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RHU practice questions

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Question 1Health insurance fundamentals, policy design, and regulation

What is the primary function of risk pooling in health insurance?

  1. Setting each member's premium to match that member's own expected claims experience
  2. Eliminating the need for insurers to hold any capital reserves against future claims
  3. Guaranteeing that each member receives benefits equal to the premiums that member paid
  4. Spreading unpredictable medical costs across a large group Correct answer.

Explanation

Pooling combines many exposures so that the contributions of the whole group fund the losses of the few, converting an unpredictable individual loss into a predictable average cost. It does not tie benefits to premiums paid, nor does it price each member at that member's individual cost.

Question 2Health insurance fundamentals, policy design, and regulation

A member with a rich benefit plan begins requesting emergency department care for minor ailments that she previously treated at home. This behavior is best described as:

  1. Moral hazard Correct answer.
  2. Experience rating
  3. Risk aversion
  4. Adverse selection

Explanation

Moral hazard is the change in behavior that occurs because insurance lowers the out-of-pocket cost of a service to the person using it. It occurs after coverage is in force, whereas selection concerns who chooses to enroll.

Question 3Health insurance fundamentals, policy design, and regulation

What is the amount a member must pay out of pocket for covered services before the plan begins sharing costs?

  1. The deductible Correct answer.
  2. The coinsurance percentage
  3. The copayment
  4. The out-of-pocket maximum

Explanation

The deductible is a fixed dollar amount of covered expense the member retains before plan cost sharing applies. Copayments and coinsurance generally take effect once the deductible is met, and the out-of-pocket maximum caps total member spending.

Question 4Health insurance fundamentals, policy design, and regulation

A plan pays 80 percent of the allowed amount for a covered service and the member pays the remaining 20 percent. The member's share is called:

  1. Coinsurance Correct answer.
  2. A stop-loss limit
  3. A deductible
  4. A copayment

Explanation

Coinsurance is the member's percentage share of the allowed charge, applied after any deductible. It differs from a copayment, which is a fixed dollar amount per service, and from a deductible, which is a dollar threshold.

Question 5Health insurance fundamentals, policy design, and regulation

In which plan type must a member generally obtain a referral from a primary care physician before seeing a specialist?

  1. An exclusive provider organization (EPO)
  2. A traditional indemnity plan
  3. A health maintenance organization (HMO) Correct answer.
  4. A preferred provider organization (PPO)

Explanation

HMO models use a primary care physician as a gatekeeper who authorizes specialist referrals. Other network models typically permit direct access to contracted specialists, and indemnity plans impose no network gatekeeping at all.

Question 6Health insurance fundamentals, policy design, and regulation

What does the annual out-of-pocket maximum limit for a member?

  1. The member's cost sharing for covered benefits in a plan year Correct answer.
  2. The total amount a hospital may bill for a single inpatient admission
  3. The monthly premium the member must pay to keep the policy in force
  4. The number of covered services the plan will pay for in a year

Explanation

The out-of-pocket maximum caps the cost sharing a member pays for in-network essential benefits during a plan year, after which the plan generally pays 100 percent of covered charges. Premiums are not counted toward the limit, and the limit does not restrict service volume.

Question 7Health insurance fundamentals, policy design, and regulation

In rate making, the portion of the premium intended to fund expected claim payments is called the:

  1. Pure premium Correct answer.
  2. Contingency reserve
  3. Expense loading
  4. Retention

Explanation

The pure premium reflects expected claims per exposure unit. Expense loading for administration, commissions, taxes, and margin is added to the pure premium to produce the gross premium charged to the policyholder.

Question 8Health insurance fundamentals, policy design, and regulation

A health insurance policy is described as a contract of adhesion because:

  1. Both parties negotiate the terms as equals before signing
  2. The member must submit to a medical examination before coverage starts
  3. The insurer may change the terms unilaterally at any time
  4. The insurer drafts the terms and the member accepts or rejects them Correct answer.

