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Health Insurance Florida 2-40 Practice Exam
Questions
Which of the following is NOT a form of medical insurance? -Business overhead expense -Surgical expense -Hospital expense -Long term care - Correct Answer Business overhead expense (Explanation: Business Overhead Expense insurance is designed to reimburse a business for overhead expenses in the event a business owner becomes disabled. Expenses such as rent, utilities, telephone, equipment, employees' salaries, etc.) All of the following are state or federal government programs that provide health insurance, EXCEPT? -Medicare -OASDI disability -Medicaid -Madigan - Correct Answer Madigan (Explanation: A Madigan policy is a Medicare supplement insurance policy sold by private insurance companies to fill "gaps" in Medicare Parts A and B.) What type of health insurance is available to assist low-income individuals? - Correct Answer Medicaid What types of reserves are set aside and held by health insurance companies? - Correct Answer Premium and Claims reserves (Explanation: Reserves are set aside for the payment of future claims.) Group health insurance is generally written on a basis that provides for dividends or experience rating. What is the basis called? - Correct Answer Participating (Explanation: Group plans written by mutual companies provide for dividends while stock companies frequently issue experience-rated plans.) Which of the following is NOT TRUE regarding eligibility for subsidies for families under the new health care act? -For those who make between 100-400% of the Federal Poverty -Level -Cannot be covered by an employer -Cannot be eligible for Medicare -Can be eligible for Medicaid - Correct Answer can be eligible for Medicaid Which of the following operates as a corporation, society, or association to provide life insurance primarily for the mutual benefit of its members, has a lodge or social system with rituals and representative form of government? A) Mutual companies B) Fraternal associations
C) Stock companies -Fraternal benefit society - Correct Answer B) Fraternal associations What does each member pay in a typical HMO plan? -Fixed premium based on a deductible and copay -Fixed premium whether or not plan is used -Premium based on how often plan is used - Correct Answer Fixed premium whether or not plan is used Which of the following is correct about those who are eligible for Medicare and wish to join an HMO? -They must have a current Medicare supplement policy -They must be told that'll be getting all the benefits from the Medicare Advantage plan -They must be age 70 and above -They must have been enrolled previously in an HMO - Correct Answer They must be told that'll be getting all the benefits from the Medicare Advantage plan Joyce is totally disabled. Her HMO policy just terminated. All of the following are correct regarding "extension of benefits" for Joyce, EXCEPT? -Coverage ends once maximum benefits have been exhausted -Coverage ends once another carrier assumes coverage -Coverage ends if no longer totally disabled -Coverage ends after 18 months - Correct Answer Coverage ends after 18 months All of the following are correct regarding Florida regulation of HMOs, EXCEPT? -Must obtain a Certificate of Authority -Must file a report of its activities within 3 months of the end of each fiscal year -Must deposit $100,000 with the Rehabilitation Administration Expense Fund -Must be sold by agents licensed and appointed as health insurance agents - Correct Answer Must deposit $100,000 with the Rehabilitation Administration Expense Fund (Explanation: They must deposit $10,000 with the Rehabilitation Administration Expense Fund.) What is "capitation" as it relates to an HMO? -Amount to be collected by the HMO from participating health care providers -Fixed amount paid by an HMO during a policy period -Fixed amount paid by an HMO to a physician for medical services -Amount required to be deposited with the State of Florida - Correct Answer Fixed amount paid by an HMO to a physician for medical services When a person is covered by an HMO, the contract certificate or member's handbook must be delivered within how many days after approval of the enrollment by the HMO? -20 days -10 days -5 days -14 days - Correct Answer 10 days
-Social Security -Workers Compensation -Madigan -Medicare - Correct Answer Workers Compensation All of the following are nontraditional methods of providing health insurance, EXCEPT? -Multiple Employer Trusts -Multiple Employer Welfare Arrangements -Self-insurance -Commercial insurers - Correct Answer Commercial insurers All of the following are true about a multiple employer welfare arrangement (MEWA), EXCEPT? -Required by law to have an employment-related common bond -Often provide insurance on a self-insured basis -Tax-exempt entities -Large employers who have joined together to provide health insurance benefits - Correct Answer Large employers who have joined together to provide health insurance benefits (Explanation: MEWAs consist of small employers who join together to provide health insurance benefits for their employees) Grouping small businesses together to obtain health insurance as one large group is a characteristic of what type of group? -Multiple Employer Trust (MET) -Franchise Health plan -Health Maintenance Organization (HMO) -Blue Cross/Blue Shield - Correct Answer Multiple Employer Trust (MET) Casey has a medical expense policy that provides a fixed rate of $150 per day for hospitalization. Casey is hospitalized for 10 days and incurred covered medical expenses of $20,000. What will her medical expense policy pay? -$1, -$20, -$15, -$3,000 - Correct Answer $1,500 (Explanation: Casey's policy will only cover a fixed rate per day for hospitalization of $150. If she is hospitalized for 10 days, then her policy will pay $1,500 ($150 x 10) of the total $20, in expenses.) Jamie has a reimbursement type medical expense policy with a maximum benefit of $500,000. She is hospitalized and incurs $25,000 in covered medical expenses. What will her policy provide in coverage? -$20, -$25, -$10,
