State: Pennsylvania | Category: Health Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. 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.
2. 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).
3. What does the term confinement usually mean in hospital indemnity policies?
Confinement refers to a period of inpatient hospital admission for which benefits are payable.
4. 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.
5. 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.
6. What is the purpose of subrogation in disability policies?
Subrogation gives the insurer the right to pursue recovery from a third party responsible for the disability.
7. If an employer's group health plan terminates for all participants, COBRA continuation:
If the employer's plan terminates for all participants, COBRA continuation ends as of the plan termination; no separate extension applies.
8. If a health insurance policy lapses, what is required for reinstatement according to typical policy provisions?
Reinstatement usually requires a new application, evidence of insurability, and payment of overdue premiums (often with interest) within a defined reinstatement period (commonly up to 3 years).
9. If a long-term care contract is not a 'qualified' LTC contract under IRC 7702B, how are the benefits generally taxed?
Non-qualified LTC benefits are generally taxed as ordinary income to the extent they exceed the premiums paid (the investment in the contract).
10. 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.
11. Before use, PA health policy forms, including endorsements and riders, must be filed with which authority?
Policy forms, endorsements, and riders must be filed with the Pennsylvania Department of Insurance for approval prior to use, ensuring forms meet state requirements.
12. Which PA disclosure addresses the truthfulness of marketing materials and compliance with consumer protection laws?
Advertising disclosures ensure marketing materials are truthful and comply with state consumer protection laws, reducing misinformation about coverage.
13. 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.
14. Do most hospital indemnity policies require proof of confinement to trigger benefits?
Benefits are typically triggered by verifiable confinement, supported by hospital records.
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 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.
17. The start of a COBRA continuation period is generally:
The continuation period generally begins on the date the qualifying event would have caused loss of coverage.
18. 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.
19. What is moral hazard in health insurance?
Moral hazard occurs when being protected by insurance leads to riskier behavior or higher usage of services.
20. 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.
21. 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.
22. 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.
23. For a premium paid for a long-term care insurance policy to be deductible as a medical expense, which condition must be met?
Only premiums paid for a qualified LTC insurance contract may be deductible as medical expenses, subject to the medical expense deduction threshold.