Explanation

In a contract of adhesion the party with superior bargaining power drafts the terms and the other party takes them or leaves them. Because of that imbalance, ambiguous policy language is generally construed against the insurer.

Question 9Health insurance fundamentals, policy design, and regulation

A plan has a $1,000 deductible and 20 percent coinsurance for in-network care, with no other cost sharing. A member incurs $6,000 of allowed charges. What is the member's total out-of-pocket responsibility?

  1. $2,000 Correct answer.
  2. $2,200
  3. $1,200
  4. $1,000

Explanation

The member first pays the $1,000 deductible, then 20 percent of the remaining $5,000, which is $1,000. The total member responsibility is therefore $2,000.

Question 10Health insurance fundamentals, policy design, and regulation

An employee is covered under her own employer's active group plan and, as a dependent, under her spouse's employer plan. Under standard coordination-of-benefits rules, which plan pays first?

  1. The spouse's plan, because the employee is a dependent there
  2. The two plans share each claim equally
  3. The plan with the lower deductible
  4. The employee's own active plan Correct answer.

Explanation

The general coordination rule is that a plan covering a person as an active employee pays before a plan covering that same person as a dependent. The secondary plan then considers the remaining balance, usually up to what it would have paid had it been primary.

Question 11Health insurance fundamentals, policy design, and regulation

Under federal marketplace rules, a policyholder who receives the premium tax credit and misses a monthly premium payment has how long before the issuer may terminate coverage for nonpayment?

  1. 12 months
  2. 10 days
  3. 30 days
  4. 3 months Correct answer.

Explanation

For plans receiving advance premium tax credits, the issuer must allow a three-month grace period. The issuer must pay claims during the first month and may pend claims for the remaining months while the enrollee is past due.

Question 12Health insurance fundamentals, policy design, and regulation

A plan reviews a request for an elective surgical procedure for medical necessity before the service is performed. This is:

  1. Concurrent review
  2. Retrospective review
  3. Prospective review Correct answer.
  4. Case management

Explanation

Prospective review occurs before care is delivered and is the mechanism behind prior authorization. Concurrent review monitors an ongoing stay, and retrospective review occurs after services have been rendered and billed.

Question 13Health insurance fundamentals, policy design, and regulation

An insurer offers a generous and a lean plan at premiums set to the average cost of all enrollees and allows enrollment year-round. Sicker people disproportionately choose the generous plan. What is the most likely long-run result?

  1. Total claims fall because members self-select into their preferred plan
  2. The two plans converge in cost because risk is shared across the market
  3. Generous-plan premiums rise as healthy members drop out, pushing rates higher Correct answer.
  4. The lean plan's premium falls because it enrolls more members each year

Explanation

When premiums are not risk-differentiated, sicker enrollees concentrate in the richer plan, raising its cost and its premium, which drives healthier members out and raises the premium again. This self-reinforcing cycle is the adverse selection spiral, and it is why risk adjustment and enrollment rules exist.

Question 14Health insurance fundamentals, policy design, and regulation

Under the ACA medical loss ratio rules, an issuer in the large-group market must generally spend at least what percentage of premium on clinical services and quality improvement?

  1. 95 percent
  2. 80 percent
  3. 85 percent Correct answer.
  4. 50 percent

Explanation

The minimum medical loss ratio is 85 percent for the large-group market and 80 percent for the individual and small-group markets. Issuers that fall short must rebate the difference to enrollees.

Question 15Health insurance fundamentals, policy design, and regulation

An insurer discovers that an enrollee omitted a serious diagnosis from the application. Under ACA market rules, the insurer may rescind the coverage only if:

  1. The policy was sold through a broker rather than directly
  2. The omission is discovered within the first 12 months of coverage
  3. The enrollee intentionally misrepresented a material fact Correct answer.
  4. The enrollee's claims exceed the premiums paid during the first year

Explanation

Rescission treats the policy as though it never existed and is permitted only for fraud or intentional misrepresentation of a material fact, with advance notice to the enrollee. Honest mistakes and innocent omissions cannot support rescission.

