49 Health Insurance Practice Questions & Answers
Every Health Insurance practice question from the Insurance License Practice Test, with the correct answer and a short explanation.
Start practice test →1. In disability income insurance, what does the 'elimination period' refer to?
- A.The time the insured has to pay the first premium
- B.The period during which the insurer may cancel the policy
- C.The maximum length of time benefits will be paid
- D.A waiting period after disability begins during which no benefits are paid✓ Answer
The elimination period is a deductible measured in time; it is the waiting period between the onset of disability and the start of benefit payments.
2. Which definition of total disability is generally considered MORE favorable to the insured?
- A.'Any occupation' — unable to perform the duties of any occupation for which suited
- B.'Own occupation' — unable to perform the duties of one's own occupation✓ Answer
- C.'Gainful occupation' regardless of prior training
- D.'Presumptive' only, with no residual coverage
The 'own occupation' definition pays if the insured cannot perform their own occupation, making it easier to qualify and thus more favorable than the stricter 'any occupation' standard.
3. What is the primary purpose of a Coordination of Benefits (COB) provision in group health plans?
- A.To require the insured to buy a second policy
- B.To prevent the insured from collecting more than 100% of covered expenses from multiple plans✓ Answer
- C.To let the insured choose which plan pays the highest benefit
- D.To increase total benefits by stacking multiple policies
COB rules designate a primary and secondary payer so combined payments do not exceed 100% of covered expenses, preventing profit from a loss.
4. In an HMO, what is the typical role of the primary care physician (PCP)?
- A.Is only used for emergency care outside the network
- B.Is chosen fresh at each visit with no ongoing relationship
- C.Sets the premium rates for the HMO
- D.Acts as a 'gatekeeper' who coordinates care and gives referrals to specialists✓ Answer
HMOs typically require members to select a PCP who acts as a gatekeeper, coordinating care and authorizing referrals to specialists.
5. How does a PPO (Preferred Provider Organization) generally differ from an HMO?
- A.A PPO pays nothing for any out-of-network care
- B.A PPO requires a PCP gatekeeper for all specialist visits
- C.A PPO uses only capitation and no fee-for-service
- D.A PPO allows out-of-network care at higher cost and usually needs no PCP referral✓ Answer
PPOs let members see out-of-network providers (at higher out-of-pocket cost) and generally do not require a PCP referral to see specialists.
6. A Point-of-Service (POS) plan is best described as which of the following?
- A.A government plan for those over age 65
- B.A plan that only pays for care received outside the network
- C.A pure indemnity plan with no provider network
- D.A hybrid that combines HMO features with the option to use out-of-network providers✓ Answer
A POS plan blends HMO and PPO features: members use a PCP/gatekeeper for in-network care but may go out-of-network at a higher cost.
7. Who is eligible for Medicare Part A generally without paying a premium?
- A.Only low-income individuals regardless of age
- B.People age 65 or older who qualify through Social Security work credits✓ Answer
- C.Anyone, but only if they buy Part B first
- D.Only children under 19
Medicare Part A (hospital insurance) is generally premium-free for those 65+ who or whose spouse earned sufficient Social Security work credits.
8. Which government program is primarily a needs-based program for low-income individuals, jointly funded by federal and state governments?
- A.Medicaid✓ Answer
- B.Social Security retirement
- C.A Health Savings Account (HSA)
- D.Medicare Part B
Medicaid is a joint federal-state, needs-based program providing health coverage to low-income individuals, unlike Medicare which is age/disability based.
9. Under HIPAA, what does the term 'portability' primarily protect?
- A.The right to keep the same insurance agent nationwide
- B.Guaranteed lower premiums for all applicants
- C.The ability to maintain health coverage and limit exclusions when changing jobs✓ Answer
- D.The ability to transfer premiums to a savings account
HIPAA's portability provisions help individuals maintain continuous coverage and limit pre-existing condition exclusions when moving between health plans/jobs.
