South Dakota Health Insurance Practice Exam Free - 2026

• A. Exclude losses within 12 months of the effective date; look back 12 months
• B. Exclude losses within 6 months of the effective date; look back 6 months
• C. Exclude losses within 3 months of the effective date; look back 6 months
• D. No preexisting condition exclusion is permitted

Correct answer: B. Exclude losses within 6 months of the effective date; look back 6 months

Explanation: A Medicare supplement policy or certificate may not exclude or limit benefits for losses incurred more than six months from the effective date of coverage for a preexisting condition, and may not define a preexisting condition more restrictively than one for which medical advice was given or treatment recommended or received within six months before the effective date. The same six-month/six-month standard applies to long-term care policies under SDCL 58-17B-6; twelve and three months are not the South Dakota limits, and D is wrong because a six-month exclusion is allowed. See SDCL 58-17A-3.

• A. At policy delivery; two years
• B. Within 10 days after the application; three years
• C. Only if the applicant requests it; one year
• D. At the time of application, obtaining a signed acknowledgment; five years

Correct answer: D. At the time of application, obtaining a signed acknowledgment; five years

Explanation: A policy sold through an agent must include a buyer's guide at the time of application; the agent must obtain a signed acknowledgment of receipt from the applicant, and the insurer must keep that acknowledgment on file for five years and make it accessible to the Division on request. Delivery upon request applies only to direct response insurers (and no later than policy delivery); the outline of coverage acknowledgment, by contrast, must be retained for at least four years under ARSD 20:06:13:37. A, B and D each misstate the timing or retention period. See ARSD 20:06:13:28.

• A. Yes, with 30 days' notice and a pro rata refund
• B. Yes, at the next annual renewal date if it cancels the entire class
• C. No; each Medicare supplement policy must be guaranteed renewable and may be cancelled or nonrenewed only for nonpayment of premium or material misrepresentation, unless the director authorizes otherwise
• D. No, unless the insured has been covered for less than two years

Correct answer: C. No; each Medicare supplement policy must be guaranteed renewable and may be cancelled or nonrenewed only for nonpayment of premium or material misrepresentation, unless the director authorizes otherwise

Explanation: Except as authorized by the director, an issuer may not cancel or refuse to renew a Medicare supplement policy or certificate for any reason other than nonpayment of premium or material misrepresentation, and each Medicare supplement policy must be guaranteed renewable; ARSD 20:06:13:19 likewise bars nonrenewal solely on the grounds of deterioration of health. A, B and D describe cancellation rights the rules do not give the issuer. See ARSD 20:06:13:60.

• A. No; a small employer has no more than 25 employees
• B. No; a small employer has no more than 100 employees but at least 51
• C. Yes; any employer with fewer than 100 employees qualifies
• D. Yes; a small employer averaged no more than 50 and no fewer than 2 employees during the preceding year and employs at least 2 on the first day of the plan year

Correct answer: D. Yes; a small employer averaged no more than 50 and no fewer than 2 employees during the preceding year and employs at least 2 on the first day of the plan year

Explanation: South Dakota defines a small employer as a person, firm, corporation, partnership or association actively engaged in business which, on an average of its working days during the preceding year, employed no more than fifty and no fewer than two employees and employs at least two employees on the first day of the plan year; affiliated companies are counted as one employer. A small employer carrier must issue plans to any small employer that applies (SDCL 58-18B-20). Twenty-five and one hundred are not the South Dakota thresholds, and B reverses the range. See SDCL 58-18B-1.

• A. Premiums are deductible as compensation, and benefits are taxable to the executive when paid
• B. Premiums are deductible as an ordinary business expense, and benefits received are taxable income
• C. Premiums are not deductible, and benefits received by the corporation are taxable as ordinary income
• D. Premiums are not deductible, and benefits received by the corporation are not taxable income

Correct answer: D. Premiums are not deductible, and benefits received by the corporation are not taxable income

Explanation: Because the corporation is the beneficiary of its own coverage, the premium is a nondeductible personal-type cost to the business and the offsetting benefit comes in tax free. Deducting premiums while receiving tax-free benefits is not permitted. The executive receives nothing under a key person policy, so nothing is taxable to him, and the tax-free character of the benefit follows from the nondeductible premium.

• A. The plan of the parent whose birthday falls earlier in the calendar year, regardless of birth year
• B. The plan of the parent who is older, as measured by the full date of birth including the year of birth
• C. The plan of the parent whose coverage has been in effect for the longer period of time
• D. The plan of the parent who is the child's custodial parent under the most recent court order

Correct answer: A. The plan of the parent whose birthday falls earlier in the calendar year, regardless of birth year

Explanation: The birthday rule looks only at month and day, so the parent whose birthday comes first in the calendar year has the primary plan, and the year of birth is irrelevant. The parent's age plays no role, only the position of the birthday within the year. Length of coverage is a tiebreaker used in other coordination situations, such as when both parents share the same birthday, and custodial-parent rules apply only when the parents are divorced or separated.