Question 16Health insurance fundamentals, policy design, and regulation

What does a guaranteed renewable individual health policy require of the insurer?

  1. It must renew while premiums are paid but may raise rates by class Correct answer.
  2. It may add a new pre-existing condition exclusion at each renewal
  3. It may cancel the policy at renewal if the member's claims are high
  4. It must keep the premium fixed for the life of the policy

Explanation

Guaranteed renewability gives the policyholder the right to continue coverage by paying the premium; the insurer cannot single out an individual for cancellation or a rate increase but may raise rates for an entire class. It does not promise that premiums will stay level.

Question 17Health insurance fundamentals, policy design, and regulation

Under pure community rating, an insurer sets premiums based on:

  1. The applicant's age, sex, and occupation only
  2. Each applicant's own medical history and predicted future claims
  3. The past claims experience of each employer group
  4. The average cost of the covered population as a whole Correct answer.

Explanation

Community rating spreads cost across a defined population so that all members pay the same rate regardless of health status. Experience rating prices each group on its own claims history, and medical underwriting prices each individual on personal health.

Question 18Health insurance fundamentals, policy design, and regulation

After paying a member's injury claim, an insurer pursues the at-fault driver's auto liability insurer to recover the amount it paid. This right is called:

  1. Coordination of benefits
  2. Indemnification
  3. Subrogation Correct answer.
  4. Contribution

Explanation

Subrogation lets the payer stand in the shoes of the member and recover from the party legally responsible for the loss, which prevents double recovery. It is often paired with a reimbursement clause requiring the member to repay the plan from a third-party settlement.

Question 19Health insurance fundamentals, policy design, and regulation

A silver-tier plan in the individual market is designed to have an actuarial value of approximately:

  1. 60 percent
  2. 80 percent
  3. 90 percent
  4. 70 percent Correct answer.

Explanation

The metal tiers correspond to actuarial values of roughly 60 percent for bronze, 70 percent for silver, 80 percent for gold, and 90 percent for platinum. Actuarial value is the share of total allowed costs the plan pays for a standard population.

Question 20Health insurance fundamentals, policy design, and regulation

For a non-grandfathered group health plan, when may the plan impose a pre-existing condition exclusion?

  1. For the first 12 months after the member enrolls
  2. Whenever the member had a gap in prior coverage of 63 days or more
  3. Never; such exclusions are prohibited Correct answer.
  4. For conditions disclosed on the application but not yet treated

Explanation

Pre-existing condition exclusions are barred in non-grandfathered plans, and claims must be paid without regard to prior health history. The older HIPAA framework of look-back and exclusion periods no longer applies to these plans.

Question 21Health insurance fundamentals, policy design, and regulation

A large employer pays employees' health claims from its own general assets and buys stop-loss coverage above a per-person threshold. Which statement is correct?

  1. It must be filed with and approved by the state department of insurance
  2. It is governed mainly by ERISA and is generally not subject to state mandates Correct answer.
  3. It is exempt from ERISA because the employer retains the risk
  4. It must satisfy every state benefit mandate because stop-loss is insurance

Explanation

A self-funded arrangement is an employee benefit plan regulated under ERISA, which preempts state insurance law, so the benefit design is not bound by a patchwork of state mandates. The stop-loss policy itself remains a state-regulated insurance product, but the underlying plan is not.

Question 22Health insurance fundamentals, policy design, and regulation

Which program moves funds from plans that enroll healthier-than-average members to plans that enroll sicker-than-average members?

  1. The risk corridor program
  2. The medical loss ratio rebate program
  3. The transitional reinsurance program
  4. The risk adjustment program Correct answer.

Explanation

Risk adjustment is a permanent, budget-neutral transfer among issuers in the same market based on the relative risk of their enrollees. It addresses selection between competing plans rather than protecting one issuer from a single catastrophic claim.

Question 23Health insurance fundamentals, policy design, and regulation

A family plan has an aggregate (non-embedded) family deductible of $4,000. One family member incurs $4,000 of allowed in-network charges. What is the result?

