Arkansas Health Insurance Study Questions

If a producer knowingly violates a cease and desist order issued by the Arkansas Commissioner for unfair trade practices, the producer may receive which of the following penalties for each violation?

$10,000 for each violation not to total more than $50,000. If a producer knowingly violates a cease and desist order issued by the Arkansas Commissioner for unfair trade practices, the producer may receive a penalty of $10,000 for each violation, not total more than $50,000.

What is the maximum tax rate a beneficiary will be charged on proceeds collected in the state of AR? *0% *5% *10% *20%

0%. In AR, a beneficiary will not be taxes on proceeds collected.

In Arkansas, how long is the "free look" period? *10 days *15 days *20 days *30 days

10 days. The "free look" period in Arkansas is 10 days.

In Arkansas, the minimum number of days the insurance company must allow for a grace period on a life policy is *10 days *15 days *20 days *30 days

30 days. IN AR the minimum number of days the insurance company must allow for a grace period on a life policy is 30 days.

In AR, a producer who moves to a new address must notify the Commissioner of the address changes within how many days? *15 days *30 days *45 days *60 days

30 days. In AR, a producer who moves to a new address must notify the Commissioner of the address change within 30 days.

A stock insurance company is owned by its *directors *stockholders *agents *insureds

A stock insurance company is owned by its stockholders.

Which of the following statements describes what an Accident and Health policy owner may NOT do? *file a covered claim *assign ownership *cancel coverage *adjust the premium payments

Adjust the premium payments. The owner of an Accident and Health policy may not change the premium amount.

Under the Unfair Trade Practice law, agents may be found guilty of defamation if they make a false statement that is intended to *malign another insurance company *mislead a prospect about a policy's term of coverage *misrepresent the benefits payable under a policy *defraud an insured or a claimant

Agents making a false statements intended to malign another insurance company may be found guilty of defamation.

A Disability Income policy owner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim? *Claim will be paid and coverage will remain in force *Claim will be denied and coverage will remain in force *Claim will be denied and coverage will be cancelled * Claim will be denied, the coverage cancelled and all premiums paid will be refunded

Claim will be paid and coverage will remain in force. After a policy has been in force for 2 (sometimes 3) years, it enters the incontestable period, in which the insurer may not deny a claim based on information not disclosed at the time of application.

The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n) *closed panel *open panel *co-op panel *capitation panel

Closed panel. This is when an HMO is represented by a group of physicians who are salaried employees and work out of the HMO's facility.

What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? *Commingling *Conversion *Renewing *Replacing

Conversion permits an individual to depart from the group and continue to be covered without providing evidence of insurability.

Medicare Part A and Part B do NOT pay for *dental work *hospitalization *skilled nursing care *physical therapy

Dental work --dental services are not covered by Medicare Part A or B

With Accidental Death and Dismemberment policies, what is the purpose of the Grace Period? * Gives the policy owner additional time to pay past due premiums *Gives the policy owner additional time to file a lawsuit *Gives the policy owner additional time to file a claim *Gives the policy owner additional time to provide proof of loss

Gives the policy owner additional time to pay any past due premiums-- the purpose of the Grace Period is to give the policy owner time to pay any past due premiums.

How does group insurance differ from individual insurance?

Group insurance differs from individual insurance in that it provided coverage at a lower cost.

A medical care provider which typically delivers health services at its own local medical facility is know as a *Health Maintenance Organization * Regional Provider *Multiple Employer Trust *Preferred Provider Organization

Health Maintenance Organization. HMO's traditionally provide services to its members at its own local health care facilities.

An agent who tells claimants that their rights may be impaired if they fail to complete a release form within a given period of time could be guilty of *defamation *rebating *coercion *discrimination

In this situation, the agent may be guilty of coercion.

Which of the following health insurance policy provisions specifies the health care services a policy will provide? *Insuring clause *Usual, Customary, and Reasonable clause *Consideration clause *Benefit Cls.

Insuring Clause. The insuring clause identifies the specific type of health care services that are covered by that policy.

Which health policy clause specifies the amount of benefits to be paid? *Insuring *Consideration *Free-look *Payment mode

Insuring. In an Accident and Health policy, the insuring clause states the amount of benefits to be paid.

Which of the following statements BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that used the "accidental means" definition? *double indemnity *benefits are taxable * more restrictive *less restrictive

Less restrictive. A policy that uses "accidental bodily injury" definition of an accident is less restrictive than the one that uses the "accidental means" definition.

