California Life & Health Insurance Exam — All Questions

In a PPO, using an out-of-network provider generally results in:

• a.Coverage at a higher out-of-pocket cost to the insured✓
• b.A cash bonus to the insured
• c.No coverage whatsoever
• d.The same cost as staying in-network

A PPO still covers out-of-network care but at a higher cost to the insured, preserving flexibility. It neither denies out-of-network care nor charges the same as in-network.

A Point-of-Service (POS) plan:

• a.Covers only emergency and urgent care services and provides no coverage at all for routine visits, whether they are in-network or out-of-network
• b.Never uses a primary care physician
• c.Blends HMO and PPO features, letting the member choose in-network (gatekeeper) or out-of-network care at the time of service✓
• d.Is identical to traditional indemnity coverage

A POS plan combines HMO gatekeeping for the lowest cost with the option to go out-of-network at higher cost, deciding at the point of service. It is not the same as indemnity coverage.

To contribute to a Health Savings Account (HSA), an individual must be covered by a:

• a.Stand-alone dental plan
• b.Qualified high-deductible health plan (HDHP)✓
• c.Low-deductible HMO plan
• d.Medicare plan

HSA contributions require enrollment in a qualified high-deductible health plan and no disqualifying coverage. Low-deductible HMOs, Medicare, and dental plans do not qualify a person to fund an HSA.

A disability income policy's 'benefit period' is the:

• a.Maximum length of time the policy will pay benefits for a covered disability✓
• b.Waiting time after a disability begins and before any benefits become payable
• c.Period during which the insured's premiums are waived after a disability begins
• d.Time the insured is allowed to file written proof of loss

The benefit period is the maximum length of time a disability income policy will pay benefits for a single period of disability — for example, 2 years, 5 years, or to age 65 — after the elimination period has been satisfied. It is distinct from the elimination period, which is the initial waiting time before benefits begin. It is not a premium-waiver window or a claim-filing deadline. A longer benefit period increases the premium because the insurer's potential payout duration is greater.

Under a disability income policy, a 'residual' (partial) disability benefit is designed to:

• a.Cover only a total and permanent disability that prevents the insured from performing the duties of any occupation whatsoever
• b.Refund all of the premiums paid once the insured reaches age 65
• c.Pay double the monthly benefit when the disability results from an accident
• d.Pay a reduced benefit proportional to the income the insured loses when able to work only part-time or at reduced capacity✓

A residual (partial) disability benefit pays a reduced benefit in proportion to the insured's loss of earnings when a disability lets them work but at reduced hours or capacity — for example, a 40% income loss yields roughly 40% of the total benefit. It is not an accident doubler, a premium refund, or coverage limited to total disability; in fact it exists to bridge the gap when the insured is only partially disabled, encouraging a return to work without abruptly losing all benefits.

A 'presumptive disability' provision in a disability income policy pays full benefits, often without regard to the ability to work, when the insured suffers:

• a.The total and irrecoverable loss of sight, hearing, speech, or two limbs✓
• b.A brief hospital stay of two or three days
• c.A temporary sprain or strain that heals within a month or two of the injury
• d.Any illness that lasts more than a week and keeps the insured away from work

Presumptive disability provisions treat certain catastrophic losses — such as total loss of sight in both eyes, hearing, speech, or the use of two limbs — as automatically (presumptively) total disability, so full benefits are paid even if the insured could technically perform some work. Ordinary short illnesses, minor injuries, or brief hospital stays do not trigger this provision. It provides certainty of payment for the most severe, permanent losses that clearly destroy earning capacity.

'Business overhead expense' (BOE) disability insurance is designed to:

• a.Reimburse the ongoing fixed business expenses (rent, utilities, staff salaries) while the owner is disabled✓
• b.Replace the disabled business owner's personal salary and lost profits for the entire duration of the disability
• c.Pay off the business's long-term mortgage and equipment debt
• d.Fund the owner's retirement through a deferred account

Business overhead expense insurance reimburses a disabled owner for the ongoing, fixed costs of running the business — rent, utilities, employee salaries, leasing, and similar overhead — so the business can stay open during the owner's recovery. It does not replace the owner's own income (that is personal disability income insurance), pay off long-term debt, or fund retirement. BOE benefits are typically paid for a shorter period and are based on actual covered expenses incurred, up to the policy limit.

In a 'disability buy-sell' arrangement funded with disability insurance, the benefits are used to:

• a.Fund the purchase of a totally disabled owner's business interest by the remaining owners or the business✓
• b.Pay the business's income taxes while the owner is disabled
• c.Replace the disabled owner's personal salary for as long as the disability lasts, up to the policy's stated limit
• d.Pay the disabled owner's medical bills and rehabilitation costs during the period of the disability, up to the policy limit

A disability buy-sell policy provides the cash needed for the remaining owners (or the business entity) to buy out the interest of an owner who becomes totally disabled, ensuring an orderly transfer of ownership at a pre-agreed price. It is not designed to pay medical bills, replace personal income, or cover business taxes. Benefits usually begin after a long elimination period (reflecting the time needed to determine the disability is permanent) and may be paid as a lump sum or installments to complete the buyout.

