Free Maine Accident & Health Practice Questions

Moral hazard equals dishonesty. It's the risk that someone deliberately causes or exaggerates a loss to profit, like torching a failing business for the payout. Don't mix it up with morale hazard (carelessness, choice B) or physical hazard (the actual physical conditions in A and D).

Morale hazard is the 'eh, I'm covered' attitude: indifference or carelessness that creeps in because insurance exists. It's not dishonesty (that's moral hazard) and it's not a physical condition (physical hazard). Trick to remember: moralE hazard is about a person's lazy attitudE.

A physical hazard is a tangible condition that increases the likelihood or severity of a loss: gasoline in the garage, a slippery floor, frayed wiring. You can see or touch it. If it's an attitude problem it's morale; if it's dishonesty it's moral; if it's a physical thing sitting there raising the odds, it's physical.

Indemnity is the whole heartbeat of insurance: you get made whole, not rich. The goal is to put you back where you were financially right before the loss, no better, no worse. That's why you can't insure a $20,000 car for $80,000 and cash in. Insurance reimburses a loss; it doesn't hand out winnings.

Reinsurance is insurance for insurance companies. The original insurer (the ceding company) hands off part of its risk to a reinsurer so one giant loss doesn't sink it. Individuals never deal with reinsurers directly; it all happens behind the scenes between carriers.

The law of large numbers needs lots of similar exposures to make predictions reliable. A big pool of comparable homes lets the insurer forecast losses; a handful of wildly different ones doesn't. And concentrating them all in one spot is actually bad: one hurricane could wipe out the whole pool at once.

A stock insurer is owned by its stockholders (shareholders), who receive taxable dividends when the company profits. Policyholders are just customers. Contrast that with a mutual insurer, which is owned by its policyholders. Stock equals stockholders; mutual equals members/policyholders.

A captive (or exclusive) agent represents a single insurer, and that insurer owns the book of business. An independent agent represents multiple companies and owns their own expirations (the renewal rights). The ownership-of-expirations detail is the classic distinguisher.

Apparent authority is about appearances: what a reasonable customer believes the agent can do based on how the insurer let the agent act (business cards, signage, company applications). Express authority is spelled out in the contract; implied is what's needed to carry out the express. Apparent is the 'looks legit' bucket.

A contract of adhesion is written by one party (the insurer) and accepted as-is by the other, with no line-by-line negotiating. The practical kicker: because the insured didn't get to write it, any ambiguity is interpreted in the insured's favor. That's a courtroom rule worth knowing.

Disability income coverage doesn't pay medical bills; it replaces a paycheck. When illness or injury keeps you from working, it provides periodic income (usually a percentage of your earnings) so the bills at home still get paid. Hook: disability income protects the paycheck, not the medical bill.

Most health policies define a covered sickness as one that first appears (manifests) and is contracted while the coverage is in force. This wording is what lets insurers exclude pre-existing conditions that showed up before the policy started. Hook: a covered sickness has to show up on the policy's watch, not before it began.

In group coverage the insurer issues one master contract to the group sponsor (typically the employer), and each covered member receives a certificate of coverage rather than an individual policy. Hook: the employer holds the master contract; employees hold certificates.

Blanket coverage protects a constantly changing group whose members aren't named individually, like airline passengers, campers, or a sports team. You're covered simply because you belong to the defined group during the covered activity. Hook: a blanket covers whoever happens to be under it, no individual names required.

Guaranteed renewable means the insurer must renew the policy to the stated age, but it may raise premiums as long as the increase applies to a whole class of policyholders, never singling out one person. Hook: guaranteed renewal of the coverage, but the price can move for the whole class.

Both require the insurer to keep renewing to a stated age, so neither can drop the insured for health reasons. The difference is price: noncancelable freezes the premium too, while guaranteed renewable lets the insurer raise rates for an entire class. Hook: both guarantee the coverage; only noncancelable also guarantees the premium.

The deductible is the insured's upfront share, the amount you pay before the insurer's coverage kicks in for the year. A higher deductible usually means a lower premium, since you're absorbing more of the early cost. Hook: the deductible is what you pay first, before the insurer pays anything.