Which of the following are NOT managed care organizations? *Point-of-Service plan (POS) *Preferred Provider Organization (PPO) *Medical Information Bureau (MIB) *Health Maintenance Organization (HMO)

Medical Information Bureau (MIB) is the only entity that is not a managed health care organization.

If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses? *Long-term care *Indemnity *Medicare Supplement *Medicaid

Medicare Supplement. IN this situation, a Medicare Supplement policy would provide the subscriber the best coverage for excess charges.

Which of the following characteristics is associated with a large group disability income policy? *no waiting periods *no medical underwriting *no elimination periods * no limit of benefits

No medical underwriting. A large group disability income policy can be distinguished by no medical underwriting.

What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy? *Premiums may increase at time of renewal *Premiums may increase at any time *Policy may be renewed at the discretion of the insured *Policy may be amended by insurer at any time

Premiums may increase at time of renewal. A Conditionally Renewable Health Insurance policy can increase premiums at time of renewal.

What must the policy owner provide to the insurer for validation that a loss has occurred? *Proof of Coverage * Proof of Claim *Proof of Loss *Proof of Payment

Proof of Loss statement must be provided to an insurance company to show that a loss actually occurred.

Which of the following provisions specifies how long a policy owner's health coverage will remain in effect if the policy owner does not pay the premium when it is due? *Grace Period * Consideration *Waiver of Premium * Reinstatement

The Grace Period is the additional period of time after a premium payment is due that will allow the policy to remain in force in the event of nonpayment.

Which of the following health insurance policy provisions specifies the health care services a policy will provide? *Insuring clause *Usual, Customary and Reasonable clause *Consideration Clause *Benefit clause

The Insuring Clause identifies the specific type of health care services that are covered by a policy.

The provision that defines to whom the insurer will pay benefits to is called *Entire Contract *Proof of Loss *Claim Forms *Payment of Claims

The Payment of Claims provision in a Health Insurance policy states to whom claims will be paid.

Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a Disability Income policy? *Issue the policy with a diabetes exclusion *Issue the policy with an altered Time of Payment of Claims provision *Issue the policy with a rating *Decline the applicant

The correct answer is "Issue the policy with an altered Time of Payment of Claims provision". The insurance company may take all of these actions EXCEPT issue the policy with an altered Time of Payment of Claims provision.

Which of the following statements is true about most Blue Cross/Blue Shield organizations? * They are the same as private insurance companies *They are federally sponsored *They are nonprofit organizations *They are owned by hospitals and physicians

They are nonprofit organizations. Most BC/BS organizations are considered nonprofit.

Medicare is intended for all of the following groups EXCEPT *those enrolled as a full-time student *those receiving Social Security disability benefits for at least 24 months * Those afflicted with chronic kidney failure *those 65 and older

Those enrolled as a full-time student. All of these groups of people are typically eligible for Medicare except full-time students.

The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is *Grace Period *Physical Exam and Autopsy * Entire Contract *Time Limit on Certain Defenses

Time Limit on Certain Defenses. This provision limits the period during which an insurer can deny a claim based on a misstatement made by the insured.

What type of reinsurance contract involves two companies automatically sharing their risk exposure?

Treaty

Inducing or attempting to induce an insured person through misrepresentation to lapse, forfeit or surrender insurance is *rolling over *rebating *twisting *coercion

Twisting is inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance is considered twisting.

Which of the following BEST describes how pre-admission certifications are used? *Used to assist in underwriting *used to prevent nonessential medical costs *Used to minimize hospital lawsuits *used to help process claims

Used to prevent nonessential medical costs.

Who elects the governing body of a mutual insurance company?

policyholders

At what point must a life insurance applicant be informed of their right that fall under the Fair Credit Reporting Act?

upon completion of the application

What is the maximum Social Security Disability benefit amount an insured can receive? *50% of the insured's Primary Insurance Amount (PIA) *75% of the insured's PIA *100% of the insured's PIA *100% of the insured's PIA minus any monies received from a retirement plan

100% of the insured's PIA. The MAXIMUM Social Security Security Disability benefit an insured may receive is equal to 100% f the insured's Primary Insurance Amount

What is the minimum age for a person to enter in to an insurance agreement in the state of Arkansas? *15 *18 *18 *21

18. A person must be at least 18 years of age to enter into an insurance agreement in the state of AR

How often must an agent complete continuing education to maintain their license in Arkansas? *Every year * Every 2 years *Never as long as they are working for an authorized insurance company * Every 4 years

2 years. An agent must complete continuing education every 2 years in order to maintain their license in AR.