-$12,500 - Correct Answer $25,000 (Explanation: A reimbursement type policy will provide coverage for expenses incurred. In this case that would be the total $25,000.) Which of the following will not be covered under "Miscellaneous Expenses" of a hospital expense policy? -Drugs -Lab fees -Daily room and board -Use of operating room - Correct Answer Daily room and board There are three different approaches used by insurers in providing basic surgical expense coverage and determining the benefits payable. Which of the following is NOT one of these approaches? -Reasonable and customary approach -Physician schedule approach -Relative value scale approach -Surgical schedule approach - Correct Answer Physician schedule approach Charlie has a hospital expense policy and a surgical expense policy. The hospital pays $100 a day for room and board and a maximum of $1,000 for miscellaneous hospital charges. The surgical policy pays a maximum of $500 for any one operation. If Charlie was hospitalized for 10 days and had charges of $200 per day for room and board, $1,500 for miscellaneous expenses, and $2,000 for surgical expenses. What will his policies pay of these expenses? -$3, -$1, -$5, -$2,500 - Correct Answer $2,500 (Explanation: Hospital will pay - $1,000 for room and board ($100 per day for 10 days) and $1, (maximum allowed) for miscellaneous expenses. Surgical will pay - $500 (maximum allowed) for surgery) Once the insured has paid a specified amount of his expenses, under the stop-loss feature of a health insurance policy, how much will the company then pay? -75% -20% -80% -100% - Correct Answer 100% How will the "miscellaneous expenses" benefit be expressed in a basic health insurance policy? -Reasonable, usual and customary rates -Multiple of daily room and board rate -Approved charge per day rate
-$1,000 - Correct Answer $1,500 (Explanation: Travis will pay the first $500 (deductible) and then 20% of the next $5,000 ($5,000 x. = $1,000. So Travis will pay a total of $1,500 (deductible plus 20% of $5,000).) When comparing a major medical policy having an 80%/20% coinsurance provision with one having a 75%/25% coinsurance provision, the insured will pay more or less premium for the 80%/20% provision? -Less premium -The same premium -Significantly less premium -More premium - Correct Answer More premium (Explanation: Because the insured will be responsible for less of the cost for medical expenses (20% verses 25%), he will pay more in premium costs.) Jason has a Major Medical policy with a flat deductible of $500, coinsurance of 80%/20% and a stop-loss of $5,000. If he has a covered claim of $5,500, what will the insurance company pay? -$ -$4, -$1, -$4,000 - Correct Answer $4,000 (Explanation: Jason will pay the first $500 (his deductible amount) of the total medical bills. After this Jason will pay 20% of the remainder ($5,000) and the insurance company will pay 80%. $5,000 (amount remaining) x .80 = $4,000 paid by insurance company.) All of the following are types of major medical policy deductibles, EXCEPT? -Franchise -Integrated -Corridor -Flat - Correct Answer Franchise What type of medical expense policy simply provides a daily, weekly, or monthly payment of a specified amount based on the number of days the insured is hospitalized? -Daily room and board expense policy -Surgical expense policy -Hospital Fixed-rate policy -Hospital expense policy - Correct Answer Hospital Fixed-rate policy What type of medical expense policy would be available to cover the high costs associated with a specific kind of illness such as cancer or heart disease? -Hospital expense -Surgical expense
-Major medical -Limited risk - Correct Answer Limited risk (Explanation: Limited risk or dread disease policies are designed specifically to cover the high costs associated with a specific illness.) William was involved in a 2-car accident in which he is disabled and his passenger and the driver of the other car are injured. Which of the following would most likely be covered by William's disability income policy? -Disability of the other driver -His lost income -William's medical expenses -Dismemberment of the passenger's leg - Correct Answer His lost income Cathy is a dentist and decides to purchase insurance that would cover a large portion of her income should she become disabled. What type of coverage will she purchase? -Disability income insurance -Business overhead expense insurance -Medical expense insurance -Lump sum disability - Correct Answer Disability income insurance All of the following are true regarding a disability income policy defining total disability as "own occupation", EXCEPT? -Insured is unable to work at their own occupation as a result of an accident or sickness -Difficult to qualify for -More advantageous to the insurer -More expensive than a policy providing "any occupation" - Correct Answer More advantageous to the insurer Which of the following terms relates to payments made for partial disabilities? -Residual amount -Gross amount -Net amount -Recurrent amount - Correct Answer Residual amount (Explanation: The amount of benefit payable when a policy covers partial disabilities depends on whether the policy stipulates a flat amount or a residual amount) Daniel's disability income policy defines total disability as "the insured's inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training or experience". This definition is known as? -Own occupation and is less restrictive than other definitions -Any occupation and is more restrictive than other definitions -Any occupation and is less restrictive than other definitions -Own occupation and is more restrictive than other definitions - Correct Answer Any occupation and is more restrictive than other definitions Which of the following is NOT correct about partial disability?
