- pay a flat benefit if the insured's condition triggers benefits.

61.     The most commonly issued LTC policies cover:
a. comprehensive services   b. services provided in nursing homes only   c. home health care service only   d. community-based health care services only

ANS:     A
Policies covering comprehensive (all-type) services are the most common policy type.

62.     The 90-day certification period:
a. requires the inability to perform ADLs for at least 90 daysto trigger benefits   b. is the maximum elimination period allowed on LTC group certificates   c. is the NAIC mandated waiting period on partnership policies   d. none of the above

ANS:     A
The benefit trigger under HIPAA is the inability to perform at least two ADLs for at least 90 days.  A physician must certified the condition will last for at least 90 days.

63.     Who is able to determine when long-term care is needed?
a. physician   b. nurse   c. medical social worker   d. all of the above

ANS:     D
Under HIPAA a licensed health care professional must certify an insured's need for long-term care.

 64.     Which two ADLS are the most likely to be lost first?
a. bathing and dressing   b. toileting and continance   c. transferrance and eating   d. toileting and eating

ANS:     A
Dressing and bathing require fine motor skills, which are typically lost first.
65.     Assisted living factilities provide all of the following EXCEPT:
a. meal preparation   b. personal care   c. help with medication   d. on-staff physical therapist

ANS:     D
ALFs typical include up to three meals a day, assistance with personal care; help with medication, staff to handle medical emergencies and social programs.


66.     An agent has an ethical duty to inform prospects of which of the following?
a. nature of long-term care   b. cost of long-term care   c. levels of long-term care service   d. all of the above

ANS:     D
Agents should inform their clients of all of these important topics

67.     An "Agent's Report" contains which of the following
a. material facts not disclosed in the application   b. the completed application, signed disclosure documents, and the first premium check   c. medical information collected by the agent   d. all of the above

ANS:     A
The Agent's Report allows the agent to append additional information known to the agent as part of the application

68.     What documents should an agent retain as evidence of his or her ethical conduct?
a. completed fact-finding forms   b. customer correspondence   c. notes on conversations with clients   d. all of the above

ANS:     D
All of these should be retained by an agents, as well as completed applications, lists of products shown or recommened to clients, and  due diligence check lists

69.     E&O insurance provides:
a. a greater level of LTC than a PQ LTC policy   b. a greater level of LTC than a TQ LTC policy   c. payment of legal fees to defend against unfounded charges of negligence   d. none of the above

ANS:     C
Error and Ommission insurance is a liability policy that protects agents from charges of neglience or malpractice.  The policy will pay claims in the event of founded or unfounded charges.

70.     Which of the following best describes an unethical sales practice in which the agent conceals the nature of a sales call?
a. churning   b. cold lead advertising   c. high-pressure tactics   d. twistng

ANS:     B
Cold lead advertising occurs with an insurer or agent conceals the purpose of the sales presentation is to sell insurance.  Ethical agents always disclose their status as a licensed agent and the true nature of the sales presentation.

71.     Which of the following is a standardized form that asks questions related to the suitability of a LTC product for a prospective applicant?
a. application   b. personal worksheet   c. Buyer's Guide   d. Outline of Coverage

ANS:     B
Personal worksheets address a particular client's LTC needs and the suitability of a proposed solution.  Buyer's Guides and Outlines of Coverage are documents that describe policies -- not necessarily their suitability for a particular client.

72.     What must an agent do to ensure suitability of proposed LTC solutions?
a. obtain relevant information from the client   b. adhere to state suitability requirements   c. document the sales presentation   d. all of the above

ANS:     D
Agents should make reasonable efforts to obtain relevant information from prospects, usually using a personal worksheet -- and document that effort.

73.     Prospects with low incomes and few assets should:
a. always buy LTC insurance   b. generally buy LTC insurance   c. generally not buy LTC insurance   d. never buy LTC insurance

ANS:     C
These prospects generally cannot afford the premiums for LTC -- and will generally qualify for government programs such as Medicaid

74.     A wealthy client reviews your sales presentation for a tax-qualified state partnership LTC policy and decides that the premium is rather high, and chooses to "self-insure" the risk instead.  Which of the following is (are) true?
a. The client exposes himself to uncapped liability   b. This is a good method to maximize the size of the estate he can leave to heirs   c. both a and b are true   d. neither a nor b are true

ANS:     A
Relying on personal assets exposes the client to an unlimited "uncapped" level of liabiity.  While savings on premiums may increase the size of any eventual estate left to heirs, if teh client needs LTC in the future, those costs could deplete the estate.

