Chapter 8-Health Insurance Basics

Completing the Application

-Conditional receipt may be issued -Formal request for the insurer to issue a policy -Required signatures

Underwriting Process

-Insurability is determined -MIB report may be requested -Classification of risk and rating

Policy Delivery

-Producer explains rating, premiums, coverages, and policy benefits -Legal delivery -Statement of Good Health

Accidental bodily injury

A spontaneous unforeseen and unintended event resulting in injury

If a premium is submitted with the application and a conditional receipt is issued, coverage is effective: A. The date of application, or date of a completed medical exam if required, whichever is later, as long as the policy would have been issued as applied for B. The date the insurance company received the results of a required medical exam C. The date the policy is issued and mailed to the producer D. The date the insured or owner signed the policy delivery receipt

A. The date of application, or date of a completed medical exam if required, whichever is later, as long as the policy would have been issued as applied for A conditional receipt provides that coverage is effective the later of the date the application is signed or when a required medical exam is completed, not when the results are provided.

Sickness

An illness or disease that occurs after a policy is issued

Which of the following sources of insurability alerts members about an insurance applicant's previous claim information? A. Agent's Report B. APS C. MIB D. Consumer Investigative Report

C. MIB The MIB, Medical Information Bureau, Report acts as an information exchange regarding an applicant's previous claims, representations, possible fraud, pre-existing conditions, hazardous hobbies or occupation, and other information that may make the applicant a higher risk.

Which party to a health insurance contract is responsible for making the premium payments? A. Beneficiary B. Insured C. Policyowner D. Producer

C. Policyowner By definition, the policyowner is responsible for making all decisions regarding the policy and maintaining the policy by paying the premiums. The insured may also be the owner, but it is not a requirement.

Insured

Individual covered for a loss under the policy

Beneficiary

Individual specified in the policy who is eligible to receive benefits upon a loss suffered by the insured

Health insurance benefits

May include payments for disability income, medical, hospital and surgical expense reimbursement, dental expenses, accidental death and dismemberment, and long-term care expenses

Insurable interest

Relationship that must exist at the time of application in which an insured's sickness or injury would result in a financial or economic loss by the policyowner

Policyowner

The person who controls the policy and maintains the right to make all decisions regarding coverages

All of the following are potential risks of replacement of an individual health or disability insurance policy, except: A. Coverage due to an accident will be restricted for 30 days after the effective date of the policy B. Premiums may be higher than the original policy C. Coverage may be reduced or excluded due to a pre-existing condition D. A new probationary period may go into effect limiting coverage for losses due to sickness

A. Coverage due to an accident will be restricted for 30 days after the effective date of the policy Replacement of a policy may result in higher premiums, exclusions due to pre-existing conditions, or a probationary period limiting when losses due to a sickness are covered. Losses due to an accident are not affected by pre-existing conditions or probationary periods.

Field underwriting is very important: A. Due to the risk of a moral hazard B. For policies that do not require home office underwriting C. For individual insurance only D. Due to the risk of morale hazard

A. Due to the risk of a moral hazard An agent's personal contact and assessment of an individual or helps to confirm whether the information provided on an application is accurate. The possibility that an applicant might, for his or her own benefit, provide information that does not accurately reflect the level of risk, is considered a moral hazard. A morale hazard refers to indifferent attitude toward being involved in risky behavior while coverage is in force.

____________ is the initial step of the total process of insuring a health risk. A. Field underwriting B. Collecting the premium payment C. The sales presentation D. Completing medical exams

A. Field underwriting Field underwriting is the initial step of the total process of insuring a health risk.

An application for health insurance is completed by a producer and signed by the applicant. The applicant remembers information that needs to be added to the application before being submitted to the insurer and contacts the producer, who has returned to the office. Which of the following statements is correct? A. The producer must meet with the applicant in person to update the information and have the applicant initial the changes B. Once the application is signed, answers reported on the application cannot be changed C. The applicant will have the opportunity to correct any information when the policy is delivered D. The producer can make any changes necessary with verbal consent of the applicant

A. The producer must meet with the applicant in person to update the information and have the applicant initial the changes Changes can only be made to an application with written consent of the applicant by initialing the changes or updates.

Which one of the following is the primary source of underwriting information? A. Attending Physician Statement B. Investigative consumer report C. Medical exam D. Application

D. Application The application is the initial source of underwriting and insurability. It is the first thing submitted to the underwriter and may include all information necessary to issue a policy or additional information may be requested.

If a premium is paid at the time of application and the policy is issued as applied, legal delivery can occur at the time of: A. Application B. When a statement of good health is provided C. Completed medical exam D. Issuance of the policy

D. Issuance of the policy Legal delivery occurs when the policy is issued or accepted by the insurer only if the initial premium has been paid and the policy was issued as applied. It is at this point that a legal contract exists since the issued policy is the acceptance of the offer.

All of the following are individual underwriting factors, EXCEPT: A. Tobacco use B. Gender C. Age D. Marital Status

D. Marital Status Marital status is not considered an underwriting factor. Individual underwriting factors include age, gender, tobacco use, occupations and hobbies, physical condition, moral hazard, health history, and the plan applied for.

If a premium is not paid at the time of application, the producer will obtain which of the following at the time of policy delivery? A. Attending physician's statement B. Notice of consent C. Conditional receipt D. Signed statement of good health

D. Signed statement of good health If premium is not paid at the time of application, the producer will collect the premium when delivering the policy and obtain a signed statement of good health from the insured stating that there have been no changes to the insured's health since the time of application.

Consumers must be made aware of all of the following in a replacement sale, except: A. The new policy may be offered with lower benefits, limitations, or exclusions of coverage B. The new policy may have a higher premium C. There may be a waiting period for pre-existing conditions D. The financial ratings from each rating service

D. The financial ratings from each rating service Upon issue of a new policy, there may be a new waiting period (probationary period) for pre-existing conditions or the policy may be issued with lower benefits, or with more limitations or exclusions compared to the old policy. Premiums may also be higher in the new policy.

Which of the following are included in Part I of a Health Insurance Application? A. Family health history B. Medical background C. Present health D. The gender of the applicant

D. The gender of the applicant Part I of the application contains general questions about the applicant, such as gender, marital status, residence, date of birth, occupation, and past and present life insurance.

If an incomplete application is accepted by the underwriter and a policy is issued without requesting the missing information, which of the following statements applies? A. The insurer can void the contract at any time since this is considered fraudulent B. The producer will be personally responsible out of pocket for any claims filed based on the missing information in the application C. The policy can be contested if a loss occurs within 2 years of the policy being issued D. The insurer waives its right to contest a claim based on the incomplete application

D. The insurer waives its right to contest a claim based on the incomplete application If the insurer issues a policy based on an incomplete application, it waives the right to contest a claim based on any missing information.