What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits? *1 *2 *3 *4

2. A qualified Long Term Car policy must stipulate that the insured be incapable of performing at least two of the ADL's without assistance for at least 90 days to qualify for benefits.

M's insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force? * 10 days *30 days *45 days *60 days

45 days. Health insurance will automatically be placed back in force if the insurer fails to notify an applicant within 45 days that the reinstatement application was denied.

The individual most likely to buy a Medicare Supplement policy would be a(an) *unemployed 64-year old female *62-year old male covered by Medicaid *68-year old male covered my Medicare *uninsured 60-year old male

68-year old male. Medicare Supplement are available to those covered by Medicare.

In AR, what is the maximum amount of interest an insurance company can charge a consumer on a policy loan? *5.00% *Prime Plus 2.99% *8,00% *12.25%

8.00% In AR, the maximum amount of interest an insurance company can charge a consumer on a policy loan is 8.00%.

J is a subscriber to a plan which contracts with doctors and hospitals to provide medical benefits at a predetermined price. What type of plan does J belong to? * Multiple Employer Welfare Arrangement *Multiple Employer Trust *Health Maintenance Organization * Co-op Arrangement

A Health Maintenance Organization (HMO) contracts with doctors and hospitals to provide medical benefits to subscribers at a predetermined price.

A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of *coercion *fraud *rebating *boycotting

A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition of the loan is guilty of coercion.

Which contract permits the remaining partners to buy-out the interest of a disabled business partner?

A disability buy-sell plan allows the remaining partners to buy out the interest of the disabled business partner.

P is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period? * Authorize for payroll deductions * Agree to a physical examination *Sign an enrollment card * Register with her state of residency

A new employee must sign an enrollment card during the open enrollment period.

Which of the following statements about the classification of applicants is INCORRECT? *Substandard applicants are never declined by underwriters *Substandard applicants are occasionally declined by underwriters *Preferred risk applicants typically have better premium rates than standard risk applicants *An applicant can be classified as substandard risk because of a hazardous job

A substandard risk is below the insurer's average risk guidelines. An individual can be rated substandard for a number of reasons and can even be rejected outright.

All of the following are requirements to become an insurance producer in the state of AR except: *Be at least 18 years of age *Completed a Prelicensing course *Passed the state exam for the line of authority sought *Graduate High School

All of these are requirements to become an insurance producer in the state of AR except graduate high school.

Which of the following is an example of defamation? *a pamphlet listing a competitor's financial rating *a brochure including an untrue statement regarding a competitor's ability to pay claims *A verbal statement of a competitor's complaint ratio *A truthful estimate of the dividends

An example of defamation would be issuing a brochure that contains untrue statements regarding a competitor's ability to pay claims.

A certificate of authority does which of the following? *Authorizes the insurance company to transact business in AR *Gives the commissioner the authority to make insurance laws in AR *Authorizes the agent to sell insurance *Authorizes the customer to complete a free medical exam

Authorizes the insurance company to transact business in Arkansas. A certificate of authority authorizes the insurance company to transact business in Arkansas.

The difference between group insurance and blanket health policies is

Blanket health policies do not issue certificates.

G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is *Business Overhead Expense * Disability Income *Key Employee Life * Contributory

Business Overhead Expense-- this policy's purpose is to cover certain overhead expenses that continue when the business own is disabled.

Which of the following actions by an insurance company is considered an unfair claims settlement practice? *Requiring an insured to give a statement under oath *Requiring the insured to submit a proof of loss statement before paying a claim *Requesting a third-party arbitrator to resolve a disagreement with a claimant *Denying an insured's claim without indicating the basis of denial under the policy

Denying an insured's claim without indicating the basis of denial under the policy is considered an unfair claim settlement practice.

An alien insurance company is defined as one formed in *AR *Florida *New Mexico *Europe

Europe. Alien insurance company is a company that is charted and organized in any country other than the US. Therefore, a company chartered in Europe would be an alien company in Arkansas.

