Accident and Health Insurance Exam Practice Test

25 practice questions

Choose an answer, then check it under Show answer.

1. Question 1 of 25Medium

   Why do Health Maintenance Organizations (HMOs) provide coverage for out-of-network emergency services without requiring prior gatekeeper authorization?

   1. AA. To avoid entering into contracts with local hospitals for acute care
   2. BB. To allow subscribers to bypass network restrictions for routine treatments
   3. CC. To convert closed-panel networks into open-panel indemnity insurance plans
   4. DD. To ensure members receive immediate life-saving care without dangerous delays
   Show answer to question 1

   Answer: D. To ensure members receive immediate life-saving care without dangerous delays

   Requiring a gatekeeper referral during a genuine medical emergency could cause life-threatening treatment delays, so emergency care is protected regardless of network status. This exception applies strictly to acute emergency conditions rather than routine, elective office visits.

2. Question 2 of 25Hard

   At the time Jamal is terminated from his job with 80 employees, his covered spouse is disabled. The spouse elects COBRA and qualifies for the disability extension. What is the longest period of continuation coverage available, and what is the maximum premium the plan may charge during that extension?

   1. AA. 18 months and up to 102 percent of the plan's cost of coverage.
   2. BB. 36 months and up to 102 percent of the plan's cost of coverage.
   3. CC. 29 months and up to 150 percent of the plan's cost of coverage.
   4. DD. 29 months and up to 102 percent of the plan's cost of coverage.
   Show answer to question 2

   Answer: C. 29 months and up to 150 percent of the plan's cost of coverage.

   When a qualified beneficiary is disabled, the disability extension lengthens continuation to 29 months and permits the plan to charge up to 150 percent of the plan's cost of coverage. The option pairing 29 months with 102 percent is tempting, but 102 percent is the standard limit, not the limit during the disability extension.

3. Question 3 of 25Medium

   HIPAA prohibits group health plans from establishing eligibility criteria based on health status-related factors. All of the following are prohibited health status factors for determining eligibility EXCEPT:

   1. AA. Genetic information
   2. BB. Full-time employment status
   3. CC. Past medical claims experience
   4. DD. Evidence of individual insurability
   Show answer to question 3

   Answer: B. Full-time employment status

   Group health plans are permitted to establish eligibility rules based on non-health factors such as working full-time, completing a probationary employment period, or belonging to a specific job classification. Plans may not, however, deny eligibility or charge higher premiums based on health-related factors like claims history, genetics, or evidence of insurability. Past claims experience is a classic health status factor that cannot be used to exclude an employee.

4. Question 4 of 25Medium

   Walter visits his dentist for two distinct procedures: installing a permanent artificial bridge to replace two missing teeth, and placing a composite filling into a decayed tooth. Under standard dental insurance benefit categories, how are these two procedures classified?

   1. AA. The bridge is oral surgery, and the composite filling is preventive care.
   2. BB. The bridge is restorative care, and the composite filling is endodontics.
   3. CC. The bridge is periodontics, and the composite filling is prosthodontics.
   4. DD. The bridge is prosthodontics, and the composite filling is restorative care.
   Show answer to question 4

   Answer: D. The bridge is prosthodontics, and the composite filling is restorative care.

   Prosthodontics includes procedures designed to replace missing natural teeth with artificial appliances like bridges, dentures, and partials. Restorative care involves repairing natural teeth damaged by decay or trauma using fillings, inlays, or crowns. Endodontics is incorrect because it specifically refers to treatment of the dental pulp, such as root canals, rather than tooth restorations.

5. Question 5 of 25Medium

   Frank owns an individual disability policy that requires monthly premium payments. When his monthly premium falls due on October 1, Frank fails to send payment, and the standard 10-day monthly grace period expires without any payment being received. What is the direct contractual consequence of Frank failing to provide this required ongoing consideration?

   1. AA. The insurer converts the contract into a paid-up policy with benefits reduced by fifty percent.
   2. BB. The policy immediately deducts future premiums from the policy's nonforfeiture cash value.
   3. CC. The policy remains active under the time limit on certain defenses provision for two full years.
   4. DD. The policy lapses for nonpayment of premium and the insurer's obligation to cover new losses terminates.
   Show answer to question 5

   Answer: D. The policy lapses for nonpayment of premium and the insurer's obligation to cover new losses terminates.