-$1,000 monthly benefit -$500 monthly benefit -$0 benefit -$2,000 monthly benefit - Correct Answer $1,000 monthly benefit What form of insurance is the primary form of pure accident coverage? -Major Medical -Disability Income -Medical Expense -Accidental Death and Dismemberment - Correct Answer Accidental Death and Dismemberment George was in an accident. His Accident, Death and Dismemberment policy will cover all of the following, EXCEPT? -Loss of sight -Loss of use of a limb -Broken arm -Death - Correct Answer Broken arm (Explanation: AD&D is the primary form of pure accident coverage. It provides a stated lump-sum benefit in the event of accidental death or in the event of loss of bodily members due to an accidental injury.) What does the principal sum represent in an AD&D policy? -Amount payable for accidental loss of sight -Amount payable as a death benefit -Amount payable for dismemberment -Amount payable for accidental loss of sight or dismemberment - Correct Answer Amount payable as a death benefit An individual accidental death and dismemberment policy (AD&D) will pay benefits if an insured dies from... -Heart attack -Catastrophic illness -Head injury resulting from an auto accident -Occupational disease - Correct Answer Head injury resulting from an auto accident Michael has an AD&D policy. Which of the following statements is CORRECT? -The benefit for the loss of both eyes is 75% of the principal sum -Michael's beneficiary will receive the capital sum of $100,000 as a death benefit -Principal sum is the amount paid for the accidental loss of sight or dismemberment -The benefit amount for the loss of one foot or one hand is 50% of the principal sum - Correct Answer the benefit amount for the loss of one foot or one hand is 50% of the principal sum Which of the following is an example of a limited risk policy? -Surgical policy
-Medical expense policy -Hospital policy -Aviation policy - Correct Answer Aviation policy A famous dancer decides to take out a special policy covering her legs for $1 million. What type of accident policy is this? -Disability income policy -Limited risk policy -Major Medical policy -Special risk policy - Correct Answer Special risk policy Margaret has a special risk policy. It will pay a benefit for... -Unusual hazards normally not covered by other policies -Death or dismemberment resulting from an aviation accident during a specified trip -Dreaded diseases -Special risks such as Lou Gehrig's disease or Parkinson's disease - Correct Answer Unusual hazards normally not covered by other policies What is the free-look period for a Medicare Supplement policy? -7-days -10-days -14-days -30-days - Correct Answer 30-days Which of the following statements is true about a Medicare Supplement policy? -These policies are designed to cover deductibles and co-insurance -Only insurance companies affiliated with Medicare can provide Medicare Supplement policies -These policies may be issued to anyone 59 1/2 or older without evidence of insurability -Anyone who qualifies for Medicaid benefits may be issued these policies - Correct Answer These policies are designed to cover deductibles and co-insurance All of the following are correct regarding Medicare Supplement policies, EXCEPT -Must cover pre-existing conditions from the date the policy goes into effect -Must automatically adjust its benefits to reflect statutory changes in Medicare -Must cover all expenses not covered by Part A from the 61st to the 90th day -Must supplement both Part A and Part B of Medicare - Correct Answer Must cover pre- existing conditions from the date the policy goes into effect Which of the following is NOT a requirement for an agent soliciting Medicare supplements? -Explain to prospect where there will be overlapping coverage -Send a signed form to the company explaining why coverage could not be placed -Inquire from each prospect if they already have coverage
All of the following are requirements in Florida to be eligible to purchase group health insurance, EXCEPT? -Natural group -Minimum of 15 employees -No specific minimum percentage participation -Group formed for reasons other than obtaining insurance - Correct Answer Minimum of 15 employees (There is no minimum) All of the following are TRUE statements regarding group health insurance, EXCEPT? -It contributes to the morale of employees. -Maternity benefits are more comprehensive than those in an individual policy. -Each individual insured covered by the group policy is given a separate policy. -Enables the employer to have some control over employees. - Correct Answer each individual insured covered by the group policy is given a separate policy. Which of the following is CORRECT about group health insurance? -Insured members decide participation requirement -Individual plans have better maternity benefits than group plans -Once issued, group insurance may only be cancelled by the insurer -Dependent survivors of a deceased worker, eligible for COBRA, may be covered by COBRA for 36 months - Correct Answer Dependent survivors of a deceased worker, eligible for COBRA, may be covered by COBRA for 36 months To qualify for group health coverage, a group of persons must be considered a "natural group". What is meant by "natural group"? -Group must be made up of people in good health -Group must have been formed for some reason other than to obtain insurance -Group must be consist of natural born citizens -Group must have ten (10) or more members - Correct Answer Group must have been formed for some reason other than to obtain insurance All of the following are correct regarding group health insurance, EXCEPT? -Major medical coverage may be written on a group basis -Employees receive separate policies -Debtor groups are eligible for group plans -Employer is issued a master policy - Correct Answer Employees receive separate policies Which of the following is CORRECT regarding group health insurance? -Insurer must ask health questions of each individual in the group -Labor unions are not eligible -A group may be eligible that is formed just for the purpose of purchasing insurance -Lodges are eligible - Correct Answer Lodges are eligible
Florida requires what percentage of participation by employees in a contributory group health plan? -100% -50% -No minimum percentage -75% - Correct Answer No minimum percentage (Explanation: Most noncontributory group health plans require 100% participation by eligible members, whereas contributory group health plans often require participation by 75% of eligible members. Under Florida law there is no specific minimum percentage participation for employees covered by group health insurance.) Which of the following is CORRECT about a group health insurance plan? -Non-contributory plans are paid for by the employer and employee -Non-contributory plans require 100% participation -Contributory plans are paid for by the employer only -Contributory plans require 100% participation - Correct Answer Non-contributory plans require 100% participation All of the following are characteristics of group health insurance, EXCEPT? -Group plans may be contributory or noncontributory -More Americans are covered by individual health plans than by group health plans -Benefits are predetermined by the employer -Cost for insuring an individual under a group plan is less than the cost under an individual plan - Correct Answer More Americans are covered by individual health plans than by group health plans Generally when would an insurer engage in "individual underwriting" under a group health plan? -Never, this is prohibited by law -When the insurer is underwriting and evaluating the group -When an eligible employee tries to join the plan after initially electing not to participate -On an annual review - Correct Answer When an eligible employee tries to join the plan after initially electing not to participate What is the plan called if the employer pays the whole premium on a group policy? -Qualified -Non-qualified -Contributory -Non-contributory - Correct Answer Non-contributory Which of the following is NOT true about "coordination of benefits"? -Establishes which health plan is primary -Found in group and individual health plans -Limits total amount of claims paid from all involved insurers -Purpose is to avoid duplication of benefits and over insurance - Correct Answer Found in group and individual health plans
-Individual policies are issued to individual members - Correct Answer Individual policies are issued to individual members The Coordination of Benefits (COB) clause is found in what kind of policy? -Fictitious -Group -Indemnity -Individual - Correct Answer Group Blanket health plans may provide coverage for which of the following groups? -School covering students -Company covering employees -Multiple employer group covering members -Association covering members - Correct Answer School covering students Under a credit health policy, what is the maximum amount of any accidental death benefit? -Multiple of the monthly loan payments -Amount of original debt -Amount of outstanding debt -$100,000 - Correct Answer Amount of outstanding debt For an individual to be able to take a tax deduction for individual contributions to a group medical plan, his medical expenses must exceed what percentage of his adjusted gross income? -7.0% -6.5% -7.5% -5.5% - Correct Answer 7.5% Which of the following would NOT be considered important when choosing the proper health insurance program? -Will I be able to deduct the premium payments from my taxes? -Is coverage available from a group plan or social insurance program? -Is the coverage for a family, individual, or business? -What are the deductibles and coinsurance? - Correct Answer Will I be able to deduct the premium payments from my taxes? Cafeteria plans are also known as? -Section 125 plans -Flexible plans -Menu plans -Section 1040 plans - Correct Answer Section 125 plans Which of the following is a TRUE statement regarding premiums and benefits for business overhead insurance?