75.     Which of the following is typically NOT a factor to consider when recommending replacement of an existing LTC policy?
a. the identity of the existing policy's insurer   b. whether the existing policy is tax-qualified or partnership-qualified   c. the length of time the client has owned the existing policy   d. the policy language of the existing policy

ANS:     A
The agent will want to compare the existing policy's terms and exclusions with the proposed policy -- this includes features such as tax-status and asset protection affored by partnership plans.  Older policies may have less-favorable terms than newer contracts -- and older policies may lock in lower premium rates.  The identity of the existing insurer is usually not a factor (unless the company's financial status is impaired).

76.     When presenting a partnership qualified plan as a possible replacement for a recently issued tax-qualified LTC policy, which feature is most likely to be the focus of the presentation
a. guaranteed renewability   b. policy exclusions   c. benefit limits   d. asset protection

ANS:     D
One goal of the Deficit Reduction Act that allows for partnership policies is that there be uniformity between the terms of PQ and non-PQ policies.  The key distinction is that partnership policies offer possible asset protection from Medicaid eligibility requirements.

77.     Purchasers of partnership qualified LTCI:
a. automatically qualify for Medicaid benefits once their policy's benefits are exhausted   b. may protect their assets and income from Medicaid eligibilty requirements   c. locks in current Medicaid eligibility requires relating to assets, but not income   d. none of the above

ANS:     D
PQ LTCI policies will protect assets (but not income) from the Medicaid eligibility requirements in place at the time the insured applies for Medicaid benefits (that is, when the policy's benefits are exhausted).  The insured will have to apply for Medicaid if the policy is exhausted -- the same procedure as non-insured applicants.

78.     Which of the following are factors to consider when contemplating a partnership LTC policy?
a. possible relocation of the insured in the future   b. possible changes in the Medicaid eligibility rules   c. possible discontinuance of the state in the partnership program   d. all of the above

ANS:     D
All of these could negatively affect the effectiveness of a partnership policy in attaining the client's financial goals.

79.     Which of the following could have a negative impact on an insurance plan that relies on a partnership LTC to meet the client's LTC goals?
a. the client has a high level of income   b. the client purchases a partnership policy with a long benefit period   c. the client has relatively few assets   d. all of the above

ANS:     D
Partnership plans are designed to protect assets from Medicaid eligibility rules -- and avoid "spending down" assets and still qualify for Medicaid. If the client has a high income, he or she may not be able to qualify for Medicaid, so the partnership plan will fail in meeting that planning objective.  The policy will only protect assets in the event that the LTC benefits are exhausted -- policies with high benefit levels or long benefit periods may mnever be exhausted. If the client has relatively few assets, there is no need to "protect" them.

80.     The purchaser of a partnership LTC policy should be aware that:
a. Medicaid does not provide the same level of LTC services as the partnership policy may provide   b. Medicaid benefits are not automatic   c. a partnership LTC policy may be more costly thatn a non-partnership policy   d. all of the above

ANS:     D
A prospect relying on a partnership policy should be aware of the shortcomings of the Medicaid system, that the prospect may have to apply for (and may be rejected) for Medicaid benefits and that policies offering asset protection will cost more than comparable plans without that feature

81.     The cost of assisted living facilities is generally:
a. the same as that at nursing home   b. the same as that of a hospital stay   c. less than that of a nursing home   d. more than that of a nursing home

ANS:     C
The average cost of a semi-private room in  a nursing home for one year is more than $60,000 ($5,000 per month).  The average cost of assisted living is a little more than half than amount ($2,700 per month).

82.     Continuing Care Retirement Communities (CCRCs):
a. tie fees to the level of services provided   b. offer a wide range of home-care services at one fixed rate   c. are another name for assisted living facilities   d. provide personal and skilled in-home care

ANS:     A
CCRCs offer a wide range of services in one location -- allowing a patient to stay in one location even if the level of needed service changes.

83.     A grantor is a person who establishes a trust to hold assets.  Medicaid will NOT apply its asset transfer rules to assets transferred to a trust that:
a. pays income to the grantor   b. could pay income to the grantor, but pays it to someone else   c. could pay income to the grantor but the trust retains the income instead   d. pays income to a disabled grantor

ANS:     D
In general, any trust in which the grantor benefits, or could benefit, will be included in the grantor's assets for purposes of calculating asset levels.  One exception is for grantors who are disabled or trusts that hold only the grantors Social Security payments, pension benefits.

84.     Which of the following is a non-countable asset in Medicaid's eligibility requirements?
a. qualified retirement plans    b. life insurance    c. family burial plot   d. collectibles

ANS:     C
Non-countable (or exempt) assets include household goods, one automobile, very small amounts of life insurance, wedding and engagement rings, and burial plots.  Most everything else will be "countable".

85.     All of the following are true regarding a personal residence in Medicaid eligibility rules EXCEPT:
a. if the Medicaid applicant is not applying for LTC benefits, the value of the home does not count as an asset   b. if the applicant moves out of the home into LTC facilities the value of the home is counted regardless of value   c. if the Medicaid applicant is applying for LTC benefits, any home equity in excess of $100,000 counts as an asset   d. Medicaid can place a lien against the home, even if the home is not deemed "countable"

ANS:     C
Equity in excess of $500,000 (not $100,000) is countable if the applicant is seeking LTC benefits.  The other statements are true.