• A. The policy covers disabilities arising on the job, supplementing the benefits workers compensation pays for work-related injuries
• B. The policy covers disabilities arising off the job, because on-the-job injuries are expected to be handled by workers compensation
• C. The policy covers disabilities arising from any cause, but only while the insured is employed in the occupation shown on the application
• D. The policy covers disabilities arising from sickness only, since occupational injuries are handled under workers compensation

Correct answer: B. The policy covers disabilities arising off the job, because on-the-job injuries are expected to be handled by workers compensation

Explanation: Non-occupational coverage deliberately excludes work-related injury and illness, assuming workers compensation will respond, which lowers the premium; occupational coverage responds 24 hours a day regardless of where the disability arose. The term describes where the disability arose, not whether the insured is currently employed or in a particular occupation. It is not limited to sickness only, and it does not supplement workers compensation for on-the-job claims.

• A. The health plan must reimburse the at-fault driver's insurer for any settlement amounts that duplicate the medical benefits already paid
• B. The at-fault driver's insurer must pay the health plan directly before the insured may file a claim under her own coverage
• C. The health plan may recover from the settlement the amounts it already paid, so the insured is not paid twice for the same expenses
• D. The insured keeps the entire settlement, because subrogation applies only to property insurance and not to health coverage

Correct answer: C. The health plan may recover from the settlement the amounts it already paid, so the insured is not paid twice for the same expenses

Explanation: Subrogation lets the insurer step into the insured's shoes and recover from the responsible party what it already paid, which enforces the indemnity principle by preventing a double recovery for one loss. Letting the insured keep both the benefits and the settlement for the same bills would be exactly that double recovery. The health plan pays first and recovers afterward, and the reimbursement flows to the plan, not from it.

• A. Residual benefits pay a flat reduced percentage of the full benefit for a limited time, while a partial disability benefit is calculated from the percentage of income the insured has actually lost since returning to work
• B. Residual benefits are payable only for disabilities caused by accidental injury, while a partial disability benefit is payable for disabilities caused by either sickness or injury
• C. Residual benefits continue only while the insured remains totally disabled, while a partial disability benefit begins once the insured returns to work in a limited capacity
• D. Residual benefits are calculated from the percentage of income the insured actually lost, while a partial disability benefit typically pays a flat reduced percentage of the full benefit for a limited time

Correct answer: D. Residual benefits are calculated from the percentage of income the insured actually lost, while a partial disability benefit typically pays a flat reduced percentage of the full benefit for a limited time

Explanation: A residual benefit is proportional and income-based, scaling the payment to the measured loss of earnings when the insured returns to work at reduced capacity. A traditional partial disability benefit is simpler, paying a set fraction such as half the total benefit for a stated number of months, often only after a period of total disability. Neither benefit is limited by cause of disability, and residual benefits exist precisely because the insured is no longer totally disabled.

• A. Workers compensation pays for the work-related injury, and the group health plan generally excludes charges covered by workers compensation
• B. The group health plan pays as primary for the work-related injury, and workers compensation reimburses the plan for any remaining balance
• C. Workers compensation pays the medical expenses, while the group health plan pays the employee's lost wages for the duration of disability
• D. The employee may submit the medical bills to either program, and whichever pays first becomes primary for that claim and all future claims

Correct answer: A. Workers compensation pays for the work-related injury, and the group health plan generally excludes charges covered by workers compensation

Explanation: Group health contracts almost always exclude occupational injuries and illnesses, leaving workers compensation as the exclusive source of benefits for a work-related claim. Reversing that order would shift a statutory employer obligation onto the health plan. Group health coverage does not replace lost wages, and the employee cannot elect which program is primary for an occupational claim.

• A. Coverage generally begins at birth for injury and sickness, but congenital defects are excluded as preexisting conditions until the child has been enrolled for the policy's waiting period
• B. Coverage generally begins at birth for injury, sickness, and medically diagnosed congenital defects, with the parent required to notify the insurer and pay any additional premium within the stated enrollment window
• C. Coverage generally begins on the date the insurer receives the parent's written notice of birth, with the newborn treated as a late enrollee subject to underwriting if notice arrives over thirty days after birth
• D. Coverage begins at birth without any premium or notice requirement, because the newborn is treated as an insured under the parent's policy until the next policy anniversary

Correct answer: B. Coverage generally begins at birth for injury, sickness, and medically diagnosed congenital defects, with the parent required to notify the insurer and pay any additional premium within the stated enrollment window

Explanation: Newborn coverage rules provide automatic protection from the moment of birth, including congenital conditions, so long as the policyholder gives notice and pays any additional premium within the required period. Excluding congenital conditions would defeat the purpose of automatic coverage. Making coverage begin on the date of notice would leave the infant unprotected during the highest-risk period, and coverage cannot simply run to the anniversary without the required notice and premium.

• A. Only coverage under an employer's group health plan
• B. Any prior coverage, including plans consisting solely of excepted benefits such as stand-alone dental
• C. Coverage under a group health plan, individual health insurance, Medicare, or Medicaid
• D. Only coverage that was continuously in force for at least five years

Correct answer: C. Coverage under a group health plan, individual health insurance, Medicare, or Medicaid

Explanation: HIPAA defines creditable coverage broadly: it includes group health plans, individual health insurance coverage, Medicare Parts A and B, Medicaid, military health coverage, and several other public programs. Coverage consisting solely of excepted benefits, such as stand-alone dental or vision, does not count. There is no minimum number of years required. See 29 U.S.C. 1181(c).