LLQP Accident and Sickness Insurance 5 — Questions and Answers
Question 1: A group health insurance plan uses a 'stop-loss' provision. Which of the following BEST describes its function?
- It stops benefit payments after a maximum benefit is reached
- It limits the insured's out-of-pocket expenses to a defined maximum per year (Correct answer)
- It prevents the insurer from canceling the group plan mid-term
- It sets the maximum premium the employer can be charged
Correct answer: It limits the insured's out-of-pocket expenses to a defined maximum per year
A stop-loss (or out-of-pocket maximum) provision caps the total amount an insured must pay in cost-sharing each year, after which the insurer covers 100% of covered expenses.
Question 2: Under an accidental death and dismemberment (AD&D) policy, the 'principal sum' refers to:
- The benefit paid for loss of life due to an accident (Correct answer)
- The benefit paid for partial dismemberment such as loss of one finger
- The maximum lifetime benefit under the policy
- The premium amount due at policy inception
Correct answer: The benefit paid for loss of life due to an accident
The principal sum is the full face amount paid for accidental death or loss of two major body parts; lesser losses pay a percentage called the capital sum.
Question 3: Which of the following is an example of a 'capitation' payment arrangement commonly found in managed care plans?
- The insurer pays the provider a set fee for each service rendered
- The provider receives a fixed monthly payment per enrolled member regardless of services used (Correct answer)
- The insured pays a co-payment at each visit and the insurer covers the rest
- The employer pays the insurer an annual premium based on employee headcount
Correct answer: The provider receives a fixed monthly payment per enrolled member regardless of services used
Capitation pays healthcare providers a fixed per-member-per-month fee regardless of how many services that member uses, incentivizing preventive care.
Question 4: An insured has both a group health plan through her employer and individual coverage. The coordination of benefits (COB) rule determines:
- Which policy is cancelled when duplicate coverage exists
- How benefits are shared between the two plans to prevent overpayment (Correct answer)
- The maximum premium the insured must pay for both plans combined
- Whether the insured is eligible to keep both plans simultaneously
Correct answer: How benefits are shared between the two plans to prevent overpayment
COB rules coordinate payments between multiple health plans so the insured is reimbursed for actual losses without receiving more than 100% of covered expenses.
Question 5: Which of the following provisions gives an insured the right to continue individual health coverage after losing group coverage, without proving insurability?
- The guaranteed renewability provision
- The conversion privilege (Correct answer)
- The continuation of coverage clause
- The waiver of premium provision
Correct answer: The conversion privilege
The conversion privilege allows an insured leaving a group plan to convert to an individual policy without undergoing a medical exam or proving insurability.
Question 6: A health insurance policy's 'internal limits' clause most directly affects which type of expense?
- Prescription drug costs only
- Specific services like room and board or mental health visits, capping what the insurer pays per day or visit (Correct answer)
- The total lifetime maximum benefit
- Out-of-network provider charges only
Correct answer: Specific services like room and board or mental health visits, capping what the insurer pays per day or visit
Internal limits cap what the insurer will pay for specific services (e.g., $300/day for hospital room) even if the overall policy maximum has not been reached.
Question 7: Under the LLQP, which of the following BEST describes the insurer's obligation under a 'guaranteed renewable' accident and sickness policy?
- The insurer must renew the policy but may increase premiums for the entire class of insureds (Correct answer)
- The insurer must renew the policy and cannot change any policy terms or premiums
- The insurer may cancel the policy at any renewal date for any reason
- The insurer must renew the policy and cannot increase premiums under any circumstances
Correct answer: The insurer must renew the policy but may increase premiums for the entire class of insureds
A guaranteed renewable policy cannot be cancelled by the insurer as long as premiums are paid, but the insurer may raise premiums on a class-wide basis.
LLQP Accident and Sickness Insurance 5
A group health insurance plan uses a 'stop-loss' provision.
Which of the following BEST describes its function?