Long Term Care policies will usually pay for eligible benefits using which of the following methods? *Delayed *Fee for service *Expense incurred *Respite

Expense incurred. Most long-term care policies pay on a reimbursement (or expense-incurred) basis, up to the policy limits.

Which of the following is an unfair claims practice? *Providing a claims form within 15 days *Failing to effectuate prompt, fair, and equitable settlements of claims *paying a claim after a reasonable investigation *Establishing specific standards to settle claims

Failing to effectuate prompt, fair, and equitable settlements of claims is considered to be an unfair claims practice.

An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the

Fair Credit Reporting Act

A foreign company operating in Arkansas is a company incorporated or organized under the laws of *Arkansas *Florida *Canada *Europe

Florida. Foreign insurance company is a company whose home office is located in another state. Therefore, a company chartered in Florida would be a foreign company in Arkansas.

Which of the following will a Long Term Care plan typically provide benefits for? *disability income *death *unemployment *home health care

Home health care. A Long Term Policy will typically pay for home health care.

If an agent tells an applicant that the insurance policy is like a share of stock, the agent may be guilty of *defamation *rebating *misrepresentation *coercion

If an agent tells an applicant that the insurance policy is like a share of stock, the agent may be guilty of misrepresentation.

In Arkansas, the Commissioner may place on probation, suspend, revoke, refuse to renew, or deny a license for all of the following reasons EXCEPT: *Forging a name to an insurance document or application * Filing bankruptcy *Failing to comply with a court order imposing child support * Failing to pay state income tax.

In AR,the Commissioner may place on probation, suspend, revoke refuse to renew, or deny a license for all of these reasons EXCEPT filing bankruptcy.

An insurance company would MOST likely pay benefits under Accidental Death and Dismemberment policy who which of the following losses? *loss of life due to a heart attack *loss of eyesight due to an accidental injury *loss of the spleen due to an accidental injury * partial paralysis due to a stroke

Loss of eyesight due to an accidental injury.

Anyone who makes a fraudulent statement on an insurance application in order to obtain money benefits from an insurance company has committed the act of *twisting *malfeasance *coercion *misrepresentation

Making a fraudulent statement on an insurance application would be considered an act of misrepresentation.

Pre-hospitalization authorization is considered an example of *managed care *PPO care *Medicaid *Major Medical Insurance

Managed care. Pre-hospitalization authorization is the insurer's approval of an insured entering a hospital. Many health policies require this as part of an effort to manage costs.

The health insurance program which is administered by each state and funded by both the federal and state governments is called *long-term care *Medicaid *Medicare Supplemental Program *Medicare

Medicaid is funded by both the federal and state governments and administered by the individual states.

An agent who tells a client that dividends are guaranteed may be guilty of *fraud *rebating *misrepresentations *slander

Misrepresentation. An agent who tells a client that dividends are guaranteed may be guilty of misrepresentation.

XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is *25% *50% *75% or *100%

Most noncontributory health plans require 100% participation by eligible employees.

If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best describes this policy is called *noncancellable *conditionally renewable *cancellable *guaranteed renewable

Noncancellable. A noncancellable policy is one which the insurance company cannot cancel and which premiums cannot be increased.

If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best describes this policy is called *noncancellable *conditionally renewable *cancellable *guaranteed renewable

Noncancellable. A noncancellable policy is one which the insurance company cannot cancel and which premiums cannot be increased.

In AR, an insurance company must do which of the following to terminate a producer's appointment? *Notify the commissioner within 30 days *Notify the Agent within 30 days *Notify the commissioner within 15 days *Notify the policy holders within 30 days

Notify the commissioner within 30 days. In AR, an insurance company must notify the commissioner within 30 days to terminate a producer's appointment.

S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning *Sept. 21 * Oct 16 *Nov 1 *Dec 1

November 1. The insured must wait 60 days after written proof of loss before legal action can be brought against the company.

A stock insurance company is BEST defined as an incorporated company that has its capital divided into shares and *specializes in selling insurance to stockholders *has its governing body elected by its policyholders *is owned exclusively by its policyholders *is owned exclusively by its shareholders

Owned exclusively by its shareholders. A stock insurance company is best defined as an incorporated company that has its capital divided into shares and is owned exclusively by its shareholders.

