Iowa Life & Health Insurance License, Practice Exams

A person generally becomes eligible for Medicare at:

1. Any age, as long as they have private health insurance
2. Age 70, once delayed retirement credits stop accruing
3. Age 62, the earliest age for Social Security retirement benefits
4. Age 65, or earlier after 24 months of Social Security disability ✓

Why: Eligibility begins at 65, or earlier for those receiving Social Security disability for 24 months, or with ESRD/ALS.

An Iowa life insurance company holding a separate account wants to keep in it the reserves for a benefit it has guaranteed as to dollar amount and duration. A creditor of another part of the company's business wants to reach the separate account's assets. And a contract holder describes the company as trustee of the account. What does Iowa Code 508A.1 provide?

1. Reserves for benefits guaranteed as to dollar amount and duration may be maintained in a separate account without any approval, the guarantee being the company's own promise and the account merely the place the supporting assets sit. Amounts allocated to a separate account are owned by the company, and the company shall not be, nor hold itself out to be, a trustee with respect to them. Unless the applicable contracts provide to the contrary, that portion of the assets equal to the reserves and other contract liabilities is not chargeable with liabilities arising out of any other business the company may conduct.
2. Reserves for benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest shall not be maintained in a separate account, except with the approval of the commissioner and under such conditions as to investments and other matters as the commissioner may prescribe, which shall recognise the guaranteed nature of the benefits provided. Amounts allocated to a separate account are owned by the company, and the company shall not be, nor hold itself out to be, a trustee with respect to them. Unless the applicable contracts provide to the contrary, that portion of the assets of the separate account equal to the reserves and other contract liabilities with respect to the account is not chargeable with liabilities arising out of any other business the company may conduct. ✓
3. Reserves for benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest shall not be maintained in a separate account except with the approval of the commissioner. Amounts allocated to a separate account are held in trust by the company for the contract holders, and the trust is the source of the insulation: without it the creditors of the company's other business would reach the account's assets in the ordinary way, the company being their owner. Unless the applicable contracts provide to the contrary, the assets equal to the reserves and other contract liabilities are not chargeable with those liabilities, and a creditor of another part of the company's business therefore reaches nothing in the account while the trust for the contract holders subsists.
4. Reserves for benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest shall not be maintained in a separate account except with the approval of the commissioner and under such conditions as the commissioner may prescribe. Amounts allocated to a separate account are owned by the company, and the company shall not be, nor hold itself out to be, a trustee with respect to them. The whole of the separate account is chargeable with liabilities arising out of any other business the company may conduct, the account being the company's own property.