   Ongoing premium payment is the insured's continuous consideration necessary to keep the contract in force. When the insured fails to pay the premium and allows the statutory grace period to expire without payment, the contract lapses for nonpayment of premium and active coverage ceases.

6. Question 6 of 25Easy

   Alan applies for an individual disability policy. The underwriter evaluates his physical examination, medical history, and occupation, concluding that Alan's exposure to loss matches the average person reflected in the company's standard morbidity tables. How will the insurer classify Alan's risk?

   1. AA. Preferred risk, qualifying for discounted premium rates
   2. BB. Substandard risk, receiving coverage with a rated-up premium
   3. CC. Standard risk, receiving coverage at regular published rates
   4. DD. Declined risk, resulting in no policy offer being made
   Show answer to question 6

   Answer: C. Standard risk, receiving coverage at regular published rates

   A standard risk classification means the applicant has an average risk profile without substantial impairments or superior health traits, qualifying for coverage at the insurer's regular manual rates. Preferred risk is incorrect because preferred status is reserved for individuals with better-than-average health and lower-than-average risk of loss.

7. Question 7 of 25Medium

   Elena applies for major medical insurance as a standard risk without submitting an initial premium. The underwriter issues the policy with a higher premium rating and an exclusionary rider. The producer arranges an in-person meeting to deliver the contract. What is the main reason an in-person delivery is important in this situation?

   1. AA. To explain the modified coverage and secure the applicant agreement to the counteroffer
   2. BB. To allow the applicant to rewrite the application without further underwriting review
   3. CC. To prevent the applicant from exercising their right to a policy free-look period
   4. DD. To extend the statutory grace period before the initial premium payment becomes due
   Show answer to question 7

   Answer: A. To explain the modified coverage and secure the applicant agreement to the counteroffer

   When an insurer issues a policy that differs from what was requested, such as adding a rating or exclusion, it constitutes a counteroffer rather than an acceptance. An in-person delivery allows the producer to explain why the changes occurred and collect the initial premium alongside the signed acceptance of the revised terms. It does not bypass underwriting or eliminate the applicant's right to a free-look period.

8. Question 8 of 25Easy

   Under a managed care plan, what typically happens if an insured undergoes an elective non-emergency inpatient procedure without obtaining the required preauthorization?

   1. AA. The policy is automatically canceled for breach of contract.
   2. BB. The hospital assumes full liability for all incurred charges.
   3. CC. The insurer pays the full benefit without any penalty.
   4. DD. Benefits are reduced or a financial penalty is applied.
   Show answer to question 8

   Answer: D. Benefits are reduced or a financial penalty is applied.

   Preauthorization allows the insurer to determine medical necessity before an elective service is rendered. If an insured skips this required step, the insurer typically reduces benefits or applies a substantial financial penalty rather than canceling coverage or covering the procedure in full.

9. Question 9 of 25Hard

   Which of the following is NOT a purpose of the legal actions provision in an accident and health policy?

   1. AA. To bar suits filed before the insurer has had 60 days to review the proof of loss.
   2. BB. To give both parties a defined period in which settlement can be negotiated.
   3. CC. To protect the insurer from stale claims brought long after the evidence has been lost.
   4. DD. To require the insured to bring suit within 60 days after the loss occurs.
   Show answer to question 9

   Answer: D. To require the insured to bring suit within 60 days after the loss occurs.

   The legal actions provision works in two directions: it delays suit for 60 days after proof of loss so the insurer can investigate and settle, and it caps the insured's time to sue at 3 years after proof of loss is required. The 60 day figure is a waiting period before suit, not a deadline for filing it. Treating it as a filing deadline would deny the insured the very time the provision is meant to allow.

10. Question 10 of 25Easy

    Danielle has been receiving total disability income benefits for two full years under a policy with a cost of living adjustment (COLA) rider. Inflation has increased consumer prices over the past twelve months. How does the COLA rider affect Danielle's ongoing benefit payments?