10. What does the 'benefit period' in a health or disability policy define?
- A.The grace period for paying premiums
- B.The time before coverage becomes effective
- C.The maximum length of time benefits will be paid for a covered claim✓ Answer
- D.The number of days the insurer can contest the policy
The benefit period is the maximum duration for which the policy will pay benefits for a given disability or claim (e.g., 2 years, 5 years, to age 65).
11. In a disability income policy, what does 'residual disability' benefit typically compensate for?
- A.Only total and permanent loss of both hands
- B.Funeral and burial expenses
- C.A loss of income due to partial disability, proportionate to earnings lost✓ Answer
- D.The full monthly benefit regardless of return to work
Residual (partial) disability benefits pay a portion of the full benefit based on the percentage of income the insured has lost due to the disability.
12. Which statement best describes a 'presumptive disability' provision?
- A.Any minor illness is presumed to be permanent
- B.Certain severe losses (e.g., sight, hearing, two limbs) are automatically deemed total disability✓ Answer
- C.The insurer presumes no disability exists until proven otherwise for years
- D.It presumes the insured is disabled only after age 65
Presumptive disability provisions automatically consider the insured totally disabled upon specified severe losses such as sight, hearing, speech, or two limbs, often without an elimination period.
13. In a major medical expense plan, what is 'coinsurance'?
- A.A cost-sharing percentage split between insurer and insured after the deductible is met✓ Answer
- B.The premium paid monthly to keep the policy in force
- C.A flat dollar amount paid at each doctor visit
- D.The total the insured pays before coverage begins
Coinsurance is a percentage sharing of covered costs (e.g., 80/20) between insurer and insured after the deductible, distinct from a fixed copayment.
14. In a health plan, what does the 'out-of-pocket maximum' represent?
- A.The most the insured must pay for covered services in a period, after which the plan pays 100%✓ Answer
- B.The monthly premium plus any riders
- C.The most the plan will ever pay in a lifetime
- D.The amount paid before the deductible starts
Once the insured's combined deductibles, copays, and coinsurance reach the out-of-pocket maximum, the plan pays 100% of covered expenses for the rest of the period.
15. How does an EPO (Exclusive Provider Organization) primarily differ from a PPO?
- A.An EPO never uses a provider network
- B.An EPO always requires capitation payment
- C.An EPO is only available to people over 65
- D.An EPO generally covers no out-of-network care except emergencies✓ Answer
Like a PPO an EPO usually needs no PCP referral, but like an HMO it restricts coverage to in-network providers, paying for out-of-network care only in emergencies.
16. Under the Affordable Care Act (ACA), what does 'guaranteed issue' mean for individual health coverage?
- A.Premiums are the same for everyone regardless of plan
- B.Insurers may deny coverage based on health history
- C.Insurers cannot deny coverage based on health status or pre-existing conditions✓ Answer
- D.Coverage is issued only during a medical emergency
Guaranteed issue requires insurers to accept applicants regardless of health status and prohibits denial or exclusion based on pre-existing conditions.
17. Which of the following is one of the ten essential health benefits required of ACA-compliant plans?
- A.Cosmetic surgery of the insured's choice
- B.Adult vision and dental as core benefits
- C.Unlimited concierge medicine
- D.Maternity and newborn care✓ Answer
Maternity and newborn care is one of the ten essential health benefits; cosmetic surgery and concierge medicine are not, and adult dental/vision are not core essential benefits.
18. An HSA (Health Savings Account) must be paired with what type of health plan?
- A.Any HMO regardless of deductible
- B.A qualified high-deductible health plan (HDHP)✓ Answer
- C.A Medicare Advantage plan only
- D.A first-dollar coverage plan with no deductible
An HSA must be paired with a qualified high-deductible health plan (HDHP); contributions are tax-advantaged and funds roll over year to year.
19. Who owns and funds a Health Reimbursement Arrangement (HRA)?
- A.The employer, who owns and solely funds it✓ Answer
- B.The employee, funded with pre-tax salary deferrals
- C.The insurer, funded by premiums
- D.The government, funded by taxes
An HRA is employer-owned and employer-funded; unlike an FSA or HSA, employees make no contributions, and unused amounts generally stay with the employer.