Why: Three subsections of Iowa Code 508A.1 answer the three parts of the stem, and the second and third of them sit together in a way that a candidate has to hold carefully. Subsection 3: EXCEPT WITH THE APPROVAL OF THE COMMISSIONER OF INSURANCE AND UNDER SUCH CONDITIONS AS TO INVESTMENTS AND OTHER MATTERS AS THE COMMISSIONER MAY PRESCRIBE, WHICH SHALL RECOGNIZE THE GUARANTEED NATURE OF THE BENEFITS PROVIDED, RESERVES FOR BENEFITS GUARANTEED AS TO DOLLAR AMOUNT AND DURATION AND FUNDS GUARANTEED AS TO PRINCIPAL AMOUNT OR STATED RATE OF INTEREST SHALL NOT BE MAINTAINED IN A SEPARATE ACCOUNT. The default is a prohibition and the approval is the exception, which the answer allowing guaranteed reserves without approval reverses - and the reason is subsection 2: a separate account may be invested without regard to the ordinary investment limitations, and putting guaranteed money there would put the guarantee behind unlimited investment risk. That is also why the approval, when given, carries conditions that SHALL RECOGNIZE THE GUARANTEED NATURE OF THE BENEFITS. Subsection 5 does two things and the first is the one that catches candidates: AMOUNTS ALLOCATED TO A SEPARATE ACCOUNT IN THE EXERCISE OF THE POWER GRANTED BY THIS CHAPTER SHALL BE OWNED BY THE COMPANY, AND THE COMPANY SHALL NOT BE, NOR HOLD ITSELF OUT TO BE, A TRUSTEE WITH RESPECT TO SUCH AMOUNTS. NOT A TRUSTEE, and expressly forbidden to say it is - which is what the answer calling the amounts held in trust asserts, and its reasoning is the natural one: if the assets are insulated, surely they are held on trust? They are not, and the insulation comes from the second half of the same subsection instead: UNLESS IT IS PROVIDED TO THE CONTRARY UNDER THE APPLICABLE CONTRACTS, THAT PORTION OF THE ASSETS OF ANY SUCH SEPARATE ACCOUNT EQUAL TO THE RESERVES AND OTHER CONTRACT LIABILITIES WITH RESPECT TO SUCH ACCOUNT SHALL NOT BE CHARGEABLE WITH LIABILITIES ARISING OUT OF ANY OTHER BUSINESS THE COMPANY MAY CONDUCT. A statutory ring-fence, not a trust - and note that it protects THAT PORTION EQUAL TO THE RESERVES AND OTHER CONTRACT LIABILITIES, not the whole account, so a surplus above that figure is not insulated. The answer making the whole account chargeable removes the ring-fence entirely. Subsection 4 completes the picture: UNLESS OTHERWISE APPROVED BY THE COMMISSIONER OF INSURANCE, ASSETS ALLOCATED TO A SEPARATE ACCOUNT SHALL BE VALUED AT THEIR MARKET VALUE ON THE DATE OF VALUATION, OR IF THERE IS NO READILY AVAILABLE MARKET, THEN AS PROVIDED UNDER THE TERMS OF THE CONTRACT - with the portion equal to the reserve liability for guaranteed benefits valued instead in accordance with the rules otherwise applicable to the company's assets. The same ring-fence language appears in Iowa Code 508.32(3) and 508.32A(1) for the two other kinds of account a life company may hold, and 508.32(3) expressly disapplies section 508A.1, subsection 5, to a separate account established for policy proceeds held in trust.

A licensed health care practitioner certifies that Joan cannot bathe or dress without substantial help. For her tax-qualified long-term care contract to pay, the loss of ability must be expected to last at least:

1. 30 days
2. 60 days
3. 90 days ✓
4. 180 days

Why: Under the HIPAA definition of chronically ill, the inability to perform at least two activities of daily living must be expected to last at least 90 days. That 90-day test is separate from any elimination period the policy sets.

The grace period in a typical life insurance policy is:

1. Only available once during the entire life of the policy
2. Exactly 24 hours from the date the premium first becomes due
3. About 31 days, during which an overdue premium may still be paid ✓
4. A full 12 months following any missed premium payment

Why: The grace period (commonly 31 days) keeps coverage in force after a missed premium; a death during it pays the benefit minus the premium owed.

Which type of care is generally NOT covered by Medicare?

1. Inpatient hospital care following an approved admission
2. Physician services and outpatient diagnostic testing
3. Long-term custodial care ✓
4. Hospice care for a terminally ill beneficiary

Why: Medicare generally does not pay for long-term custodial care (help with daily living); it covers hospital, physician, and hospice care.

A member insurer has been placed under an order of rehabilitation by a court of competent jurisdiction; no finding of insolvency has been made. Among the contracts it wrote are a major medical policy, a Medicare supplement policy, and a dental-only policy. The association asks how the insurer is classified and which of the three contracts is a health benefit plan for the purposes of the chapter.