86.     In most states, Medicaid allows a long-term benefit applicant who is unmarried to retain countable assets totalling:
a. $1,500   b. $2,000   c. $3,000   d. $5,000

ANS:     B
Medicaid generally requires a single applicant to have assets totally less than $2,000 ($3,000 for married applicants).

87.     The income rules for Medicaid eligibility will count all of the following EXCEPT:
a. earned income   b. unearned income   c. Social Security benefits   d. veteran pensions

ANS:     A
Medicaid's income rules relate to unearned sources of income (from investments, government benefits, private and public pensions) -- earned income is not counted (but for most applicants for LTC benefits, earned income is not a factor)

88.     The term "community spouse" refers to
a. a married recipient of community-based LTC   b. a married period living in a community property state   c. the spouse of a person residing in a nursing home   d. none of the above

ANS:     C
A community spouse is the spouse of a person receiving LTC services (home helath care community care of nursing home care).  This is the person who continues to live in the "general community".

89.     The minimum monthly maintenance needs allowance (MMMNA) is:
a. income a community spouse may retain and not trigger income eligibility rules of Medicaid   b. the maximum amount of income a Medicaid applicant may retain and still be eligible for Medicaid LTC benefits   c. the amount of income a nursing home resident may retain for personal care needs such as toiletries of reading material   d. none of the above

ANS:     A
The MMMNA is the amount of income a community spouse may retain or receive from a spouse who receives Medicaid benefit.  This is designed to avoid "spousal impoverishment".

90.     The protected resource amount (PRA) is:
a. the maximum level of assets a community spouse may retain   b. is limited to an inflation adjusted amount set by federal law   c. is designed to avoid spousal impoverishment   d. all of the above

ANS:     D
The PRA are assets a community spouse may retain to avoid "spousal impoverishment". The federal government sets an maximum permissible amount (about $100,000) but states may set lower limits.

91.     Medicaid's estate recovery system applies to assets of all deceased Medicaid beneficiaries who received
a. nursing home services   b. home health care services   c. community based care   d. all of the above

ANS:     A
Estate recovery is the process of reclaiming assets of Medicaid beneficiaries who have died. If applies to all nursing home beneficiaries -- and beneficiaries of home health care and community care services if they were age 55 or older when then began receiving Medicaid benefits.

92.     Federal guidelines require state Medicaid programs to provide which of the following to eligible applicants?
a. home health care services   b. community based care services   c. nursing home care service   d. all of the above

ANS:     C
The minimum federal requirement is for nursing home care, although many states provide a wider range of LTC services unde Medicaid.

93.     The level of LTC care services available under Medicaid is
a. less generous than available under Medicare   b. the same as available under Medicare   c. more generous than available under Medicare   d. more or less generous depending on the state

ANS:     C
Medicare covers only skilled care in nursing homes -- Medicaid covers skilled care and less intensive levels of service.

94.     Medicare Part A will provide all of the following forms of LTC EXCEPT
a. home health care   b. skilling nursing care   c. occupational therapies   d. custodial care

ANS:     D
Skilled nursing care is available under Medicare Part A if is medically necessary following at least three days of hospitalization.  A limited level of home care is available and that may include occupational therapy.  Medicare does not provide for custodial care.

95.     Medicare Part A covers nursing home care only if
a. the care is certified as  medically necessary by a physician   b. the patient has been hospitalized for at least 3 days in the previous month   c. skilled care is provided   d. all of the above are required for Medicare to cover nursing home care

ANS:     D
All of these conditions must be met to qualify for Medicare coverage of nursing home care.

96.     Medicare Part C (Medicare Advantage) plans:
a. supplement coverage under Parts A and B   b. replace coverage under Parts A and B   c. automatically offer prescription drug benefits   d. all of the above

ANS:     B
Medicare Advantage plans offer a wide range of alternatives to original Parts A and B coverage.  By enrolling in Part C, beneficiaries are "disenrolled" from traditional Medicare.

97.     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.


98.     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 hanges 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

99.     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.

100.     Althea, age 88,  suffers from progressive dementia. She forgot to pay the premium on her LTC policy.  Which of the following is true regarding her policy?
a. it will lapse as of the premium due date   b. the company must notify a third party of the potential lapse   c. the company must allow a third party to reinstate the policy   d. all of the above

ANS:     D
LTC policies must provide a notice to a third party of any possible lapses due to nonpayment of premiums.  The insured (and in many states, the third party) must be granted the ability to reinstate any policy that lapses due to non-payment. If the premium is not paid (within permitted time frames) the policy will lapse.