    1. AA. It automatically doubles her policy's maximum benefit period from two years to four years.
    2. BB. It provides a lump-sum reimbursement to offset Danielle's out-of-pocket medical expenses at the end of the year.
    3. CC. It increases Danielle's monthly disability benefit checks based on a specified index to preserve purchasing power.
    4. DD. It converts her monthly income checks into non-taxable distributions regardless of who paid the premium.
    Show answer to question 10

    Answer: C. It increases Danielle's monthly disability benefit checks based on a specified index to preserve purchasing power.

    A cost of living adjustment (COLA) rider periodically increases monthly benefit payments during an active claim, typically indexing them to a measure like the Consumer Price Index to protect the insured's purchasing power against inflation. It does not provide medical expense reimbursements, nor does it alter the base contract's stated maximum benefit period or the tax status of the benefits.

11. Question 11 of 25Hard

    Elena has Medicare Part A but has never enrolled in Part B. She wants to join a Medicare Advantage plan in her area. What must she generally do first?

    1. AA. Wait until the annual open enrollment period.
    2. BB. Disenroll from Medicare Part A.
    3. CC. Buy a Medigap policy.
    4. DD. Enroll in Medicare Part B.
    Show answer to question 11

    Answer: D. Enroll in Medicare Part B.

    Medicare Advantage (Part C) plans provide the benefits of Part A and Part B, so a person must be enrolled in both parts to join one. Elena has only Part A, so she needs to enroll in Part B first. A Medigap policy is separate and cannot be used with Medicare Advantage, and dropping Part A would not help her qualify.

12. Question 12 of 25Hard

    David holds an individual disability income policy with a 60-day elimination period. He suffers a disabling injury on March 1 and remains totally disabled until June 30. Assuming each month is counted as 30 days, for how many months of total disability will David receive income benefit payments?

    1. AA. 1 month
    2. BB. 2 months
    3. CC. 3 months
    4. DD. 4 months
    Show answer to question 12

    Answer: B. 2 months

    David's total disability lasted four months (March, April, May, and June, totaling 120 days). The 60-day elimination period functions as a time deductible covering the first two months (March and April). Consequently, David is entitled to receive benefits only for the remaining two months (May and June).

13. Question 13 of 25Medium

    Brian has a hospital indemnity policy that pays a fixed daily benefit, and he recently spent three days as an inpatient. He later had an outpatient hernia repair and asks his producer why that procedure generated no payment. Which explanation is correct?

    1. AA. The fixed daily benefit applies only to days of inpatient hospital confinement.
    2. BB. The policy pays nothing until a major medical plan reaches its limit.
    3. CC. The policy applies a new elimination period to each separate claim filed.
    4. DD. Outpatient surgery is paid under a separate surgical schedule in the contract.
    Show answer to question 13

    Answer: A. The fixed daily benefit applies only to days of inpatient hospital confinement.

    Hospital indemnity policies pay a flat amount for each day of inpatient confinement and generally provide no benefit for outpatient treatment, so the hernia repair produced no payment. A surgical schedule belongs to surgical expense policies, not to a daily hospital indemnity contract.

14. Question 14 of 25Medium

    An insured incurs $5,500 in eligible medical expenses under a major medical policy that includes a $500 calendar-year deductible and an 80/20 coinsurance requirement. If this is the insured's first claim of the year, how much will the insurer pay?

    1. AA. The insurer pays $4,000.
    2. BB. The insurer pays $4,400.
    3. CC. The insurer pays $4,500.
    4. DD. The insurer pays $5,000.
    Show answer to question 14

    Answer: A. The insurer pays $4,000.

    The insurer first applies the $500 deductible to the total eligible expenses, leaving $5,000 subject to coinsurance ($5,500 minus $500 equals $5,000). The insurer then pays its 80 percent share of that remaining amount, which equals $4,000 (0.80 multiplied by $5,000). The distractor of $4,400 mistakenly calculates 80 percent of the entire $5,500 bill without subtracting the deductible first.