  1. The family deductible is satisfied for all covered family members Correct answer.
  2. The member must pay a further amount before family coverage begins
  3. Only that member's individual deductible is satisfied and the family deductible remains unmet
  4. The family deductible is reduced by the applicable coinsurance percentage

Explanation

With an aggregate family deductible, cost sharing by any combination of family members accumulates toward the single family limit. Once the $4,000 is reached, the deductible is satisfied for everyone on the policy; an embedded design would instead track individual limits within the family total.

Question 24Health insurance fundamentals, policy design, and regulation

An active employee age 66 works for a firm with 30 employees and is enrolled in both the employer's group health plan and Medicare. Which coverage pays first?

  1. Neither; the employee may choose the order each year
  2. The employer group health plan Correct answer.
  3. Medicare, because the employee is eligible for Medicare
  4. The employer plan and Medicare pay the same claim proportionally

Explanation

Medicare is the secondary payer for a person covered by an employer group health plan of 20 or more employees based on current employment, whether the coverage is through the employee or a spouse. Medicare therefore pays after the employer plan.

Question 25Health insurance fundamentals, policy design, and regulation

Under ACA market reforms, what is the maximum eligibility waiting period a group health plan may impose?

  1. 6 months
  2. 30 days
  3. 60 days
  4. 90 days Correct answer.

Explanation

A group health plan may not require an employee to wait more than 90 days after satisfying the plan's substantive eligibility conditions before coverage begins. Coverage must therefore start no later than the 91st day.

Question 26Health insurance fundamentals, policy design, and regulation

Under a standard health maintenance organization (HMO) product, how is non-emergency care received from a provider outside the plan's network generally treated?

  1. It is covered after the member satisfies a separate out-of-network deductible.
  2. It is covered at the same cost-sharing level as care received from in-network providers.
  3. It is generally not covered unless it is authorized as a referral or is an emergency. Correct answer.
  4. It is covered at the in-network rate if the member files the claim within 30 days.

Explanation

HMO products rely on a defined provider network and a gatekeeper model, so routine care from non-network providers is generally excluded. Exceptions are typically limited to emergencies and services the plan has pre-authorized or referred. The contractual restriction is a core design feature that separates HMOs from indemnity and PPO products.

Question 27Health insurance fundamentals, policy design, and regulation

An employee covered under a group health plan loses coverage after terminating employment. Under COBRA, how long may the employee generally continue coverage for this qualifying event?

  1. 6 months
  2. 29 months
  3. 18 months Correct answer.
  4. 36 months

Explanation

Termination of employment or a reduction in hours is a qualifying event that gives the qualified beneficiary up to 18 months of continuation coverage. Longer periods apply in other situations, such as 29 months when a disability extension applies and 36 months for certain other qualifying events. The continuation period runs from the date coverage would otherwise end.

Question 28Health insurance fundamentals, policy design, and regulation

A non-grandfathered individual market plan charges a $40 copayment for in-network preventive services that the U.S. Preventive Services Task Force rates A or B. Which statement is correct?

  1. The copayment is permitted only if the member has already satisfied the annual deductible.
  2. The copayment is not permitted, but the prohibition applies only to plans sold through a public marketplace.
  3. The copayment is not permitted, because these services must be covered without cost sharing when delivered in network. Correct answer.
  4. The copayment is permitted because cost sharing may be applied to any covered service.

Explanation

Non-grandfathered plans must cover preventive services recommended by the USPSTF, ACIP, and HRSA with no cost sharing when the services are delivered by in-network providers. This rule applies broadly, not only to marketplace plans. Applying a copayment to a grade A or B service in network violates the requirement.