20. Which feature is characteristic of a Flexible Spending Account (FSA)?
- A.Funds are portable and follow the employee to a new job
- B.Employers may never contribute to it
- C.It requires pairing with an HDHP
- D.It is typically 'use-it-or-lose-it' within the plan year✓ Answer
FSAs are generally 'use-it-or-lose-it' within the plan year (subject to limited carryover/grace-period rules), are not portable, and do not require an HDHP.
21. Under COBRA, continued group health coverage is generally available for how long after a standard qualifying event such as termination of employment?
- A.6 months
- B.12 months
- C.18 months✓ Answer
- D.60 months
COBRA generally allows up to 18 months of continued coverage after termination or reduction in hours; certain other events extend this to 29 or 36 months.
22. Which uniform provision states that the entire contract consists of the policy and the attached application, and no agent can change it?
- A.Time Limit on Certain Defenses
- B.Grace Period
- C.Reinstatement
- D.Entire Contract; Changes✓ Answer
The 'Entire Contract; Changes' provision states the policy and attached application form the whole contract and only an executive officer of the insurer (not an agent) can change it.
23. The 'Time Limit on Certain Defenses' (incontestability) provision in health policies generally does what after two years?
- A.Prevents the insurer from voiding the policy for misstatements (except fraud, per state law)✓ Answer
- B.Lets the insurer cancel the policy at will
- C.Doubles the benefit amount automatically
- D.Requires the insured to reapply for coverage
After the policy has been in force two years, the insurer generally cannot contest it or deny claims based on misstatements in the application (fraudulent misstatements may be excepted under state law).
24. Which of the following is an OPTIONAL uniform provision that an insurer may include in a health policy?
- A.Grace Period
- B.Entire Contract; Changes
- C.Misstatement of Age✓ Answer
- D.Proof of Loss
'Misstatement of Age' is one of the optional uniform provisions; Grace Period, Entire Contract, and Proof of Loss are required (mandatory) uniform provisions.
25. Under the 'Proof of Loss' uniform provision, within how many days must the insured typically submit proof after a loss?
- A.10 days
- B.20 days
- C.1 year with no exceptions
- D.90 days✓ Answer
The Proof of Loss provision typically requires written proof within 90 days of the loss, though late proof may be accepted if it was not reasonably possible to submit sooner.
26. Which Medicare part is delivered by private insurers as 'Medicare Advantage' and bundles Parts A and B (often with drug coverage)?
- A.Part A
- B.Part C✓ Answer
- C.Part B
- D.Part D
Medicare Part C (Medicare Advantage) is offered by private insurers approved by Medicare and combines Part A and Part B benefits, frequently including Part D drug coverage.
27. Medicare Part D primarily provides coverage for what?
- A.Prescription drugs✓ Answer
- B.Outpatient physician services
- C.Inpatient hospital stays
- D.Long-term custodial nursing home care
Medicare Part D is the prescription drug benefit, offered through private plans; Part A covers hospital, Part B covers outpatient/physician services.
28. What is the main purpose of a Medicare Supplement (Medigap) policy?
- A.To replace Medicare entirely with private coverage
- B.To cover only dental and vision services
- C.To provide life insurance to Medicare enrollees
- D.To pay for gaps in Original Medicare such as deductibles and coinsurance✓ Answer
Medigap policies are standardized plans that fill 'gaps' in Original Medicare, paying costs like deductibles, copayments, and coinsurance; they supplement rather than replace Medicare.
29. Long-term care (LTC) insurance most commonly pays benefits when the insured cannot perform a certain number of what?
- A.Activities of daily living (ADLs)✓ Answer
- B.Hours of paid employment
- C.Annual physical exams
- D.Premium payments
LTC policies typically trigger benefits when the insured cannot perform a specified number (usually two) of the activities of daily living, such as bathing, dressing, eating, or transferring.
30. In LTC insurance, what does an 'inflation protection' rider do?
- A.Freezes the premium for life
- B.Increases the daily/monthly benefit over time to keep pace with rising care costs✓ Answer
- C.Refunds all premiums at death
- D.Pays a lump sum if the insured never files a claim
Inflation protection increases the policy's benefit amount over time (e.g., compound growth) so coverage keeps up with rising long-term care costs.