15. Question 15 of 25Easy

    Chloe applies for an individual disability income policy. Her medical history shows a chronic right knee disorder from an old sports injury, but she is otherwise in excellent health. The insurer offers to issue the policy at standard premium rates, but attaches an exclusion rider specifically excluding benefits for any disability resulting from injuries to the right knee. This underwriting action is an example of:

    1. AA. Limiting the overall policy benefit period
    2. BB. Increasing the elimination period for accident claims
    3. CC. Using an impairment rider as an issuance alternative
    4. DD. Rating the applicant using a flat extra premium
    Show answer to question 15

    Answer: C. Using an impairment rider as an issuance alternative

    An impairment (or exclusion) rider allows an insurer to offer standard coverage while excluding a specific preexisting condition that would otherwise make the applicant uninsurable or subject to a high extra rating. Rating the applicant using a flat extra premium would mean charging more money while covering the condition, which is not what occurred here.

16. Question 16 of 25Easy

    A policyowner wants to change from annual to quarterly premium payments. What should the producer tell her?

    1. AA. She may request it from the insurer, and no new underwriting is needed
    2. BB. The beneficiary must consent in writing before the mode can change
    3. CC. Mode changes are not permitted after the first policy year
    4. DD. A new application and medical underwriting are required for any mode change
    Show answer to question 16

    Answer: A. She may request it from the insurer, and no new underwriting is needed

    Changing the payment mode is an owner's election that is handled by a request to the insurer and does not involve a new risk assessment. The distractor requiring a new application and underwriting is wrong because the mode affects only how the premium is paid, not the coverage being underwritten.

17. Question 17 of 25Medium

    Mia has a qualified HDHP and contributes to an HSA. Her employer offers a general-purpose health care Flexible Spending Account (FSA). What happens if Mia also enrolls in the general-purpose FSA?

    1. AA. She becomes ineligible because the FSA provides disqualifying coverage.
    2. BB. Her HSA contributions become tax free after the FSA balance reaches zero.
    3. CC. Her HSA must be converted into an employer-funded HRA.
    4. DD. She remains eligible because FSAs and HSAs are always compatible.
    Show answer to question 17

    Answer: A. She becomes ineligible because the FSA provides disqualifying coverage.

    A general-purpose health care FSA provides coverage that disqualifies an individual from contributing to an HSA, even if the individual also has a qualified HDHP. The idea that FSAs and HSAs are always compatible is a common misconception; limited-purpose FSAs are the exception.

18. Question 18 of 25Medium

    Under a standard individual accident and health insurance policy, which of the following losses is typically excluded from coverage?

    1. AA. An acute viral illness requiring unexpected hospitalization and intravenous care
    2. BB. An accidental laceration sustained while performing routine household chores
    3. CC. An injury sustained while actively committing an illegal act or felony
    4. DD. A broken arm resulting from an unexpected motor vehicle collision
    Show answer to question 18

    Answer: C. An injury sustained while actively committing an illegal act or felony

    Standard health and accident policies routinely exclude losses caused by war, intentional self-inflicted injuries, and injuries sustained while committing an illegal act or felony. Routine accidents at home, traffic collisions, and acute infectious illnesses are standard perils covered by health insurance.

19. Question 19 of 25Hard

    An applicant is comparing two policies with identical benefits and asks why the renewability provision deserves attention. Which statement best explains its importance?

    1. AA. It determines whether coverage can be kept in force in later years and whether the premium can change
    2. BB. It fixes the deadline for the insurer to pay a claim after proof of loss is received
    3. CC. It establishes the period after which the insurer cannot contest the application
    4. DD. It sets the maximum dollar amount the insurer will pay for any single claim
    Show answer to question 19

    Answer: A. It determines whether coverage can be kept in force in later years and whether the premium can change

    The renewability provision controls the insured's ability to continue the policy as health changes and whether the insurer may adjust premiums, which directly affects long-term value. Claim limits, the contestable period, and claim payment deadlines are governed by other policy provisions.

20. Question 20 of 25Easy

    Which statement best defines community care in long-term care?

    1. AA. Room and board in a nursing facility for residents needing 24-hour nursing.
    2. BB. Services such as personal care and adult day care provided outside an institution.
    3. CC. Emergency medical treatment provided in a hospital outpatient department.
    4. DD. Continuous skilled nursing and rehabilitation provided only in a hospital.
    Show answer to question 20

    Answer: B. Services such as personal care and adult day care provided outside an institution.

    Community care refers to long-term care services delivered in home and community settings to help people remain outside institutions. The nursing facility choice describes institutional care, not community care.