Coinsurance is the sharing percentage that applies once the deductible is met; an 80/20 plan means the insurer pays 80% and the insured pays 20% of covered charges. It keeps the insured with some skin in the game. Hook: coinsurance is the percentage you and the insurer split after the deductible.

An attending physician's statement (APS) is a report the insurer obtains, with the applicant's authorization, from the doctor who treated a disclosed condition. It fills in clinical details the application alone can't provide. Hook: when underwriters need the medical specifics, they go to the treating doctor for an APS.

Underwriters sort applicants into risk classes, commonly preferred (better than average health, lowest rates), standard (average), and substandard or rated (higher risk and higher premium), with some applicants declined outright. Hook: preferred, standard, substandard, the ladder running from lowest risk and price to highest.

After the policy has been in force for a set period, commonly two years, the insurer can no longer void it or deny a claim because of misstatements in the application, with fraudulent misstatements being the usual exception. It mirrors the incontestable clause in life insurance. Hook: after about two years, honest application errors can no longer be used against the claim.

Written notice of claim must be given within 20 days after a covered loss, or as soon as reasonably possible. It simply alerts the insurer that a claim is coming. Hook: 20 days to put the insurer on notice that a loss occurred.

The insurer has 15 days after notice of claim to send the claimant the forms used to file proof of loss. Hook: notice of claim starts a 15-day clock for the insurer to provide claim forms.

Proof of loss, the documentation supporting the claim, must be furnished within 90 days after the loss, or as soon as reasonably possible. It's a longer window than the 20-day notice because it requires more detail. Hook: 20 days to notify, 90 days to prove.

While a claim is pending, the insurer may have the insured examined as often as reasonably necessary and, in the event of death, order an autopsy unless state law forbids it, with the insurer paying for these. Hook: during a claim the insurer can examine (or autopsy) at its own cost to verify the loss.

Because age affects the premium, a misstatement is corrected by adjusting the benefit rather than canceling coverage: the insurer pays what the premium actually paid would have bought at the true age. Hook: a wrong age just resizes the benefit to match what you really paid for.

This provision prevents overinsurance on disability claims: if the benefits from all the insured's disability coverage would exceed their actual earnings, the insurer can proportionally reduce its benefit and refund the excess premium. The goal is to keep disability income from becoming more lucrative than working. Hook: it caps disability benefits at your earnings so you can't profit from being disabled.

This optional provision excludes losses sustained while the insured is intoxicated or using narcotics not taken on a physician's advice. Prescribed and properly used medications don't trigger the exclusion. Hook: losses while drunk or on non-prescribed narcotics aren't covered.

The free look period, commonly 10 days, lets a new policyowner examine the policy and return it for a full premium refund if they decide it isn't right. Hook: about 10 days to look it over and back out for a full refund.

A pre-existing condition is one that was diagnosed, treated, or for which advice was sought (or that a prudent person would have sought treatment for) before the coverage took effect. Policies may limit or exclude such conditions for a time. Hook: pre-existing means it was already on the radar, treated or advised, before coverage began.

The own-occupation definition pays benefits when the insured can't perform the main duties of their specific occupation, even if they could work in some other field. It's the more generous definition because it judges disability against your actual career. Hook: own occ asks only whether you can do your own job.

The any-occupation definition is stricter and more insurer-friendly: you're considered totally disabled only if you can't work in any job that fits your background. It's harder to qualify for benefits than under own occ. Hook: any occ asks whether you can do any suitable job, not just your old one.

Own occupation is the more favorable, and more expensive, definition, because it pays when you can't do your specific job regardless of whether you could earn a living elsewhere. Any occ, by contrast, sets a much higher bar to collect. Hook: own occ favors the insured, any occ favors the insurer.

Presumptive disability treats certain severe losses, such as total loss of sight, hearing, speech, or any two limbs, as automatically and totally disabling, so full benefits are paid even if the insured could technically still work. Often no elimination period applies. Hook: lose sight, hearing, speech, or two limbs and you're presumed totally disabled, no questions asked.

A longer elimination period means the insurer pays out less often and later, so it charges a lower premium. The insured accepts more of the short-term risk in exchange for a cheaper policy. Hook: wait longer to collect, pay less to own, so a longer elimination period means a lower premium.