1. The insurer is an insolvent insurer, an order of rehabilitation being one of the three orders that establishes insolvency for the purposes of the chapter, and all three contracts are health benefit plans because each is a hospital or medical expense policy or a similar health contract issued to a resident of this state.
2. The insurer is an impaired insurer, and the major medical and Medicare supplement policies are both health benefit plans while the dental-only policy is not, the definition excluding coverage confined to a single class of provider but reaching every contract that supplements or coordinates with the benefits payable under Medicare.
3. The insurer is neither impaired nor insolvent until the rehabilitation fails and a liquidation order follows, and the question of which contracts are health benefit plans does not arise until that point, because the definitions in the chapter attach only on the entry of an order of liquidation with a finding of insolvency by a court.
4. The insurer is an impaired insurer rather than an insolvent insurer, and of the three contracts only the major medical policy is a health benefit plan; Medicare supplement insurance and dental-only insurance are both excluded from that definition. ✓

Why: Two definitions in Iowa Code 508C.5 decide this. Subsection 11 defines an “impaired insurer” as a member insurer which is NOT an insolvent insurer and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction; subsection 12 defines an “insolvent insurer” as one placed under an order of LIQUIDATION WITH A FINDING OF INSOLVENCY. Rehabilitation without a liquidation order is therefore impairment, and the chapter’s machinery attaches at that point rather than waiting for a liquidation. Subsection 10 defines “health benefit plan” as any hospital or medical expense policy or certificate, health maintenance organization subscriber contract or other similar health contract, and then excludes nine things: accident-only insurance, credit insurance, dental-only insurance, vision-only insurance, MEDICARE SUPPLEMENT INSURANCE, benefits for long-term care, home health care or community-based care, disability income insurance, coverage for an onsite medical clinic, and specified disease, hospital confinement indemnity or limited benefit health insurance where that coverage does not coordinate benefits and is under a separate policy. So only the major medical policy qualifies. That list is not academic: it is what sends Medicare supplement, long-term care and disability income business to the lower or separate ceilings in section 508C.3(5) rather than to the five hundred thousand dollar health benefit plan ceiling.

An Iowa investor wants to buy a policy that was issued three years ago. The insurer, asked to record the change of ownership, wants the viator to sign the insurer's own consent form, which the commissioner has never approved, and says it will get to the request when it can. What does Iowa Code 508E.11 provide?

1. Except as provided in section 508E.12, it is a violation of the chapter for any person to enter into a viatical settlement contract at any time prior to the application or issuance of the policy, or within a five-year period commencing with the date of issuance of the policy or certificate - so at three years the purchase is barred unless it falls within section 508E.12. An insurer shall not, as a condition of responding to a request for verification of coverage or effecting the transfer of a policy, require that the viator, insured, provider or broker sign any form, disclosure, consent or waiver form that has not been expressly approved by the commissioner for use in connection with viatical settlement contracts in this state. On receipt of a properly completed request for change of ownership or beneficiary the insurer shall respond in writing within twenty days, confirming that the change has been effected or specifying why it cannot be processed, and shall not unreasonably delay the change or otherwise seek to interfere with a lawful viatical settlement contract. ✓
2. Except as provided in section 508E.12, it is a violation of the chapter for any person to enter into a viatical settlement contract prior to the application or issuance of the policy or within a two-year period commencing with the date of issuance, so at three years this purchase is outside the bar altogether and no exemption need be certified. An insurer shall not, as a condition of responding to a request for verification of coverage or effecting a transfer, require any person to sign a form that has not been expressly approved by the commissioner. On receipt of a properly completed request for change of ownership or beneficiary the insurer shall respond in writing within twenty days and shall not unreasonably delay the change. Where the insurer misses that deadline the requested change is deemed effected as of the twenty-first day, the statute supplying the acknowledgment the insurer failed to give, and the provider may record the transfer on its own request; the insurer's only recourse is then to apply to the commissioner to have the deemed change set aside.
3. Except as provided in section 508E.12, it is a violation of the chapter for any person to enter into a viatical settlement contract prior to the application or issuance of the policy or within a five-year period commencing with the date of issuance, so at three years the purchase is barred unless section 508E.12 applies. An insurer may require the viator, insured, provider or broker to sign its own consent or waiver form as a condition of effecting a transfer even though the commissioner has never approved it, an insurer being entitled to protect itself against a disputed assignment and against paying the wrong claimant; what it may not do is refuse the transfer outright. On receipt of a properly completed request for change of ownership or beneficiary the insurer shall respond in writing within twenty days with an acknowledgment confirming the change or specifying why it cannot be processed, and shall not unreasonably delay the change.
4. Except as provided in section 508E.12, it is a violation of the chapter for any person to enter into a viatical settlement contract prior to the application or issuance of the policy or within a five-year period commencing with the date of issuance, so at three years the purchase is barred unless section 508E.12 applies. An insurer shall not, as a condition of responding to a request for verification of coverage or effecting the transfer of a policy, require any person to sign a form, disclosure, consent or waiver that has not been expressly approved by the commissioner. The chapter sets no deadline for an insurer to act on a request for change of ownership or beneficiary; the insurer's only duty is to avoid unreasonable delay, which is judged case by case, the thirty-day clock in section 508E.10 running against a request for verification of coverage instead.