Question 29Health insurance fundamentals, policy design, and regulation

An insurer sets its allowed amount for a service at the lower of the billed charge or a benchmark derived from the range of fees charged by providers in the same geographic area. This benchmark is best described as:

  1. The stop-loss attachment point
  2. The usual, customary, and reasonable charge Correct answer.
  3. The negotiated case rate
  4. The actuarial value

Explanation

A usual, customary, and reasonable (UCR) benchmark reflects prevailing provider charges in a geographic area and is used to determine the allowed amount when no contracted rate exists. The plan pays its share of the allowed amount, and the member may be responsible for charges above it. Contracted networks usually replace UCR pricing with negotiated rates.

Question 30Health insurance fundamentals, policy design, and regulation

An employer sponsors a self-funded medical plan governed by ERISA. A state enacts an insurance law mandating coverage of a particular therapy and applying it to health policies issued in the state. How does the mandate generally apply to this plan?

  1. The mandate applies, but only to those employees who reside and work in the enacting state.
  2. The mandate generally does not apply, because ERISA preempts state insurance mandates for self-funded plans. Correct answer.
  3. The mandate applies, because every employer plan must follow the benefit mandates of the state where the employer is headquartered.
  4. The mandate does not apply, because ERISA plans are exempt from all federal benefit requirements.

Explanation

ERISA preempts state laws that relate to employee benefit plans, and a self-funded plan is not treated as insurance subject to state insurance law. As a result, state benefit mandates generally do not bind self-funded plans, although fully insured plans remain subject to them. Self-funded plans are still bound by applicable federal requirements.

Question 31Individual medical expense and disability income insurance

Under an individual medical expense policy, what does the deductible require the insured to do?

  1. Pay the full charge for any service the insurer calls unnecessary
  2. Pay a percentage of each charge once benefits begin
  3. Pay a set amount of covered expenses before benefits begin Correct answer.
  4. Pay a fixed fee for each office visit, regardless of cost

Explanation

A deductible is the amount of covered expenses the insured must pay in a benefit period before the insurer begins paying. It is a stated dollar amount rather than a percentage or a per-visit fee, and it applies only to covered services.

Question 32Individual medical expense and disability income insurance

In a medical expense policy with an 80/20 coinsurance provision, how are covered charges handled after the deductible is met?

  1. The insurer pays 20% and the insured pays 80% of each charge
  2. Both parties split every charge equally until the maximum is met
  3. The insurer pays 80% and the insured pays 20% of each charge Correct answer.
  4. The insurer pays 80% of the deductible and the insured pays the rest

Explanation

Coinsurance divides covered charges remaining after the deductible between insurer and insured according to stated percentages. In an 80/20 clause the insurer carries the larger 80% share and the insured pays 20%, typically up to an out-of-pocket cap.

Question 33Individual medical expense and disability income insurance

In a disability income policy, the elimination period is best described as which of the following?

  1. The maximum number of months benefits will be paid
  2. The time allowed to pay the premium before the policy lapses
  3. The waiting period before disability benefits become payable Correct answer.
  4. The period during which the insurer may contest the contract

Explanation

The elimination period is the waiting period that runs from the onset of disability until benefits begin. Choosing a longer elimination period lowers the premium because the insurer avoids paying for short-term disabilities.

Question 34Individual medical expense and disability income insurance

Which disability income benefit definition pays when the insured cannot perform the duties of the specific job held when the disability began?

  1. Presumptive disability definition
  2. Any occupation definition
  3. Own occupation definition Correct answer.
  4. Gainful occupation definition

Explanation

The own occupation definition ties eligibility to the duties of the job the insured actually held at the time of disability. Because it is easier to satisfy, it is the broadest and most expensive definition for the insurer to offer.

Question 35Individual medical expense and disability income insurance

An individual medical expense policy typically gives the policyholder a free-look period that allows which of the following?

  1. Skipping one premium payment each year without losing coverage
  2. Returning the policy for a refund within a stated number of days Correct answer.
  3. Cancelling the policy at any time and receiving all premiums paid
  4. Changing the deductible once per policy year at no cost

Explanation

The free-look provision gives the buyer a stated period, commonly 10 days after delivery, to review the contract and return it for a full refund of premium. It protects consumers who purchased without fully understanding the coverage.

