Life & Health Insurance Health Insurance Fundamentals Questions and Answers — Questions and Answers
Question 1: An insured has a health insurance plan with a $1,000 deductible and 20% coinsurance. If the insured incurs a covered medical expense of $5,000, how much will the insurance company pay?
- $3,000
- $4,000
- $3,200 (Correct answer)
- $5,000
Correct answer: $3,200
First, the insured must pay the $1,000 deductible, leaving a balance of $4,000. The coinsurance provision requires the insured to pay 20% of this remaining amount, which is $800 ($4,000 * 0.20). The insurance company pays the other 80%, which amounts to $3,200 ($4,000 * 0.80).
Question 2: Which of the following health insurance plans typically requires the policyholder to select a Primary Care Physician (PCP) and obtain a referral to see a specialist?
- Preferred Provider Organization (PPO)
- Health Maintenance Organization (HMO) (Correct answer)
- Exclusive Provider Organization (EPO)
- Indemnity Plan
Correct answer: Health Maintenance Organization (HMO)
A Health Maintenance Organization (HMO) is a type of managed care plan that often requires members to choose a Primary Care Physician (PCP) who acts as a gatekeeper. To see a specialist, the member must first get a referral from their PCP.
Question 3: A couple has a child covered under both of their group health insurance plans. The father's birthday is March 15th, and the mother's birthday is July 22nd. According to the 'birthday rule' for coordination of benefits, which plan is considered primary for the child's claims?
- The mother's plan, because she is the female parent.
- The plan that has been in effect the longest.
- The parents can choose which plan is primary.
- The father's plan, because his birthday occurs earlier in the calendar year. (Correct answer)
Correct answer: The father's plan, because his birthday occurs earlier in the calendar year.
The birthday rule states that for a dependent child covered by both parents' plans, the primary plan is that of the parent whose birthday (month and day) occurs earlier in the calendar year. The year of birth is not a factor. Since March comes before July, the father's plan is primary.
Question 4: Which provision in a health insurance policy prevents the insurer from denying a claim due to misstatements on the application after the policy has been in force for a specific period, typically two years?
- Grace Period
- Reinstatement
- Incontestable Clause (Correct answer)
- Entire Contract Clause
Correct answer: Incontestable Clause
The Incontestable Clause is a mandatory provision that limits the insurer's right to contest the validity of the policy based on misrepresentations in the application after a certain period, usually two years. This protects the insured from having a claim denied long after the policy was issued.
Question 5: The Affordable Care Act (ACA) requires that most health insurance plans cover a set of 'Essential Health Benefits.' Which of the following is NOT considered one of the ten essential health benefits?
- Cosmetic surgery (Correct answer)
- Prescription drugs
- Maternity and newborn care
- Mental health and substance use disorder services
Correct answer: Cosmetic surgery
The Affordable Care Act mandates coverage for ten essential health benefits, including prescription drugs, maternity care, and mental health services. Elective cosmetic surgery is not included in this list of mandated benefits.
Question 6: An individual has a health plan with a feature that allows them to see providers both in and out-of-network, but with higher cost-sharing for out-of-network services. They are not required to have a PCP or get referrals. What type of plan does this most likely describe?
- Health Maintenance Organization (HMO)
- Exclusive Provider Organization (EPO)
- Preferred Provider Organization (PPO) (Correct answer)
- Point of Service (POS)
Correct answer: Preferred Provider Organization (PPO)
A Preferred Provider Organization (PPO) offers the most flexibility by allowing members to see providers both in and out of the network without needing a referral from a primary care physician. However, the out-of-pocket costs are lower when using in-network providers.
Life & Health Insurance Health Insurance Fundamentals Questions and Answers
An insured has a health insurance plan with a $1,000 deductible and 20% coinsurance.
If the insured incurs a covered medical expense of $5,000, how much will the insurance company pay?