Free Pennsylvania Accident & Health Practice Questions

Insurance only deals with pure risk: situations where there's a chance of loss or no loss, but no chance of gain (like your house burning down). Speculative risk involves a chance of loss, no loss, OR gain. That's gambling and investing, and insurers won't touch it. If there's an upside, it's not insurable.

Insurers like risks that are accidental (due to chance, not intentional) and definite and measurable (you can pin down when, where, and how much). Add in 'predictable for large groups,' 'not catastrophic to the insurer,' and 'affordable premium,' and you've got the recipe for an insurable risk. A loss someone causes on purpose? Not insurable.

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 mutual insurer is owned by its policyholders, so a 'dividend' is really a return of overpaid premium, which is why it's generally not taxable. And it's never guaranteed; it depends on the company's results. Stock dividends, by contrast, go to stockholders and are taxable.

A reciprocal (an unincorporated group of members who insure each other) is run by an attorney-in-fact. The members are both insureds and insurers to one another. Niche, but the exam likes the 'attorney-in-fact' detail, so tuck it away.

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 broker works for the insured, shopping the market on the client's behalf, while an agent works for the insurer. Same exam, different masters: keep them straight. Broker equals the buyer's side; agent equals the company's side.

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.

Aleatory means the exchange of value can be lopsided and depends on chance. You might pay $600 in premium and collect $200,000 on a claim, or pay for years and never file one. That built-in inequality, hinging on whether a loss happens, is what makes the contract aleatory.

A waiver is voluntarily surrendering a known right, say, an insurer choosing not to enforce a policy condition. Estoppel is the follow-on: once you've waived something, you can be legally prevented (estopped) from later trying to enforce it. Waiver is the giving up; estoppel is being held to it.

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.

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.

Group coverage is underwritten on the group as a whole, its size, industry, and demographics, rather than screening each person's health. That's why an employee can usually enroll without a medical exam during the eligibility window. Hook: group underwriting looks at the group, not each individual's medical history.

Noncancelable is the strongest renewal guarantee for the insured: the insurer can't cancel, can't refuse renewal, and can't raise the premium beyond what the policy already states, all the way to the stated age. Hook: noncancelable locks everything, coverage and premium alike, in the insured's favor.

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.

A cancelable policy lets the insurer terminate coverage at virtually any time with proper written notice (returning any unearned premium), making it the least secure arrangement for the insured. The other classifications all restrict when, or whether, the insurer can walk away. Hook: cancelable means the insurer can pull the plug almost anytime, so it's the weakest guarantee.

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.

The stop-loss, or out-of-pocket maximum, protects the insured from runaway costs: once their deductible and coinsurance add up to the cap, the insurer pays 100% of covered charges for the rest of the period. Hook: stop-loss stops the bleeding, since after the cap the insured's share drops to zero.

First the insured pays the $500 deductible. That leaves $4,500, which the 80/20 coinsurance splits, so the insured pays 20% of $4,500, or $900. Add the deductible and the coinsurance share: $500 + $900 = $1,400, while the insurer pays the remaining $3,600. Hook: deductible first, then your coinsurance percentage of what's left, so $500 plus $900 equals $1,400.

The entire contract is just the policy plus the application attached to it. Nothing outside those documents, not the agent's promises and not the company's internal rules, can be made part of the agreement. Hook: if it isn't in the policy or the attached application, it isn't in the contract.

Changes to the contract are valid only when approved in writing by an executive officer of the insurer, and even then they must be noted on or attached to the policy. An agent has no power to waive or alter provisions. Hook: only a company officer can change the deal, never the agent at your kitchen table.

Once the time limit passes, the insurer loses the right to deny a claim merely because the condition predated the policy, unless that condition was specifically named and excluded by endorsement. It protects insureds from late-discovered, unintentional omissions. Hook: after the clock runs out, an unexcluded pre-existing condition can't be used to refuse the claim.

The unpaid premium provision lets the insurer simply subtract any premium then due and unpaid from the benefits it pays out, rather than denying the claim. Hook: the insurer just nets the overdue premium out of the claim check.

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.

Benefits are generally paid to the insured, while any death benefit (such as under AD&D) goes to the named beneficiary, or to the insured's estate if none is named. Hook: living benefits to the insured, death benefits to the beneficiary.

The owner keeps the right to change the beneficiary unless they've named an irrevocable beneficiary, in which case the beneficiary's written consent is required. Hook: revocable means change freely, irrevocable means you need the beneficiary's okay.

