California Life and Health Insurance Practice Exam

In health insurance, which provision addresses the issue of overinsurance?

1. Pre-existing conditions clause

2. Coordination of benefits

3. Beneficiary designation

4. Road to recovery provision

The correct answer is: Coordination of benefits

The provision that addresses the issue of overinsurance in health insurance is the Coordination of Benefits. This provision is crucial in situations where an individual is covered by multiple health insurance policies. It ensures that the total benefits paid do not exceed the actual costs incurred by the insured, thereby preventing overinsurance. When a policyholder has coverage from more than one insurer, the Coordination of Benefits provision determines the order in which the different policies will pay their benefits. It clearly states how much each policy will contribute to healthcare expenses, thus avoiding scenarios where the combined benefits exceed the allowable charges, which would lead to an unfair advantage or profit from the healthcare system. In contrast, the other options serve different purposes. The pre-existing conditions clause focuses on conditions that existed before obtaining insurance coverage, affecting how and when those conditions are covered. Beneficiary designation pertains to who will receive benefits upon the death of the insured, and the Road to Recovery provision relates to the insured returning to health and the rehabilitation process. None of these directly address the issue of overlapping insurance coverage the way Coordination of Benefits does.