Arkansas Insurance and Health Insurance Fundamentals Flashcards

Vocabulary-style flashcards covering the core principles of risk, health insurance policy provisions, managed care, Medicare/Medicaid, business disability, and Arkansas state insurance regulations.

Pure Risk

A type of risk that refers to situations that can only result in a loss or no change, with no opportunity for financial gain. This is the only type of risk insurance companies are willing to accept.

Speculative Risk

A type of risk that involves the opportunity for either loss or gain, such as gambling. These risks are not insurable.

Indemnity

The main principle of insurance stating that the insured cannot recover more than their loss, aimed at restoring the insured to the same position as before the loss.

Law of Large Numbers

A statistical principle stating that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.

Adverse Selection

The tendency of risks that are more prone to losses than the average risk to seek insurance coverage to a greater extent than better risks.

Physical Hazard

Individual characteristics that increase the chances of the cause of loss, such as physical conditions, past medical history, or conditions at birth like blindness.

Moral Hazard

Tendencies towards increased risk evaluated via the character and reputation of the insured, involving potential lies on applications or fraudulent claims.

Morale Hazard

A state of mind that causes indifference to loss, such as carelessness or actions taken without forethought that may cause physical injuries.

Peril

The specific cause of loss insured against in an insurance policy, such as sickness or accidental bodily injury.

Express Authority

The authority a principal intends to grant to an agent by means of the agent’s written contract.

Implied Authority

Authority that is not written into the contract but which the agent is assumed to have in order to transact the business of insurance.

Apparent Authority

Also known as perceived authority; the assumption of authority based on the actions, words, or deeds of the principal or circumstances created by the principal.

Representations

Statements believed to be true to the best of one's knowledge, but not guaranteed to be true; these are typically the answers provided on an insurance application.

Warranty

An absolutely true statement upon which the validity of the insurance policy depends; a breach of this can void the policy.

Consumer Reports

Written or oral information regarding a consumer's credit, character, reputation, or habits collected from employment records, credit reports, and public sources.

Investigative Consumer Reports

Information on a consumer's character and reputation obtained through investigations and interviews with associates, friends, and neighbors.

1033 Waiver

A letter of written consent from an insurance regulatory official required for an individual convicted of a crime involving dishonesty to work in insurance affecting interstate commerce.

Accidental Bodily Injury

An unforeseen and unintended injury that results from an accident rather than a sickness.

Medical Expense Coverage

A contract that covers expenses incurred from an accident or sickness, such as physician or hospital expenses, typically paid on a reimbursement basis.

Elimination Period

A type of deductible measured in days which must expire after the onset of an illness or accident before disability benefits become payable.

Coinsurance

A provision for the sharing of expenses between the insured and the insurance company, often expressed as a percentage such as $80/20$ after a deductible is met.

Stop-Loss Limit

A specified dollar amount beyond which the insured no longer participates in the sharing of expenses and the insurer pays $100% of eligible costs.

Total Disability

Defined in many policies as the inability of the insured to perform any occupation for which they are reasonably suited by education, training, or experience.

Presumptive Disability

A provision specifying conditions, such as the loss of any two limbs or total blindness, that automatically qualify the insured for full disability benefits.

Recurrent Disability

A policy provision specifying a period (usually $3$ to $6$ months) during which a recurrence of an illness is considered a continuation of a prior disability to avoid a new elimination period.

Master Policy

The contract issued to the group sponsor (employer, union, etc.) in a group insurance plan.

Certificate of Insurance

Evidence of coverage issued to individuals covered under a group insurance plan, detailing coverage and how to file claims.

Coordination of Benefits (COB)

A provision found only in group health plans to avoid duplication of benefit payments and overinsurance when an individual is covered under multiple plans.

COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1985, requiring employers with $20$ or more employees to extend group health coverage to terminated employees for up to $18$ months.

Medicare Part A

Hospital insurance financed through FICA taxes that helps pay for inpatient hospital care, skilled nursing facility care, home health care, and hospice care.

Medicare Part B

Optional medical insurance funded by premiums and general revenues that pays for doctor's services and other medical supplies not covered by Part A.

Medicare Advantage (Part C)

Allows beneficiaries to receive all health care services through provider organizations like HMOs or PPOs, often offering extra coverage like vision or dental.

Medigap

Medicare Supplement policies issued by private insurance companies designed to fill gaps in Medicare coverage attributable to deductibles and copayments.

Medicaid

A federal- and state-funded program providing medical care for individuals whose income and resources are insufficient.

Skilled Care

Daily nursing and rehabilitative care that must be provided by medical personnel under the direction of a physician, usually in an institutional setting.

Custodial Care

Care for personal needs such as eating, dressing, or bathing, which can be provided by nonmedical personnel in an institutional or home setting.

Domestic Insurer

An insurance company that is incorporated in the state where it is transacting business.

Foreign Insurer

An insurance company that is incorporated in another state, the District of Columbia, or a U.S. territorial possession.

Alien Insurer

An insurance company that is incorporated outside of the United States.

Twisting

An illegal trade practice involving a misrepresentation or incomplete comparison of policies to persuade an insured to cancel or switch policies to their detriment.

Churning

Replacing insurance policies for the sole purpose of making commissions, using original policy values to purchase another policy with the same insurer.

Defamation

Oral or written statements intended to injure a person engaged in the insurance business or maliciously critical of the financial condition of an insurer.

Rebating

An illegal inducement offered to the insured in the sale of insurance products that is not specified in the policy, such as a premium refund or special favor.

Arkansas Life and Health Insurance Guaranty Association

A body established to protect policyowners and beneficiaries from financial loss caused by the insolvency of an insurer.