Question 36Individual medical expense and disability income insurance

A grace period in an individual health insurance policy serves which purpose?

  1. It extends the benefit period after a disability ends
  2. It delays the start of coverage until the first claim is filed
  3. It suspends the deductible until the next policy year begins
  4. It allows a premium to be paid late without immediate lapse Correct answer.

Explanation

The grace period is the interval after the premium due date, commonly 7 to 31 days, during which the payment may still be made and the policy remains in force. Coverage terminates only if the premium is not paid by the end of that period.

Question 37Individual medical expense and disability income insurance

In an HMO plan, the primary care physician generally serves which function?

  1. Reviewing claims submitted by specialists after treatment
  2. Setting the premium rate for each enrolled family
  3. Paying providers directly from the member's health savings account
  4. Coordinating care and authorizing referrals to specialists Correct answer.

Explanation

The HMO primary care physician acts as a gatekeeper who manages the member's care and must authorize specialist referrals. Care obtained outside the network without authorization is generally not covered except in emergencies.

Question 38Individual medical expense and disability income insurance

The benefit period in a disability income policy determines which of the following?

  1. The maximum length of time benefits will be paid for a disability Correct answer.
  2. The grace period allowed for late premium payments
  3. The maximum age at which the insured may renew the policy
  4. How long the insured must wait before benefits start

Explanation

The benefit period is the maximum duration over which the insurer will pay for a single disability, such as two years, five years, or to age 65. Longer benefit periods produce higher premiums.

Question 39Individual medical expense and disability income insurance

Which of the following is counted toward an individual medical policy's out-of-pocket maximum?

  1. Charges for services the policy does not cover
  2. Deductibles and coinsurance paid by the insured Correct answer.
  3. Premiums paid for the policy during the year
  4. Amounts the insured pays above the allowed charge

Explanation

The out-of-pocket maximum caps the insured's cost sharing and is accumulated from deductible and coinsurance amounts on covered services. Once the cap is reached, the plan pays covered charges in full.

Question 40Individual medical expense and disability income insurance

Both parents carry medical coverage for their child, and both policies use the standard birthday rule. Which plan pays first?

  1. The plan with the lower deductible and richer benefits
  2. The plan of the parent whose birthday falls earlier in the year Correct answer.
  3. The father's plan, unless a court order states otherwise
  4. The plan of the parent with the higher income

Explanation

Under the standard birthday rule, when both parents cover a dependent child, the plan of the parent whose birthday comes earlier in the calendar year is primary. A court decree specifying responsibility would override that rule.

Question 41Individual medical expense and disability income insurance

A residual disability benefit is designed to do which of the following?

  1. Refund premiums paid during a period of total disability
  2. Pay a full benefit after the loss of both hands or sight
  3. Pay a flat sum for each day spent in a hospital
  4. Pay a reduced benefit when income falls due to a disability Correct answer.

Explanation

Residual disability benefits pay a partial monthly amount when the insured returns to work but earns less because of the disabling condition. The payment is generally proportional to the loss of income.

Question 42Individual medical expense and disability income insurance

Which situation would typically trigger a presumptive disability benefit with no elimination period?

  1. The total and irrecoverable loss of sight in both eyes Correct answer.
  2. A back injury that prevents lifting more than ten pounds
  3. A diagnosis of a chronic but controllable illness
  4. A temporary absence from work for a scheduled surgery

Explanation

Presumptive disability provisions list catastrophic losses, such as loss of sight in both eyes or loss of two limbs, and pay the full benefit immediately without waiting out the elimination period.

Question 43Individual medical expense and disability income insurance

An insured returns to work after a disability and later suffers a relapse of the same condition. How does a recurrent disability provision typically treat the relapse?

  1. A continuation of the earlier claim, with no new waiting period Correct answer.
  2. A new disability claim that requires a fresh elimination period
  3. A partial disability paying half of the prior benefit amount
  4. An excluded condition for which no benefit is payable

Explanation

A recurrent disability provision links a relapse of the same cause to the original claim when it occurs within a stated period, commonly six months, so the insured does not have to satisfy a new elimination period.