Why: Iowa Code 508E.11 is three sentences long and each one bites on these facts. Subsection 1: EXCEPT AS PROVIDED IN SECTION 508E.12, IT IS A VIOLATION OF THIS CHAPTER FOR ANY PERSON TO ENTER INTO A VIATICAL SETTLEMENT CONTRACT AT ANY TIME PRIOR TO THE APPLICATION OR ISSUANCE OF A POLICY WHICH IS THE SUBJECT OF A VIATICAL SETTLEMENT CONTRACT OR WITHIN A FIVE-YEAR PERIOD COMMENCING WITH THE DATE OF ISSUANCE OF THE INSURANCE POLICY OR CERTIFICATE. Five years, not two - the two-year figure belongs to section 508E.12, subsection 2, which is a route OUT of the bar, and to the contestable-period trigger in section 508E.10, subsection 1. A three-year-old policy is inside the bar, so the transaction stands or falls on whether one of the section 508E.12 exemptions is certified. Subsection 2 answers the insurer's form: AN INSURER SHALL NOT, AS A CONDITION OF RESPONDING TO A REQUEST FOR VERIFICATION OF COVERAGE OR EFFECTING THE TRANSFER OF A POLICY PURSUANT TO A VIATICAL SETTLEMENT CONTRACT, REQUIRE THAT THE VIATOR, INSURED, VIATICAL SETTLEMENT PROVIDER, OR VIATICAL SETTLEMENT BROKER SIGN ANY FORM, DISCLOSURE, CONSENT, OR WAIVER FORM THAT HAS NOT BEEN EXPRESSLY APPROVED BY THE COMMISSIONER FOR USE IN CONNECTION WITH VIATICAL SETTLEMENT CONTRACTS IN THIS STATE. The prohibition is on requiring the unapproved form at all, which is what the answer letting the insurer require its own form softens into a rule about outright refusal. Subsection 3 supplies the deadline the answer setting no deadline denies: UPON RECEIPT OF A PROPERLY COMPLETED REQUEST FOR CHANGE OF OWNERSHIP OR BENEFICIARY OF A POLICY, THE INSURER SHALL RESPOND IN WRITING WITHIN TWENTY DAYS, WITH WRITTEN ACKNOWLEDGMENT CONFIRMING THAT THE CHANGE HAS BEEN EFFECTED OR SPECIFYING THE REASONS WHY THE REQUESTED CHANGE CANNOT BE PROCESSED, and it adds that the insurer SHALL NOT UNREASONABLY DELAY EFFECTING A CHANGE OF OWNERSHIP OR BENEFICIARY AND SHALL NOT OTHERWISE SEEK TO INTERFERE WITH ANY VIATICAL SETTLEMENT CONTRACT LAWFULLY ENTERED INTO IN THIS STATE. Keep the twenty days here distinct from the thirty days an insurer has to answer a verification of coverage request under section 508E.10, subsection 1, paragraph "d": different request, different clock.

In an 'entity' (stock redemption) buy-sell agreement funded with life insurance:

1. The agreement applies only to sole proprietorships, never partnerships
2. The business owns one policy on each owner and buys the deceased owner's interest ✓
3. A bank or other third party holds all of the policies in trust until the business is sold or dissolved
4. Each owner personally owns a policy on every other owner of the firm

Why: In an entity plan the business owns the policies and purchases a deceased owner's share; in a cross-purchase plan the owners insure each other.