If the insured moves to riskier work and is later hurt, the insurer can pay reduced benefits, specifically the amount the premium already paid would have purchased at the rate for the more hazardous job. The policy isn't void; the benefit is simply scaled to the risk. Hook: a more hazardous job means benefits shrink to match what your premium buys at the higher-risk rate.

Move to safer work and the insurer reduces the premium to the lower-risk rate, refunding the excess premium already paid for the period. The change works in the insured's favor here. Hook: a safer job means a lower premium and money back.

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.

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.

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.

The elimination (or waiting) period is the time after a disability begins before benefits start to accrue, functioning like a time deductible. A 90-day elimination period means no benefits for the first 90 days. Hook: the elimination period is the unpaid waiting stretch before benefits begin.

Insurers cap benefits below full income (and below what you'd net after taxes, since the benefits are often tax-free) so the insured always has a financial reason to recover and return to work. Paying 100% could encourage staying disabled, known as malingering. Hook: benefits stop short of full pay so working still beats collecting.

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.

This rider lets the insured increase coverage at specified times or as income rises, without proving they're still insurable, which is valuable for someone whose health declines but whose earnings grow. Hook: it locks in the right to buy more coverage later, no new medical questions asked.

A social insurance supplement rider is designed to fill the gap if Social Security disability benefits are denied, delayed, or paid at a reduced amount, paying the supplement in their place and stepping down as Social Security pays. Hook: the SIS rider covers the shortfall when Social Security disability falls through or comes up short.

A return of premium rider refunds part of the premiums paid, less any claims, after a stated number of years, rewarding insureds who stay healthy. It raises the premium in exchange for that potential refund. Hook: stay claim-free and the insurer hands back a chunk of your premiums.

A disability buy-sell arrangement supplies the money for the remaining owners (or the business) to purchase the share of an owner who becomes permanently disabled, mirroring how a life-insurance buy-sell works at death. Hook: it funds the buyout of a disabled owner's stake in the business.

Occupational coverage, sometimes called 24-hour coverage, pays for disabilities arising both on and off the job, around the clock. It's broader, and costs more, than nonoccupational coverage. Hook: occupational/24-hour means covered anytime, anywhere, on or off the clock.

A scheduled surgical plan assigns a set dollar benefit to each listed procedure, so an appendectomy pays one amount and a different surgery pays another. If the surgeon charges more than the schedule amount, the insured covers the difference. Hook: a surgical schedule is a fixed price list, one dollar figure per operation.

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.

An EPO is a middle ground: like an HMO, it generally covers only in-network providers (no out-of-network benefits except emergencies), but like a PPO, it usually doesn't require a gatekeeper referral to see a specialist. Hook: EPO equals HMO network rules with PPO-style direct specialist access.

HSAs are tied to HDHPs by law: you must be covered by a qualified high deductible health plan (and have no disqualifying coverage) to contribute. The high deductible is what the HSA is meant to help fund. Hook: no HDHP, no HSA, they're a required pair.

An HSA belongs to the individual, so it follows them from job to job, the balance rolls over year to year, and it offers strong tax treatment: deductible (or pre-tax) contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Hook: an HSA is yours to keep, rolls over, and is tax-favored coming and going.

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.

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.

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.

A valid insurable group must exist for some primary reason other than getting insurance, such as an employer, a union, or a trade association, so the coverage is incidental and the group isn't just assembled to game the system. Hook: the group has to exist first for another reason, with insurance as a perk, not the point.

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.

Because employees share the cost in a contributory plan, not everyone signs up, so insurers usually require around 75% participation to guard against adverse selection. Hook: contributory plans need roughly three-quarters in to keep the risk pool healthy.

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.

Events such as divorce or legal separation, the covered employee's death, the employee becoming entitled to Medicare, or a child losing dependent status give the spouse or dependents up to 36 months of COBRA continuation. Hook: family-status events like divorce and death stretch COBRA to 36 months for dependents.

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.

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.

Self-funded employer plans fall largely under ERISA, a federal law, which is one reason employers choose self-funding: it exempts them from many state insurance mandates. Hook: self-funded plans answer mainly to ERISA at the federal level.

A scheduled dental plan lists a set dollar benefit for each covered procedure, regardless of what the dentist actually charges. If the bill exceeds the schedule amount, the patient pays the difference. Hook: scheduled dental is a fixed price list, one dollar figure per procedure.