The benefit period is the longest span the policy will keep paying for a single disability, such as 2 years, 5 years, or to age 65. A longer benefit period raises the premium. Hook: the benefit period is how long the checks can keep coming.

An integrated, or offset, plan coordinates with Social Security disability so the combined payment doesn't exceed the target percentage of income; the policy reduces its benefit (dollar-for-dollar or partially) by what Social Security pays. It controls overinsurance and lowers the premium. Hook: the policy's benefit shrinks by whatever Social Security kicks in.

The benefit is simply 60% of monthly earned income: 0.60 times $5,000 equals $3,000 per month. The remaining 40% stays uninsured on purpose, preserving the incentive to return to work. Hook: 60% of $5,000 is $3,000, the monthly check.

Short-term disability typically replaces a larger share of income (sometimes 60% to 70%) but only for weeks or months, while long-term disability pays a somewhat lower percentage for years or to retirement age. STD covers the early gap; LTD takes over for prolonged disabilities. Hook: STD pays more for a short time, LTD pays steadily for the long haul.

Group plans are commonly nonoccupational because employees are already protected on the job by workers' compensation, so the group plan avoids duplicating that coverage and instead handles off-the-job disabilities. Hook: group DI skips on-the-job claims because workers' comp already has them.

Major medical is built for big claims: it features high (or no) maximum benefits, a deductible, and coinsurance, in exchange for covering a broad range of expenses. The cost sharing is the trade-off for that wide, deep protection. Hook: major medical goes big and broad, with a deductible and coinsurance along the way.

The out-of-pocket maximum (stop-loss) caps the insured's coinsurance share. Once the insured has paid $2,000 in coinsurance, the plan switches to paying 100% of additional covered charges for the rest of the year, protecting against a catastrophic bill. Hook: hit the out-of-pocket max and your 20% share drops to 0%.

Under capitation, the HMO pays a provider a set amount for each member assigned to them per period, whether that member needs a lot of care or none. It gives providers an incentive to manage care efficiently. Hook: capitation pays per head, not per service.

In the IPA model, the HMO contracts with independent doctors (or physician groups) who continue to run their own practices and see non-HMO patients too, rather than employing them directly as in a staff model. Hook: IPA doctors keep their own practices and just contract with the HMO.

An FSA lets an employee set aside pre-tax salary for medical costs, but it traditionally follows a use-it-or-lose-it rule: money not spent by the plan year's end (subject to limited grace or carryover options) is forfeited. Hook: an FSA is pre-tax but use-it-or-lose-it, so don't overfund it.

An HRA is funded solely by the employer, which sets aside money to reimburse employees for qualified medical expenses. Because the employer owns it, the rules on carryover and portability are set by the employer. Hook: the employer funds and owns the HRA.

Precertification is a utilization-management tool: the plan reviews and approves certain planned services or admissions in advance to confirm they're medically necessary before agreeing to pay. Emergencies are generally exempt. Hook: precert means getting the plan's green light before non-emergency care.

Coordination of benefits prevents duplicate payment when someone has two plans: one is designated primary and pays first, the other is secondary and may cover the remainder, but the total can't exceed the actual cost. It stops the insured from making money on a claim. Hook: COB keeps two plans from paying more than 100% combined, primary first, secondary second.

Federal law generally lets young adults stay on a parent's health plan until they turn 26, regardless of student or marital status, when the plan offers dependent coverage. Hook: kids can ride a parent's plan to age 26.

Federal reform requires these plans to cover a core set of essential health benefits (things like hospitalization, prescription drugs, maternity, and preventive care) and bars them from denying coverage or claims based on pre-existing conditions. Hook: a guaranteed benefit floor, and no more pre-existing-condition lockouts.

Community rating spreads risk across a wide pool and charges similar rates regardless of any one group's experience, which protects small groups from volatile pricing. It's the counterpart to experience rating. Hook: community rating prices everyone off the shared community pool, not your group alone.

A noncontributory plan is fully employer-paid; the employee contributes nothing toward the premium. A contributory plan, by contrast, has the employee pay a share. Hook: noncontributory means the employee does not contribute, so the employer foots the whole bill.

