Texas Life & Health Insurance Practice Test

Why A is correct

Under TIC 843.002, an evidence of coverage is any certificate, agreement, or contract, including a blended contract, that is issued to an enrollee and states the coverage to which the enrollee is entitled. It is the document that defines the HMO's obligation to the covered person, and in a group plan the certificate issued to each subscriber is part of the evidence of coverage. Because the evidence of coverage is issued to the enrollee and states entitlement, a producer should never describe benefits from memory or from sales material; the evidence of coverage controls what the HMO owes.

Why the other options are wrong

• B) Advertising and sales material is not the contract; only the certificate, agreement, or contract issued to the enrollee states the coverage.
• C) Physician and provider contracts govern the HMO's relationship with its network; they are not issued to the enrollee and do not state the enrollee's coverage.
• D) The schedule of charges is a separate rate filing; it is not the document issued to an enrollee that states the coverage to which the enrollee is entitled.

Memory hook

The evidence of coverage is issued TO the enrollee and states what they get.

Why D is correct

TIC Chapter 1501 governs health benefit plans issued to small employers, covering guaranteed issue, guaranteed renewal, portability and the related rating limits, and it does not reach individual health coverage, life insurance, Medicare supplement policies, or self-funded employee benefit plans, which are regulated elsewhere or lie outside state jurisdiction. An agent should therefore check whether the case in front of the client is truly an insured small employer plan before relying on Chapter 1501 protections.

Why the other options are wrong

• A) Self-funded employee benefit plans are not within the scope of TIC Chapter 1501, whose requirements attach to insured small employer health benefit plans.
• B) Chapter 1501 is a health benefit plan statute; life insurance is governed by other provisions of the Texas Insurance Code.
• C) Medicare supplement coverage issued to individuals has its own regulatory scheme and is outside Chapter 1501.

Memory hook

Chapter 1501 means insured small employer health plans only.

Why C is correct

Under TIC 101.051, transacting the business of insurance includes soliciting or negotiating insurance, taking or receiving an application for insurance, receiving or collecting any premium or other consideration for insurance, and issuing or delivering a contract of insurance to a resident of this state. Any one of these acts can stand on its own. Practically, an unauthorized insurer or unlicensed person cannot argue that it never really did business in Texas: taking a single application or collecting a single premium is enough to bring the activity within the Code and to trigger the certificate of authority and licensing requirements.

Why the other options are wrong

• A) Distributing generic educational material that does not discuss a specific policy, quote a premium, or move the prospect toward an application is not transacting insurance.
• B) Purely clerical or administrative work that does not involve solicitation, negotiation, or taking an application is not transacting insurance.
• D) Investing company funds is investment activity by the insurer, not the transaction of insurance business with the public.

Memory hook

Take it, collect it, deliver it — each one alone is transacting insurance.