21. Question 21 of 25Easy

    A producer explains to a client that a disability income policy includes a 0-day elimination period for accidental injuries, but a 30-day elimination period for sickness. All of the following are reasons why insurers typically require a longer waiting period for sickness disabilities EXCEPT:

    1. AA. Accidental injuries are readily verifiable through physical trauma, whereas subjective sickness symptoms can be exaggerated.
    2. BB. Sickness disabilities are legally classified as temporary, while accidental injuries are always deemed permanent.
    3. CC. Routine, short-term illnesses would otherwise create high administrative expenses for numerous small claims.
    4. DD. Imposing an elimination period on sickness helps reduce moral hazard and encourages policyholders to return to work.
    Show answer to question 21

    Answer: B. Sickness disabilities are legally classified as temporary, while accidental injuries are always deemed permanent.

    There is no legal rule stating that sickness disabilities are temporary while accidental injuries are permanent; both perils can produce either temporary or total permanent disability. Insurers use longer elimination periods for sickness to control administrative costs on short-term minor illnesses, curb moral hazard, and verify prolonged impairment.

22. Question 22 of 25Hard

    A health insurer attempts to calculate premium rates by grouping 5,000 deep-sea commercial divers with 5,000 sedentary office workers into a single morbidity pool. What is the primary consequence of failing to use homogeneous exposure units?

    1. AA. The policy contracts become legally void because health policies require identical occupations.
    2. BB. The law of large numbers is fully satisfied because the total pool reaches 10,000 individuals.
    3. CC. The insurer cannot reliably predict loss frequency and severity to establish equitable rates.
    4. DD. The actual claim costs will automatically fall below the expected claim costs for both groups.
    Show answer to question 22

    Answer: C. The insurer cannot reliably predict loss frequency and severity to establish equitable rates.

    The law of large numbers requires exposure units to be homogeneous, meaning they share similar risk characteristics and loss likelihoods. Combining occupations with radically disparate hazards prevents the insurer from accurately predicting morbidity, resulting in distorted loss forecasts and inequitable pricing. Simply having a large head count does not satisfy the principle if the underlying risks are fundamentally dissimilar.

23. Question 23 of 25Medium

    All of the following statements about employer prescription drug coverage and Medicare Part D are correct EXCEPT:

    1. AA. Employer drug coverage that is at least as good as Medicare Part D is called creditable coverage.
    2. BB. A person must drop employer drug coverage before Medicare Part D will pay any claims.
    3. CC. A person with creditable employer drug coverage can generally wait to enroll in Part D without a late enrollment penalty.
    4. DD. When an employer ends creditable drug coverage, the person may have a special enrollment period to join a Part D plan.
    Show answer to question 23

    Answer: B. A person must drop employer drug coverage before Medicare Part D will pay any claims.

    A person is not required to drop employer drug coverage before Part D will pay claims; the two plans can coexist and the person weighs which coverage to keep. The statement that creditable employer drug coverage lets a person wait to enroll in Part D without a late penalty is correct, which makes it a tempting but valid choice.

24. Question 24 of 25Hard

    Rosa calls the insurer the day after a covered accident and the insurer mails claim forms, which she sets aside. She submits no medical records or signed statement, and four months later she demands payment. How should the insurer respond?

    1. AA. It must pay, because notice was given within 20 days of the accident.
    2. BB. It may deny the claim, because notice of claim does not substitute for proof of loss.
    3. CC. It must gather her medical records itself and pay without her proof.
    4. DD. It must pay, because the 90-day proof period had already expired.
    Show answer to question 24

    Answer: B. It may deny the claim, because notice of claim does not substitute for proof of loss.

    Notice of claim only alerts the insurer that a loss occurred; the claimant must still furnish proof of loss, normally within 90 days. Timely notice is the tempting answer, but it does not by itself establish the amount or extent of the loss.

25. Question 25 of 25Medium

    In many prepaid plans, members must choose a primary care physician who coordinates their care and authorizes referrals to specialists. This physician functions as a:

    1. AA. reinsurer
    2. BB. benefit assignee
    3. CC. claims administrator
    4. DD. gatekeeper
    Show answer to question 25

    Answer: D. gatekeeper

    The primary care physician in this role is commonly called a gatekeeper because care flows through that physician and specialist referrals require authorization. A claims administrator processes claims and does not direct the member's care.

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