Which of the following BEST describes how a Preferred Provider Organization (PPO) is less restrictive than a Health Maintenance Organization (HMO)? *Typically not subject to deductibles *Not regulated by the federal government *More benefits available *More physicians to choose from

PPO's normally provide a wider choice of physicians and hospitals.

Which of these is considered a mandatory provision? *Payment of Claims *Insurance with Other Insurers *Misstatement of Age *Change of Occupation

Payment of Claims is considered a mandatory provision and directs where the claim benefits will go. The others are considered optional provisions.

Replacement is involved in all of the following situations EXCEPT when * Depleting Cash value in an existing policy and applying for a new one *Taking a reduced paid up option for a policy and applying for a new one *Maintaining an existing policy and applying for a new one * Terminating an existing policy and applying for one with better coverage

Replacement is involved in all of the following situations EXCEPT when maintaining an existing policy and applying for a new one.

The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called

Reserves

Which of the following parties must provide an insured with proper disclosure concerning the replacement of an insurance company? *Producer *Applicant *Underwriter *Commissioner

The Producer must provide an insured with proper disclosure concerning the replacement of an insurance company.

T files a claim on his Accident and Health policy after being treated for an illness. The insurance company believes that T misrepresented his actual health on the initial insurance application and is, therefore, disputing the claim's validity. The provision that limits the time period during which the company may dispute a claim's validity is called. *Insuring * Time Limit on Certain Defenses * Grace Period *Free Look

The Time Limit on Certain Defenses (Incontestability) provision limits the time during which the insurance company may challenge the validity of an insurance claim on the basis of a misstatement made on the insured's application.

P is a Major Medical policy owner who is hospitalized as a result of injuries sustained from participating in a carjacking. How will the insurer most likely handle this claim? *Claim will be denied and policy terminated *Claim will be partially paid * Claim will be paid * Claim will be denied

The claim will be denied. If a person is insured while committing an illegal act, health insurance will not cover the expense of the injury.

Which statement is TRUE regarding a group accident and health policy issued to an employer? *Neither the employer or employee are policy owners *The employer is issued a certificate of coverage and each employee receives a policy * The employer receives the policy and each employee is issued a certificate *Both the employer and employee are policy owners.

The employer receives the policy and each employee is issued a certificate.

Which type of provider is know for stressing preventative medical care? *Multiple Employer Welfare Arrangements (MEWA) * Major medical provider *Health Maintenance Organizations (HMO's) *Preferred Provider Organizations (PPO's)

The health provider that stresses preventative medical care is know as a Health Maintenance Organization.

A prepaid application for individual Disability Income insurance was recently submitted to an insurer. When the insurer received the Medical Information Bureau (MIB) report, the report showed that the applicant had suffered a stroke 18 months ago, some that was not disclosed on the application. Which of the following actions would the insurance company NOT take? *Send the initial premium back to the applicant *Send a notice to the applicant that the coverage is declined *Send a notice to the MIB that the applicant was declined *Send a notice to the agent that the applicant was declined.

The insurance company would NOT send a notice to the MIB that the applicant was decline. The MIB does not need to be notified that the coverage was declined.

The purpose of the Guaranty Fund is to *Protect consumers from an insurance company's insolvency *Issue and maintain insurance producer records *Determine the appropriate level for agent commissions *Assist in the subsidy of life insurance premiums for seniors

The purpose of the Guaranty Fund is to protect consumers from an insurance company's insolvency.

What is the purpose of the Time of Payment of Claims provision? * Requires the insured to wait 60 days after submitting Proof of Loss before filing a lawsuit *Prevents delayed claim payments made by the insurer *Requires a probation period for each claim filed by the insured *Protects the insurer from frivolous lawsuits.

The purpose of the Time of Payment of Claims provision is to prevent the insurance company from delaying claim payments.

An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to *issue the policy only when the initial premium check has cleared * determine if the applicant is insurable by investigating family health history *issue the policy on a standard basis * determine if the applicant is an acceptable risk by completing standard underwriting procedures

With a conditional receipt, the insurance company will complete standard underwriting procedures before making a decision about whether to insure the applicant.

With Optionally Renewable Health policies, the insurer may *renew the policy only if no claims have been filed the previous year *renew the policy only with the insured's consent *review the policy whenever they please and determine whether or not to renew it *review the policy annually and determine whether or not to renew it

With an Optionally Renewable policy, the insurance company may review the policy annually and choose whether or not to renew it.