A nonscheduled, or comprehensive, dental plan pays a percentage of the UCR charge for each service rather than a fixed dollar amount, so benefits track local prevailing fees. It's the dental version of UCR-based medical coverage. Hook: nonscheduled dental pays a percentage of the going UCR rate, not a fixed table.

A dental PPO contracts with a network of dentists who accept negotiated (discounted) fees, while still letting members see out-of-network dentists at a higher out-of-pocket cost. It mirrors the medical PPO model. Hook: a dental PPO is the discounted-network-with-an-exit-option model.

Plans usually cover preventive and diagnostic care at or near 100% with no deductible, because catching problems early is cheaper than treating them later. It's the same prevention logic as in managed medical care. Hook: prevention is usually free (100%, no deductible) because it saves the plan money down the road.

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 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.

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.

Just as with medical coverage, dental coordination of benefits designates a primary and a secondary plan so that total payments don't exceed the actual cost of care. Hook: two dental plans still pay only the real cost, primary first, secondary second.

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.

A managed vision plan that pays providers a fixed amount per member and limits members to its network mirrors the HMO/capitation model, trading provider choice for lower cost. Hook: capitation plus a required network equals the HMO model, applied to vision.

Medicare's standard eligibility age is 65, the same age tied to its origins alongside Social Security. Certain younger people qualify too, such as those who have received Social Security disability for the required period. Hook: 65 is the magic Medicare age.

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.

Part B is medical insurance: it covers doctor visits, outpatient services, preventive care, lab tests, and durable medical equipment like wheelchairs. Inpatient hospital care is Part A. Hook: Part B is the doctor-and-outpatient side of Medicare.

Medigap is designed to fill gaps in Original Medicare, so it doesn't work with, and shouldn't be sold to, someone on a Medicare Advantage plan. Selling Medigap to an Advantage enrollee is a prohibited practice. Hook: Medigap and Medicare Advantage don't mix, one supplements Original Medicare, the other replaces it.

LTC insurance fills the gap left by Medicare, which doesn't pay for ongoing custodial care, by covering help with daily living over an extended period, whether in a facility or at home. Hook: LTC covers the long-term custodial care Medicare leaves out.

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.

LTC benefits are also triggered by severe cognitive impairment, such as Alzheimer's or other dementia, even if the person can still physically perform ADLs, because they need supervision for safety. Hook: serious cognitive decline is its own LTC trigger, separate from the ADL test.

Like the elimination period in disability income coverage, the LTC elimination period is the number of days at the start of care the insured pays out of pocket before policy benefits begin; a longer one lowers the premium. Hook: the elimination period is the upfront waiting stretch before LTC benefits start.

You can't get a tax benefit twice for the same dollar. If you deducted a medical expense and the insurer later reimburses it, that reimbursed amount can become taxable to undo the earlier deduction. Hook: no double-dipping, deduct and then get reimbursed, and the reimbursement is pulled back into income.

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.

Employer-paid group health premiums are a deductible business expense, a major reason employers offer health benefits. Hook: the employer writes off group health premiums as a business cost.

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.

When premiums are split, the benefits are taxed in proportion: the part attributable to the employer's deducted premium is taxable, and the part attributable to the employees' after-tax contributions is tax-free. Here that's about 60% taxable and 40% tax-free. Hook: split the premium, split the tax, in the same proportions.

Key person DI premiums are not deductible (the business is also the beneficiary), and the benefits the business receives are income-tax-free, the same nondeductible-in, tax-free-out pattern as key person life insurance. Hook: key person coverage, no deduction in, tax-free out.

Employer-paid medical expense benefits reimburse care and stay tax-free, but employer-paid disability income benefits replace taxable wages, so they're taxable to the employee. The benefit type, not just the funding, matters here. Hook: employer health benefits stay tax-free, while employer-paid disability benefits are taxed because they replace a paycheck.

The HSA's triple advantage is contributions that are deductible or pre-tax, earnings that grow tax-free, and withdrawals that are tax-free when used for qualified medical expenses. Few accounts offer all three. Hook: HSA equals a tax break going in, growing, and coming out, all three.

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.

FSA contributions come out of salary on a pre-tax basis, lowering the employee's taxable income, in exchange for the use-it-or-lose-it restriction on unused funds. Hook: FSA money goes in pre-tax, shrinking your taxable pay.