Under California law, which of the following is generally recognized as an eligible group for group health insurance?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California's group insurance statutes define the eligible groups for which group health coverage may lawfully be issued. Recognized categories include employer-employee groups, labor unions, trustees of funds established for such groups, and bona fide associations of employers or of members that exist for purposes other than obtaining insurance. The association must have a legitimate organizational purpose independent of the insurance purchase, and the group must share a common bond such as employment or association membership. These eligibility rules are designed to prevent the fragmentation and adverse selection that would occur if any collection of people could band together to buy group coverage.
Why the other options are wrong
- B) Two unrelated individuals sharing a residence do not form an eligible group. Group coverage requires a common bond such as employment or bona fide association membership; unrelated roommates lack it.
- C) A group whose sole purpose is to obtain insurance is expressly not eligible. The group must exist for some legitimate purpose independent of the insurance transaction, such as a trade or professional purpose.
- D) Retail discount-card holders lack the common employment or organizational relationship that defines an eligible group. They are a collection of customers, not a recognized group for group insurance.
Memory hook
Eligible groups share a real bond — work, union, or association — not a shopping habit.