Someone who passes up the on-time enrollment window becomes a late enrollee and may have to provide evidence of insurability or wait until an open enrollment period to join. The penalty discourages waiting until you're sick to sign up. Hook: enroll late and you may have to prove insurability or wait, the cost of not signing up on time.

Termination of employment (except for gross misconduct) or a reduction in hours is an 18-month qualifying event for the employee under COBRA. Hook: lose the job or the hours, get 18 months of COBRA.

A disability determination (under Social Security rules) during the early part of COBRA can extend the 18-month period to 29 months, and the premium during the extension may rise to as much as 150% of the group rate. Hook: disability stretches COBRA from 18 to 29 months, at a higher premium.

Termination for gross misconduct is the key exception; it does not trigger COBRA rights. Ordinary terminations, layoffs, and resignations do qualify. Hook: gross misconduct is the one firing that forfeits COBRA.

Conversion must be requested within a short window after group coverage ends, commonly 31 days. Miss that window and the right to convert without evidence of insurability is lost. Hook: act fast, the conversion window is short, often about 31 days.

HIPAA's nondiscrimination rule prohibits a group plan from denying an eligible individual coverage, or charging them more, because of their health status or medical history. Everyone in the eligible group must be treated alike. Hook: HIPAA says a group plan can't single you out for being sick.

The birthday rule makes the plan of the parent whose birthday comes first in the calendar year (earliest month and day, not earliest birth year) the primary plan for a dependent child. It's a simple tiebreaker, not based on who is older. Hook: the earlier birthday in the year means the primary plan for the kids.

For active employees age 65 and older at larger employers, the group health plan is primary and Medicare is secondary, under the Medicare Secondary Payer rules. The retiree situation can differ. Hook: still working at a big employer means the group plan leads and Medicare follows.

Major services are usually covered at about 50%, the lowest tier, because they are expensive, so the plan shifts more of the cost to the patient through higher coinsurance. The three-tier 100/80/50 pattern is the classic dental structure. Hook: the bigger and pricier the work, the smaller the share the plan pays, with major care around 50%.

The 100/80/50 pattern maps to the three dental tiers: preventive/diagnostic at 100%, basic/restorative at 80%, and major at 50%. Knowing this ladder answers many dental questions at a glance. Hook: 100/80/50 equals preventive, basic, major, top to bottom.

The annual (calendar-year) maximum is the ceiling on what the plan pays per covered person each year; once reached, the patient pays the rest until the maximum resets the following year. Dental annual maximums are often modest. Hook: the annual max is the plan's yearly payout ceiling per person.

To encourage preventive care, plans commonly waive the deductible on cleanings and exams while applying it to basic and major services. That keeps the barrier off the care the plan most wants people to use. Hook: the deductible usually skips preventive care and lands on basic and major work.

Because orthodontic treatment is a one-time, multi-year course, plans cap it with a separate lifetime maximum rather than an annual one. Once that lifetime amount is used, ortho benefits end. Hook: ortho is capped for life, not per year.

The alternate benefit (LEAT) provision lets the plan calculate its payment based on the cheapest treatment that would adequately do the job. If the patient chooses a pricier option, they pay the difference. Hook: the plan pays for the cheapest adequate fix; upgrades are on the patient.

Dental plans generally exclude purely cosmetic work, like whitening or veneers done solely for appearance, since it isn't medically necessary. Functional and preventive care is what's covered. Hook: cosmetic-only dental work is on you; the plan covers function, not vanity.

Frequency limitations cap how often each benefit can be used, such as one exam per year and frames every other year, controlling cost while still meeting routine needs. Hook: frequency limits set how often you can use each vision benefit.

Network-based vision plans work much like a PPO: members get the best benefit (often a richer allowance or lower copay) by using in-network providers, with reduced benefits out of network. Hook: vision networks follow the PPO playbook, best deal inside the network.

Routine vision, like dental, is usually a standalone elective benefit with its own premium and rules, rather than being built into major medical. Hook: vision, like dental, typically stands alone as its own benefit.

The Initial Enrollment Period spans 7 months: the 3 months before your 65th-birthday month, that month itself, and the 3 months after. Enrolling on time avoids late penalties. Hook: a 7-month window, three before, the month of, and three after your 65th.