In a Preferred Provider Organization (PPO) plan, an insured who chooses to receive care from an out-of-network provider generally:

• a.Pays exactly the same cost share as for in-network care
• b.Must first obtain a written referral from a primary care physician before any benefit is paid
• c.Still has coverage but pays higher out-of-pocket costs than for in-network care✓
• d.Receives no coverage at all for that care

A PPO offers flexibility: the insured may use out-of-network providers and still receive benefits, but at a higher cost share (higher deductible and coinsurance) than for in-network care, which is discounted. Out-of-network care is not entirely uncovered, and it does not cost the same as in-network. Unlike an HMO, a PPO generally does not require a primary care physician gatekeeper or referrals to see specialists. The higher-cost-but-still-covered treatment of out-of-network care is the defining PPO feature.

Under the federal Affordable Care Act (ACA), non-grandfathered individual and small-group health plans must cover a defined set of 'essential health benefits.' Which is an example of such a benefit?

• a.Routine adult dental cleanings and adult vision examinations in every plan that is sold
• b.Elective cosmetic surgery performed only to improve appearance
• c.Ambulatory (outpatient) and emergency services, hospitalization, and maternity care✓
• d.Long-term custodial nursing home care for an insured who cannot perform daily activities

The ACA's essential health benefits include ten categories such as ambulatory (outpatient) services, emergency services, hospitalization, maternity and newborn care, mental health and substance use treatment, prescription drugs, rehabilitative services, laboratory services, preventive/wellness care, and pediatric services. Elective cosmetic surgery is not an essential health benefit, routine adult dental is not a required category (pediatric dental is), and long-term custodial care is not an essential health benefit. The listed clinical categories are the core the law requires.

Under the ACA, health insurers must generally allow young adults to remain on a parent's plan until they reach age:

• a.21
• b.30
• c.19
• d.26✓

The Affordable Care Act requires plans that offer dependent coverage to make it available to an adult child until age 26, regardless of the child's marital status, student status, residence, or financial dependency. Age 19 and 21 reflect older, pre-ACA dependent cutoffs that generally no longer apply to this federal requirement, and 30 is not the standard federal limit. This provision expanded coverage for young adults transitioning into the workforce.

The ACA prohibits non-grandfathered health plans from doing which of the following?

• a.Covering prescription drugs as one of the essential health benefits
• b.Charging any premium at all for coverage
• c.Denying coverage or charging more due to a pre-existing condition✓
• d.Offering a provider network that limits the insured's choice of doctor

A central ACA reform is guaranteed issue with no pre-existing-condition exclusions: non-grandfathered plans cannot deny coverage, exclude benefits, or charge higher premiums because of an applicant's health history or pre-existing conditions. Plans still charge premiums, cover prescription drugs (an essential health benefit), and use provider networks — none of those is prohibited. The bar on pre-existing-condition discrimination, along with the ban on lifetime and annual dollar limits for essential benefits, is among the law's key protections.

In ACA Marketplace 'metal tier' plans (Bronze, Silver, Gold, Platinum), moving from Bronze toward Platinum generally means:

• a.Coverage of fewer essential health benefits in exchange for a lower monthly premium
• b.Higher premiums but lower out-of-pocket cost sharing when you receive care✓
• c.No change in either the premium or the cost sharing
• d.Lower premiums but higher out-of-pocket cost sharing when you receive care

The metal tiers reflect actuarial value — the share of covered costs the plan pays on average. Bronze plans have the lowest premiums but the highest cost sharing (deductibles, coinsurance), while Platinum plans have the highest premiums and the lowest out-of-pocket costs at the point of care; Silver and Gold fall in between. All tiers must cover the same essential health benefits, so the higher tiers do not cover fewer benefits — they simply pay a larger share of the costs in exchange for higher premiums.

Under the ACA, in-network 'preventive care' services (such as certain immunizations and screenings) must be provided:

• a.At a 50% coinsurance rate paid by the insured at the time the service is received
• b.Without any cost sharing (no copay, coinsurance, or deductible) to the insured✓
• c.Only to insureds who are over age 50
• d.Only after the insured has satisfied the plan's annual deductible and paid the copay

The ACA requires non-grandfathered plans to cover a defined list of recommended preventive services — such as many immunizations, screenings, and wellness visits — from in-network providers with no cost sharing, meaning no copay, coinsurance, or deductible applies. It is not conditioned on meeting the deductible first, does not carry a 50% coinsurance, and is not limited to older insureds. Removing cost barriers to prevention is intended to encourage early detection and reduce long-term costs.

A Point-of-Service (POS) plan is best described as a managed care plan that:

• a.Blends HMO and PPO features — using a primary care physician for in-network care but allowing out-of-network care at higher cost✓
• b.Pays only for care received outside the plan's provider network
• c.Is identical to a traditional indemnity plan, paying exactly the same benefit whether the member stays in network or goes outside it
• d.Has no provider network of any kind and no primary care physician

A POS plan combines HMO and PPO characteristics: members typically choose a primary care physician who coordinates in-network care (HMO-like) but retain the option to go out of network at a higher out-of-pocket cost (PPO-like). It does use a network, does cover in-network care, and is not the same as an unmanaged indemnity plan. The 'point of service' name reflects that the member decides, each time care is needed, whether to stay in network or go outside it.