Question 1

An insurer pricing a major medical policy studies the likelihood that insureds within a group will become sick or injured during the policy year. Which statistical concept is the insurer primarily relying on?

Accepted Answer

Morbidity refers to the incidence and severity of sickness and injury in a given population, which is the foundation for health insurance rating. Mortality, by contrast, measures the frequency of death and is used to price life insurance.

Question 2

Which type of health coverage is specifically designed to replace a portion of an insured's income when they are unable to work due to sickness or injury?

Accepted Answer

Disability income insurance pays periodic benefits that replace lost earnings while the insured is disabled and unable to work. It reimburses lost income rather than paying for medical treatment or custodial care.

Question 3

A policy pays for care such as assistance with bathing, dressing, and eating for an insured who can no longer perform activities of daily living. Which type of coverage provides these benefits?

Accepted Answer

Long-term care insurance covers custodial and personal care services, often triggered by the inability to perform a certain number of activities of daily living. Standard medical expense plans focus on treatment of illness, not ongoing custodial assistance.

Question 4

How does a deductible fundamentally differ from coinsurance in a major medical policy?

Accepted Answer

The deductible is a specified flat dollar amount the insured must pay out of pocket before the insurer begins paying. Coinsurance is the percentage split of covered costs shared between insurer and insured after the deductible has been satisfied.

Question 5

Under an 80/20 coinsurance arrangement, what does the out-of-pocket maximum (stop-loss) provision accomplish for the insured?

Accepted Answer

The stop-loss, or out-of-pocket maximum, places a ceiling on the insured's coinsurance obligation. Once the insured's out-of-pocket spending reaches that limit, the insurer pays 100% of remaining covered expenses for the benefit period.

Question 6

A health plan requires the insured to pay a flat $25 each time they visit a physician, regardless of the total charge for the visit. This fixed charge is best described as a:

Accepted Answer

A copayment is a set flat dollar amount the insured pays for a specific service, such as an office visit, at the time of service. It differs from coinsurance, which is a percentage of the charge rather than a fixed sum.

Question 7

Which statement best describes coverage that provides first-dollar benefits?

Accepted Answer

First-dollar coverage pays for covered losses immediately, with no deductible for the insured to satisfy first. Basic medical expense plans are the classic example of first-dollar coverage.

Question 8

In a comprehensive major medical plan that integrates a basic plan with a supplemental major medical layer, what is the purpose of the corridor deductible?

Accepted Answer

A corridor deductible is the out-of-pocket amount the insured must pay after basic benefits are used up but before the major medical portion begins to pay. It bridges the gap, or corridor, between the two layers of coverage.

Question 9

Which description correctly distinguishes basic medical expense coverage from major medical coverage?

Accepted Answer

Basic medical expense plans typically pay first-dollar benefits up to modest limits without deductibles or coinsurance. Major medical is designed for catastrophic protection, featuring high maximum limits along with deductibles and coinsurance to share cost.

Question 10

An insured receives a bill from a surgeon, pays it in full, and then submits the receipt to the insurer for payment directly to the insured. This payment method is characteristic of which type of plan?

Accepted Answer

Under an indemnity or reimbursement plan, the insured may pay the provider and be reimbursed by the insurer, or benefits are paid on a cash basis. Service plans, by contrast, contract directly with providers who bill the plan rather than the insured.

Question 11

A surgical expense policy contains a printed list assigning a specific maximum dollar benefit to each covered surgical procedure. This benefit-determination method is known as:

Accepted Answer

A scheduled approach lists a set maximum benefit payable for each specified procedure. This contrasts with the UCR method, which bases payment on the prevailing charges for a service in a given geographic area.

Question 12

A health policy will not cover treatment for a medical condition that existed before the policy's effective date for a specified period. This limitation addresses what kind of condition?

Accepted Answer

A pre-existing condition is one for which the insured received diagnosis, care, or treatment before the policy began. Individual policies may limit coverage of such conditions for a stated period, subject to state and federal limits.

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