Most people pay no premium for Part A because they (and their employers) already funded it through Medicare payroll taxes while working. Those without enough work credits can buy in by paying a premium. Hook: Part A is usually premium-free, paid for by a lifetime of FICA taxes.

Part A uses benefit periods: one begins when you're admitted and ends after you've been out of a hospital or skilled nursing facility for 60 days in a row. A new stay after that starts a new benefit period (and a new deductible). Hook: a Part A benefit period resets only after 60 days fully out of care.

Skipping Part B when first eligible, without other qualifying coverage, can trigger a lifelong premium surcharge for late enrollment. It's designed to encourage timely sign-up. Hook: wait too long on Part B and you pay a permanent penalty.

Part D is the prescription drug benefit, delivered through private drug plans (either standalone or built into a Medicare Advantage plan). It helps cover the cost of outpatient medications. Hook: Part D is for drugs, the prescription piece of Medicare.

Medigap plans are standardized into lettered plans (Plan A, Plan G, Plan N, and so on); a given lettered plan offers identical core benefits no matter which insurer sells it, so consumers can compare on price and service. Hook: same letter equals same benefits, whoever sells it.

The Medigap open enrollment period runs for 6 months starting when the person is 65 or older and enrolled in Part B. During this window, coverage is guaranteed-issue: the insurer can't deny coverage or charge more for health reasons. Hook: 65 plus Part B starts a 6-month guaranteed-issue Medigap window.

Medigap policies carry a 30-day free look, letting the buyer return the policy for a full refund if they change their mind. It's longer than the typical individual-policy free look. Hook: Medigap gives a generous 30-day free look.

Because Medicare largely excludes long-term custodial care, Medicaid has become a major payer of nursing home and long-term care, but only after a person has spent down assets to qualify under its strict financial limits. Hook: Medicaid is the big long-term-care payer, once you've spent down to qualify.

The six ADLs are bathing, dressing, eating, transferring (moving in and out of a bed or chair), toileting, and continence. They measure basic self-care, not complex tasks like driving or managing finances. Hook: ADLs are the basics, bathing, dressing, eating, transferring, toileting, continence.

Personal health insurance premiums generally aren't deductible, though they may count toward the itemized medical expense deduction if total medical costs clear the AGI threshold. Hook: personal health premiums usually get no deduction, paid with after-tax dollars.

Without itemizing, a typical individual gets no federal deduction for personal health premiums; they're paid with after-tax dollars. (Self-employed individuals are a notable exception, covered separately.) Hook: no itemizing usually means no deduction for your health premiums.

Premiums for an individually owned disability income policy are not deductible; they're paid with after-tax dollars. That sets up the favorable treatment of the benefits. Hook: no deduction for personal DI premiums, you pay them after tax.

Just like individual medical expense benefits, group medical benefits reimburse care and aren't treated as income, so they're tax-free to the employee. Hook: group medical benefits reimburse bills, so they're tax-free.

The combination is what makes it powerful: the employer deducts the premium as a business expense, and the employee pays no tax on either the coverage or the benefits. Hook: deductible for the employer, tax-free for the employee, the best of both ends.

The employer's premium payments aren't taxed to the employee when paid; the tax is deferred to the benefit stage if a claim arises. Hook: the premium isn't taxed now, the benefit is taxed later instead.

Taxability of disability benefits turns on how the premiums were funded: pre-tax employer dollars lead to taxable benefits, after-tax employee dollars lead to tax-free benefits. Hook: follow the premium dollars, pre-tax in equals taxable out.

Since the employer funded and deducted all the premiums and the employee was never taxed on them, the full benefit is taxable income to the employee. Hook: fully employer-funded DI means a fully taxable benefit.

Pull HSA money out for non-medical reasons before age 65 and it's taxed as ordinary income plus a 20% penalty. After 65, non-qualified withdrawals are taxable but penalty-free (like an IRA). Hook: misuse the HSA early and it's income tax plus a steep 20% penalty.

HRA reimbursements for qualified medical expenses are tax-free to the employee, and the employer funds and deducts the arrangement, another tax-favored health benefit. Hook: employer-funded HRA reimbursements reach the employee tax-free.