Life & Health Insurance Exam Life & Health Insurance Health Insurance Fundamentals 2 — Questions and Answers
Question 1: What does the term 'coinsurance' mean in a health insurance policy?
- The insurer pays 100% after the deductible
- The policyholder shares a percentage of costs after the deductible (Correct answer)
- A second insurer splits the premium with the primary insurer
- The policyholder pays a flat fee per service
Correct answer: The policyholder shares a percentage of costs after the deductible
Coinsurance is the percentage of covered costs the insured pays after meeting the deductible, such as 20% while the insurer pays 80%.
Question 2: Which type of health plan requires members to choose a primary care physician (PCP)?
- PPO
- HMO (Correct answer)
- Indemnity plan
- HDHP
Correct answer: HMO
HMOs (Health Maintenance Organizations) require members to select a PCP who coordinates all care and provides referrals to specialists.
Question 3: What is the maximum annual out-of-pocket limit designed to protect the insured against?
- Premium increases
- Catastrophic medical expenses (Correct answer)
- Experimental treatment costs
- Cosmetic procedure costs
Correct answer: Catastrophic medical expenses
The out-of-pocket maximum caps the total amount an insured must pay in a plan year, protecting against catastrophic medical bills.
Question 4: A health insurance policy that pays a fixed dollar amount per day of hospitalization regardless of actual charges is called a:
- Major medical policy
- Hospital indemnity policy (Correct answer)
- Comprehensive plan
- Stop-loss policy
Correct answer: Hospital indemnity policy
A hospital indemnity policy pays a predetermined daily benefit for each day the insured is hospitalized, without regard to actual expenses.
Question 5: Under HIPAA portability rules, how long must an employee be enrolled in group coverage before prior creditable coverage counts toward a preexisting condition exclusion period?
- No minimum — all prior coverage counts (Correct answer)
- At least 30 days
- At least 63 days without a break
- At least 90 days continuously
Correct answer: No minimum — all prior coverage counts
HIPAA allows creditable coverage to reduce or eliminate preexisting condition exclusion periods, and there is no minimum enrollment length required for that prior coverage to count.
Question 6: Which provision in a health insurance policy requires the insurer to renew coverage as long as premiums are paid, regardless of claims history?
- Conditionally renewable
- Optionally renewable
- Guaranteed renewable (Correct answer)
- Noncancellable
Correct answer: Guaranteed renewable
A guaranteed renewable policy must be renewed by the insurer as long as premiums are paid on time, though premiums can be increased by class.
Question 7: What is the primary purpose of a coordination of benefits (COB) provision?
- To prevent the insured from receiving more than 100% of covered expenses when covered by multiple plans (Correct answer)
- To coordinate premium payments between the insured and employer
- To allow two insurers to share underwriting risk equally
- To determine which physician network the insured must use
Correct answer: To prevent the insured from receiving more than 100% of covered expenses when covered by multiple plans
COB provisions ensure that when an individual is covered by more than one health plan, total benefits paid do not exceed 100% of actual covered expenses.
Life & Health Insurance Exam Life & Health Insurance Health Insurance Fundamentals 2
What does the term 'coinsurance' mean in a health insurance policy?