-Both premiums and benefits are tax-deductible -Both premiums and benefits are taxable -Premiums-tax-deductible, Benefits-taxable -Premiums-taxable, Benefits-tax-deductible - Correct Answer Premiums-tax-deductible, Benefits-taxable All of the following are examples of how disability insurance is used for business continuation, EXCEPT? -Business overhead expense -Key person disability -Employee disability -Disability buy-out - Correct Answer Employee disability Why were Cafeteria Plans designed? -Provide insurer greater control over benefits selected for employees -Allow employees to pick and choose from a menu of benefits to tailor their own benefit package -Allow employers to pick and choose benefits from a menu that best suits their company needs -Provide diversity of insurance company and HMO - Correct Answer Allow employees to pick and choose from a menu of benefits to tailor their own benefit package Which of the following will NOT be covered under Business Overhead Expense Insurance? -Leased equipment -Mortgage payments -Owner's salary -Employees' salaries - Correct Answer Owner's salary (Explanation: Business Overhead Expense insurance is designed to reimburse a business for overhead expenses in the event a business owner becomes disabled.) As compared to individual disability income policies, group disability income policies are generally? -More costly and have less liberal provisions -Tied more closely to Social Security disability benefits -Less costly and have more liberal provisions -More restrictive in terms of covered medical expenses - Correct Answer Less costly and have more liberal provisions What is the typical maximum coverage provided to an individual by a group disability income insurance policy? -100% of pre-disability gross earnings -60% of pre-disability gross earnings -75% of pre-disability gross earnings -50% of pre-disability gross earnings - Correct Answer 60% of pre-disability gross earnings
When an application for health insurance is submitted without an initial premium, the earliest effective date is the date on which the? -Policy is received by the agent -Policy is delivered to the client by the agent and the premium is collected -Application is taken by the agent -Insurance company issues the policy - Correct Answer Policy is delivered to the client by the agent and the premium is collected All of the following are additional risk factors used in underwriting a health insurance policy, EXCEPT? -Avocations -Policy premiums of other health insurance -Age -Family history - Correct Answer Policy premiums of other health insurance Barry suffered a heart attack 26 months ago. What type of risk would he be considered? -Standard risk -Restricted risk -Special risk -Substandard risk - Correct Answer Substandard risk (Explanation: A substandard risk applicant is one who poses a higher-than-average risk for one or more reasons. Substandard applicants may represent a very low risk on moral and occupational considerations and still pose a high risk because of their physical condition.) When must insurable interest exist in health insurance? -During the policy period -Both at the time of application and time of claim -At the time of a claim -At the time of application - Correct Answer At the time of application (Explanation: Insurable interest for health insurance is the same as for life insurance. Insurable interest must exist at the time of application.) All of the following are used in underwriting an applicant's health application, EXCEPT? -Parents ages -Weight -Age -Sex - Correct Answer Parents ages Who is the one that determines the classification of an applicant for health insurance? -Underwriter -Agent -Risk manager -Actuary - Correct Answer Underwriter
All of the following are techniques commonly used by insurers in issuing health insurance policies to substandard risks, EXCEPT? -Add a waiting period of 6 months -Charge extra premium -Attach exclusion or impairment rider or waiver -Limit the type of policy - Correct Answer Add a waiting period of 6 months All of the following are classifications of applicants for health insurance, EXCEPT? -Standard risk -Preferred risk -Special risk -Substandard risk - Correct Answer Special risk (Explanation: The classifications of applicants for health insurance are: preferred risk, standard risk, substandard risk and uninsurable risk.) When an insured holds more than one occupation, and occupation is used to classify the risk, what occupation will the insurer generally use to classify the insured? -Occupation that would produce the lowest premium -Occupation where insured spends the majority of hours -Occupation insured has been employed the longest -Occupation that is most hazardous - Correct Answer Occupation that is most hazardous Which of the following is NOT a factor affecting health insurance premiums? -Marital status -Sex -Age -Hobbies - Correct Answer Marital status With all other factors being equal, who of the following would have the highest premiums for a health insurance policy? -25 year old female -45 year old male -25 year old male -45 year old female - Correct Answer 45 year old female (Explanation: Health insurance costs tend to increase as the age of the insured increases. The older the insured, the higher the applicable premium rate. Disabilities among women under the age of 55, on the average, have a greater frequency and longer duration than among men, so female premium rates for certain coverage’s are higher than premium rates for males.) Both life and health insurance use all of the following factors in determine premiums, EXCEPT? -Interest factor -Expense factor -Morbidity
