California Health Insurance Practice Exam Free 2026

• A. A standard insurance contract
• B. A list of prescription drugs covered by a health plan
• C. A form for claims
• D. A formula for calculating premiums

Correct answer: B. A list of prescription drugs covered by a health plan

Explanation: A formulary is a list of prescription drugs covered by a health insurance plan. Drugs are often organized into tiers, with different cost-sharing amounts for each tier.

• A. Gradually increasing medication dosages
• B. A therapy for addiction recovery
• C. Requiring trial of lower-cost drugs before more expensive options
• D. Physical therapy for walking

Correct answer: C. Requiring trial of lower-cost drugs before more expensive options

Explanation: Step therapy requires patients to try one or more lower-cost medications (typically generics) before the plan will cover a more expensive brand-name drug for a condition.

• A. Health insurance for chronic conditions
• B. Extended hospital coverage
• C. Coverage for assistance with daily living activities when unable to care for oneself
• D. Insurance for long hospital stays

Correct answer: C. Coverage for assistance with daily living activities when unable to care for oneself

Explanation: Long-term care insurance covers services needed when a person cannot perform activities of daily living (like bathing, dressing, eating) due to chronic illness, disability, or cognitive impairment.

• A. Daily work activities
• B. Exercise routines
• C. Basic self-care tasks used to measure need for long-term care
• D. Recreational activities

Correct answer: C. Basic self-care tasks used to measure need for long-term care

Explanation: Activities of daily living (ADLs) are basic self-care tasks including bathing, dressing, eating, toileting, transferring (moving), and continence. Inability to perform ADLs often triggers long-term care benefits.

• A. What starts premium payments
• B. The criteria that must be met before benefits are paid
• C. What cancels the policy
• D. A device for dispensing medication

Correct answer: B. The criteria that must be met before benefits are paid

Explanation: A benefit trigger is the condition that must be met before long-term care insurance benefits begin. Common triggers include inability to perform a certain number of ADLs or cognitive impairment.

• A. Mental health screening for insurance
• B. Equal premium rates for all members
• C. Equivalent mental and physical fitness
• D. Requiring equal coverage for mental health as for medical/surgical conditions

Correct answer: D. Requiring equal coverage for mental health as for medical/surgical conditions

Explanation: Mental health parity requires health insurers to provide the same level of benefits for mental health and substance use disorder treatment as they do for medical and surgical treatments.

• A. Insurance for community organizations
• B. Rating doctors in the community
• C. Rating insurance companies by community members
• D. Setting premiums based on the entire community rather than individual health status

Correct answer: D. Setting premiums based on the entire community rather than individual health status

Explanation: Community rating is a method of setting premiums where everyone in a geographic area pays the same base rate, regardless of individual health status. The ACA requires modified community rating.

• A. Rating insurance agents' experience
• B. Rating based on customer experience
• C. Rating medical providers' experience
• D. Setting premiums based on a group's actual claims history

Correct answer: D. Setting premiums based on a group's actual claims history

Explanation: Experience rating bases premium rates on the actual claims history and experience of a specific group. Groups with fewer claims may receive lower rates, while those with more claims pay higher rates.

• A. A primary care physician who coordinates and authorizes specialist care
• B. An insurance claims reviewer
• C. A hospital administrator
• D. A security guard at hospitals

Correct answer: A. A primary care physician who coordinates and authorizes specialist care

Explanation: In managed care plans, particularly HMOs, the gatekeeper is the primary care physician who coordinates all patient care and must authorize referrals to specialists to ensure medical necessity and cost control.

• A. Taking medication in steps
• B. Requiring use of less expensive drugs before covering more expensive alternatives
• C. A physical therapy technique
• D. Increasing dosages gradually

Correct answer: B. Requiring use of less expensive drugs before covering more expensive alternatives

Explanation: Step therapy is a cost-control strategy requiring patients to try less expensive, often generic medications first before the plan will cover more expensive brand-name or specialty drugs.

• A. A mathematical calculation for premiums
• B. A list of prescription drugs covered by the plan, often organized by tier
• C. A medical formula for treatment
• D. The policy application form

Correct answer: B. A list of prescription drugs covered by the plan, often organized by tier

Explanation: A formulary is a list of prescription drugs covered by a health insurance plan, typically organized into tiers based on cost. Drugs on the formulary are covered; those off-formulary may not be or have higher costs.

• A. Prior health insurance coverage that reduces or eliminates pre-existing condition exclusions
• B. Coverage with a credit card
• C. Insurance from a credible company
• D. Coverage that earns credit

Correct answer: A. Prior health insurance coverage that reduces or eliminates pre-existing condition exclusions

Explanation: Creditable coverage is prior health insurance coverage that can reduce or eliminate pre-existing condition exclusion periods when switching to new coverage. HIPAA established rules for crediting prior coverage.