Question 44Individual medical expense and disability income insurance

How does a waiver of premium provision typically operate during a long-term total disability?

  1. It doubles the monthly benefit during the disability
  2. It keeps the policy in force and forgives premiums due Correct answer.
  3. It refunds premiums already paid for the prior policy year
  4. It converts the policy into a paid-up permanent contract

Explanation

A waiver of premium provision keeps the policy in force without further premium payments while the insured is totally disabled, usually after a waiting period such as 90 days, and often refunds premiums paid during that waiting period.

Question 45Individual medical expense and disability income insurance

Which statement correctly distinguishes a noncancellable policy from a guaranteed renewable policy?

  1. The noncancellable policy can be cancelled for frequent claims
  2. The guaranteed renewable policy may cancel for a change in health
  3. The guaranteed renewable policy may raise an individual's premium
  4. Only the noncancellable policy prevents rate increases Correct answer.

Explanation

A noncancellable policy guarantees renewal and level premiums, so the insurer cannot increase that insured's rate. A guaranteed renewable policy guarantees renewal but permits rate increases that apply to an entire class of policyholders.

Question 46Individual medical expense and disability income insurance

What does the incontestability clause of an individual health insurance policy provide once the policy has been in force for two years?

  1. The insured may return the policy for a full premium refund
  2. The insurer may cancel coverage for any decline in health
  3. The insurer may not deny a claim based on an application misstatement Correct answer.
  4. The insurer may raise the premium because of individual claims

Explanation

After the contestable period, usually two years, the insurer cannot rescind the policy or deny a claim because of a misstatement in the application. Nonpayment of premium remains a valid ground for termination.

Question 47Individual medical expense and disability income insurance

To contribute to a health savings account, an individual must meet which requirement?

  1. Hold two or more separate medical expense policies
  2. Be covered by a high-deductible health plan Correct answer.
  3. Be enrolled in both Medicare Part A and Part B
  4. Own a policy that pays first-dollar benefits with no deductible

Explanation

HSA eligibility requires coverage under a qualified high-deductible health plan and the absence of disqualifying coverage. Medicare enrollment and first-dollar plans both disqualify an individual from contributing.

Question 48Individual medical expense and disability income insurance

An insurer reimburses on a usual, customary, and reasonable basis. A provider charges $600 while the allowed allowance is $450. How is the claim handled?

  1. The insurer pays $600 and the insured owes nothing
  2. The insurer denies the claim because the charge was excessive
  3. The insurer pays $450 and the provider may not bill further
  4. The insurer pays based on $450 and the insured may owe the balance Correct answer.

Explanation

Under UCR reimbursement the insurer pays the lesser of the actual charge or the allowed amount. The insured is responsible for the difference, and in a non-network setting the provider is generally permitted to bill the patient for it.

Question 49Individual medical expense and disability income insurance

Business overhead expense insurance is written primarily to do which of the following?

  1. Pay ongoing business expenses while the owner is disabled Correct answer.
  2. Fund the buyout of a disabled partner's ownership interest
  3. Provide retirement income for the employees of the business
  4. Replace the owner's lost personal income during a disability

Explanation

Business overhead expense insurance reimburses eligible operating costs, such as rent and employee salaries, while a disabled owner cannot work. Benefit periods are short, commonly 12 to 24 months.

Question 50Individual medical expense and disability income insurance

If a lapsed individual health policy is reinstated, which statement best describes coverage for a sickness that begins shortly afterward?

  1. The policy can never be reinstated once a claim has been filed
  2. Sickness is covered immediately, exactly as before the lapse
  3. Sickness coverage resumes only after a new elimination period
  4. Sickness coverage resumes after a waiting period, often 10 days Correct answer.

Explanation

On reinstatement, accidental injury coverage usually resumes at once, but sickness coverage is delayed for a brief period, commonly 10 days, to discourage reinstating a policy only after illness begins. The insurer may also require evidence of insurability and payment of overdue premium.