State: North Carolina | Category: Health Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. Which statement best describes the tax treatment of benefits paid under a qualified long-term care (LTC) insurance contract when they are used to pay for qualified LTC services?
Qualified LTC benefits used for qualified LTC services are generally excluded from gross income, meaning they are tax-free for the recipient.
2. A policy that pays a fixed daily benefit regardless of actual hospital charges is known as a
Indemnity-based hospital coverage pays a fixed cash amount per day, not a reimbursement of actual charges.
3. During open enrollment, enrollment in a major medical policy typically occurs without:
Open enrollment typically allows enrollment without individual medical underwriting, though some plans may still apply guaranteed issue rules in certain markets.
4. If a critical illness policy lapses and is later reinstated, what is commonly required?
Lapsed policies may be reinstated, but typical terms require evidence of insurability and payment of any back premiums; a new waiting period may apply.
5. What does the parol evidence rule generally prohibit when interpreting a health insurance policy?
The parol evidence rule bars extrinsic oral or written statements that would modify or contradict the written contract.
6. Who is responsible for sending the COBRA election notice to qualified beneficiaries?
The plan administrator (often the employer or a third-party administrator) is responsible for providing the COBRA election notice.
7. Which statement best describes a deductible in a health insurance plan?
A deductible is the amount the insured must pay for covered services before benefits begin. It does not include premiums, and after it is met, coinsurance or copays may apply.
8. What distinguishes a Health Maintenance Organization (HMO) from a Preferred Provider Organization (PPO) regarding gatekeeping?
HMOs typically require a gatekeeper (PCP) and referrals for specialty care, while PPOs generally offer more open access to specialists without mandatory referrals. The other options misstate the typical gatekeeping practices.
9. What is a pre-existing condition exclusion?
A pre-existing condition exclusion is a condition diagnosed or treated before policy issue that may be excluded or limited for a specified period, depending on the policy.
10. Are critical illness policies typically guaranteed renewable, and what does that mean for premiums?
Many CI policies are guaranteed renewable; insurers cannot cancel due to age, but premiums may increase with age or attained age as specified in the policy.
11. Which scenario best illustrates 'case management' in a provider network?
Case management involves coordinating care for complex conditions across multiple providers to optimize outcomes and costs. The other options describe less coordinated or inappropriate actions.
12. How does a critical illness policy define covered illnesses?
CI policies define coverage by listing specific illnesses on the policy. If an illness is not listed, it is typically not covered unless the policy states otherwise.
13. Open enrollment is important because
Open enrollment allows selection of coverage without underwriting and enables changes due to life events that affect needs and costs.
14. Which NC disclosure must be provided to consumers describing the process to file complaints or appeals for health insurance coverage?
Policies must outline how to file complaints or appeals and the availability of external review to ensure consumer protections.
15. If LTC benefits are used to pay for both qualified and non-qualified expenses, how are the benefits taxed?
Benefits used for qualified LTC services are generally tax-free, while amounts used for non-qualified expenses are taxable.
16. What is moral hazard in health insurance?
Moral hazard occurs when being protected by insurance leads to riskier behavior or higher usage of services.
17. In individual health insurance planning, risk management strategies include
Effective risk management combines retention (self-insuring small losses), transfer (insurance), and reduction (mitigating likelihood or impact of losses).
18. NC health insurance policies must include disclosures about coverage limitations and exclusions.
Disclosures about what is not covered help consumers understand the scope of coverage and avoid surprises.
19. Which is a primary responsibility of a gatekeeper in a managed care plan?
Gatekeepers coordinate care by approving referrals and ensuring appropriate utilization. The other options describe roles outside the gatekeeper function.
20. Which document is primarily considered to govern the insurer-insured relationship in a health insurance contract?
The policy and attached riders constitute the primary governing document, along with any endorsements, that define coverage and obligations.
21. What is a copayment (copay)?
Copays are fixed dollar amounts paid per visit or service, typically due at the time of service, and are separate from the deductible.
22. If a policy pays per day, it can also be written to pay per admission. This means:
Some hospital indemnity policies offer either a per-day or per-admission benefit structure, depending on the policy.
23. What is the general rule about preexisting conditions under most modern health plans?
Under many modern health plans, preexisting conditions cannot be denied coverage; waiting periods or limitations may be subject to plan rules, not blanket denial.
24. Which feature helps individuals budget for medical costs by providing predictable costs at the point of service?
Copayments are fixed amounts paid at the time of service, providing predictable costs; coinsurance is a percentage of costs after the deductible.