31. In business disability insurance, what does a 'Business Overhead Expense' (BOE) policy cover?
- A.The disabled owner's personal salary and lost income
- B.The medical bills of the disabled owner
- C.The cost of buying out a disabled partner's share
- D.Ongoing fixed business expenses like rent, utilities, and staff salaries while the owner is disabled✓ Answer
BOE insurance reimburses covered fixed business expenses (rent, utilities, employee salaries, etc.) while the owner is disabled; it does not replace the owner's personal income.
32. A disability buy-sell agreement funded with disability insurance is designed to do what?
- A.Pay the disabled owner's medical bills
- B.Cover business rent while the owner recovers
- C.Provide funds for remaining owners to buy out a permanently disabled owner's business interest✓ Answer
- D.Replace the disabled owner's personal income indefinitely
A disability buy-sell agreement uses disability insurance proceeds to fund the purchase of a permanently disabled owner's share by the remaining owners or the business.
33. Key person disability insurance is owned by, and pays benefits to, whom?
- A.The key employee, who receives income replacement
- B.The business, which receives benefits to offset losses from the key employee's disability✓ Answer
- C.The key employee's family
- D.A charity named by the employee
In key person disability insurance the business is the owner, premium payer, and beneficiary, using the benefits to offset losses caused by a vital employee's disability.
34. How are benefits from an individual disability income policy generally treated for income tax when the individual paid premiums with after-tax dollars?
- A.Fully taxable as ordinary income
- B.Received income-tax-free✓ Answer
- C.Taxable only above a set annual amount
- D.Taxed at capital gains rates
When an individual pays disability income premiums with after-tax dollars, the benefits are generally received income-tax-free.
35. In an employer-paid group disability plan where the employer pays all premiums and does not include them in the employee's income, how are the benefits generally taxed?
- A.Always tax-free to the employee
- B.Taxable only to the employer
- C.Generally taxable to the employee as income✓ Answer
- D.Never reportable at all
When the employer pays the premiums and does not report them as income to the employee, the disability benefits are generally taxable to the employee.
36. How are benefits from a personally owned, individually purchased medical expense (health) insurance policy generally treated for income tax?
- A.Generally not taxable as income (reimbursement of medical expenses)✓ Answer
- B.Taxable as ordinary income
- C.Taxed at a flat 20% rate
- D.Taxable only if benefits exceed premiums paid
Medical expense benefits that reimburse the insured for incurred medical costs are generally not treated as taxable income.
37. What does an Accidental Death & Dismemberment (AD&D) policy's 'capital sum' typically refer to?
- A.The full benefit paid for accidental death
- B.The refund of premiums at expiration
- C.The annual premium
- D.The amount paid for a covered dismemberment loss, often a percentage of the principal sum✓ Answer
In AD&D, the 'principal sum' is paid for accidental death, while the 'capital sum' is paid for dismemberment losses (e.g., loss of a limb or sight), often a percentage of the principal sum.
38. In health insurance, what is 'field underwriting'?
- A.The insurer's home-office review of lab results
- B.The reinsurer's assessment of catastrophic risk
- C.The producer/agent gathering accurate applicant information during the application✓ Answer
- D.The state regulator's audit of the insurer
Field underwriting is the producer's role in gathering accurate information about the applicant and completing the application properly, serving as the insurer's first line of risk selection.
39. What is a 'pre-existing condition' as generally defined in health insurance?
- A.A condition for which care was received or symptoms existed before the policy's effective date✓ Answer
- B.Any condition that develops after the policy is issued
- C.A condition that only affects people over 65
- D.A condition the insurer creates through exclusions
A pre-existing condition is generally one for which the insured received diagnosis, treatment, or had symptoms before the policy's effective date; the ACA prohibits excluding coverage for them.
