Free Alabama Health Insurance Practice Exam Online

Correct answer: A. At the time the policy is issued

Correct. Insurable interest must exist at the time the health policy is applied for and issued.

• B: Incorrect. Waiting until a claim arises would defeat the purpose of insurable interest, which exists to prevent wagering contracts.
• C: Incorrect. The insurable interest requirement applies to individual policies as well as group arrangements.
• D: Incorrect. Insurable interest is a foundational contract-law principle applicable to health insurance, not just life or property lines.

Correct answer: B. As the number of exposure units increases, actual loss results become more predictable

Correct. The law of large numbers holds that predicted losses become more accurate as the number of similar exposure units grows, allowing insurers to price risk more reliably.

• A: Incorrect. Insurer size does not automatically translate to lower premiums; pricing depends on risk pooling, expenses, and underwriting.
• C: Incorrect. Commission structure is a business/contract matter, unrelated to the statistical law of large numbers.
• D: Incorrect. The law of large numbers concerns predictability of aggregate losses, not a guaranteed decrease in claim frequency.

Correct answer: C. An HMO generally requires a primary care physician referral for specialist care and offers no out-of-network benefit, while a PPO allows self-referral and out-of-network coverage at a higher cost

Correct. HMOs typically use a primary care physician gatekeeper model with in-network-only coverage, while PPOs allow greater provider flexibility, including out-of-network access at reduced reimbursement.

• A: Incorrect. This reverses the actual structure — the gatekeeper/referral model is characteristic of HMOs, not PPOs.
• B: Incorrect. HMOs, like other health plans, require premium payments to maintain coverage.
• D: Incorrect. PPOs commonly include prescription drug coverage as part of the overall plan design.

Correct answer: D. HMO and PPO

Correct. A POS plan blends HMO-style primary care coordination with PPO-style flexibility to go out-of-network at a higher cost.

• A: Incorrect. Workers' compensation and disability income are separate lines of coverage, not managed-care structures blended into a POS plan.
• B: Incorrect. Medicare and Medicaid are government health programs, not the private managed-care models combined in a POS design.
• C: Incorrect. Term and whole life are life insurance product types, unrelated to managed care plan structure.

Correct answer: A. A managed care plan that covers services only within its network, generally without requiring a PCP referral

Correct. An EPO restricts coverage to in-network providers (with limited exceptions such as emergencies) but typically does not require a PCP referral for specialists.

• B: Incorrect. Mandatory PCP referrals are more characteristic of HMO plans, not the typical EPO structure.
• C: Incorrect. EPOs do restrict coverage to their provider network; that is the defining feature of the plan type.
• D: Incorrect. EPOs are private managed care plans, not a government program like Medicaid.