40. What does an 'impairment rider' (exclusion rider) on a health policy do?
- A.Increases benefits for a specified condition
- B.Excludes or limits coverage for a specific named condition or body part✓ Answer
- C.Adds an automatic cash value
- D.Waives all premiums permanently
An impairment/exclusion rider lets the insurer issue a policy while excluding coverage for a specific pre-existing condition or body part rather than declining the applicant.
41. A 'Waiver of Premium' rider on a disability or health policy generally does what?
- A.Refunds all past premiums immediately
- B.Cancels the policy during disability
- C.Waives future premiums while the insured is totally disabled, keeping the policy in force✓ Answer
- D.Increases the premium during disability
The Waiver of Premium rider suspends the insured's obligation to pay premiums (after a waiting period) while totally disabled, keeping coverage in force.
42. What is 'capitation' as a provider payment method in managed care?
- A.Paying providers a fee for each service rendered
- B.Paying members directly for their own care
- C.Paying providers only when a claim is denied
- D.Paying providers a fixed amount per enrolled member per period regardless of services used✓ Answer
Under capitation, a provider receives a fixed per-member-per-month payment regardless of how many services the member uses, shifting utilization risk to the provider.
43. What is the primary function of dental insurance's 'scheduled' (or 'basic/schedule of allowances') plan?
- A.It pays a fixed dollar amount listed for each covered procedure✓ Answer
- B.It pays 100% of any dental charge
- C.It covers only orthodontics
- D.It has no benefit limits at all
A scheduled dental plan lists a fixed dollar allowance payable for each covered procedure; the insured pays any difference above the scheduled amount.
44. In a group health plan, what is the 'probationary period' (waiting period)?
- A.The time an insurer has to contest claims
- B.The length of time a new employee must wait before becoming eligible to enroll✓ Answer
- C.The grace period for premium payment
- D.The time benefits are paid after a claim
The probationary/waiting period is the length of time a newly hired employee must be employed before becoming eligible to enroll in the group plan.
45. What does a 'stop-loss' feature in a major medical plan protect the insured against?
- A.Rising premiums each year
- B.Denial of pre-existing conditions
- C.Excessive out-of-pocket coinsurance costs by capping the insured's share✓ Answer
- D.Loss of the insurance agent
A stop-loss (out-of-pocket limit) provision caps the total coinsurance the insured must pay; once reached, the plan pays 100% of remaining covered expenses.
46. Under the 'Grace Period' uniform provision, what happens if a premium is paid during the grace period?
- A.The policy lapses immediately
- B.The policy remains in force with no lapse in coverage✓ Answer
- C.The insured must reapply and undergo underwriting
- D.The insurer doubles the premium as a penalty
The Grace Period provision allows a set number of days after the due date to pay a late premium while keeping the policy in force with no lapse in coverage.
47. What distinguishes a 'copayment' from 'coinsurance' in a health plan?
- A.They are identical terms
- B.A copayment is always larger than coinsurance
- C.A copayment applies only to hospital stays
- D.A copayment is a fixed dollar amount per service; coinsurance is a percentage of the cost✓ Answer
A copayment is a fixed dollar amount the insured pays per service (e.g., $30 per office visit), while coinsurance is a percentage share of covered costs (e.g., 20%).
48. Vision insurance plans most commonly provide benefits for which of the following?
- A.Major surgery of any kind
- B.Routine eye exams, lenses, and frames✓ Answer
- C.Inpatient hospital care
- D.Prescription drugs of all types
Vision plans typically cover routine eye examinations and an allowance toward corrective lenses and frames or contacts, not general medical or surgical care.
49. In disability income insurance, what does a 'change of occupation' provision allow the insurer to do?
- A.Cancel the policy whenever the insured changes jobs
- B.Require the insured to switch to any-occupation coverage
- C.Adjust benefits or premiums if the insured changes to a more or less hazardous occupation✓ Answer
- D.Refuse all future claims automatically
The change of occupation provision lets the insurer adjust benefits payable or premiums charged if the insured moves to a more hazardous (or less hazardous) occupation.
Practice questions cover general, uniform insurance concepts. State-specific laws and limits vary — study your state's official exam outline before testing. Insurance info (NAIC) →