Key person disability insurance provides benefits to:

1. The business, to offset the loss when a key employee is disabled ✓
2. Every employee of the firm equally, regardless of their role
3. A lender, to pay off the company's outstanding commercial loans
4. The disabled employee's family, to replace their lost personal income

Why: Key person disability is owned by and paid to the business to cover losses and the cost of replacing an essential employee who becomes disabled.

In a cross-purchase buy-sell agreement among four business owners, the number of life insurance policies required is:

1. 12 ✓
2. 4
3. 8
4. 16

Why: Cross-purchase requires each owner to insure every other owner: n(n−1) = 4 × 3 = 12 policies; an entity plan would need only 4.

The McCarran-Ferguson Act established that the insurance business is primarily regulated by:

1. A single federal insurance agency in Washington
2. International treaty organizations and trade bodies
3. The individual states ✓
4. The Internal Revenue Service and the U.S. Treasury

Why: McCarran-Ferguson (1945) affirmed that regulation of insurance is left to the states, except where federal law specifically applies.

An Iowa insurer's draft individual sickness policy with a hospital confinement indemnity benefit would impose a six-month waiting period for hernia and tonsil conditions, would exclude one named preexisting back condition by a waiver printed in full on the first page, and would exclude confinement in a federal government hospital. What does IAC 191-36.5 provide?

1. A waiting period of up to six months may apply to the listed conditions, such as hernia and tonsils, but not where they are treated on an emergency basis; a waiver of a named preexisting condition is allowed, signed by the insured unless at issue its full text or a notice of it is on the first or specification page; and a hospital confinement indemnity policy may not exclude federal government hospital confinement. ✓
2. A waiting period of up to twelve months may apply to the listed conditions, including hernia and tonsils, and it applies even where they are treated on an emergency basis; a waiver excluding a named preexisting condition is allowed without any signed acceptance, whatever appears on the first page; and a hospital confinement indemnity policy may exclude confinement in a federal government hospital, since that care is publicly funded.
3. No waiting or probationary period of any length may apply to any sickness or condition, the listed conditions included; waivers excluding a named preexisting condition may not be used in an individual accident and sickness policy at all, the preexisting condition definition doing that work; and a hospital confinement indemnity policy may not exclude confinement in a federal government hospital, whoever pays for it.
4. A waiting period of up to six months may apply to the listed conditions, including hernia and tonsils, even where they are treated on an emergency basis; a waiver excluding a named preexisting condition always needs the insured's signed acceptance, even where its full text is on the first page; and a hospital confinement indemnity policy may exclude confinement in a federal government hospital where no legal liability exists.

Why: IAC 191-36.5(1) bars probationary or waiting periods, except that a policy may specify a probationary or waiting period not to exceed six months for specified diseases or conditions and losses resulting therefrom for hernia, disorder of reproductive organs, varicose veins, adenoids, appendix, and tonsils; the permissible six months' exception shall not be applicable where such specified diseases or conditions are treated on an emergency basis, and accident policies shall not contain probationary or waiting periods. The answer giving twelve months doubles the period, and the answer applying it even to emergency treatment drops the emergency exception. Subrule 36.5(7) preserves the use of waivers to exclude, limit or reduce coverage or benefits for specifically named or described preexisting diseases, physical condition or extra hazardous activity; where waivers are required as a condition of issuance, renewal or reinstatement, signed acceptance by the insured is required unless on initial issuance the full text of the waiver is on the first page or specification page of the policy or notice of the waiver appears there. So a waiver printed in full on the first page at issue needs no signature, which the answer always requiring a signature denies, and a ban on waivers is wrong. Subrule 36.5(5): policies providing hospital confinement indemnity coverage shall not contain provisions excluding coverage because of confinement in a hospital operated by the federal government, which the answers allowing that exclusion contradict. Note also subrule 36.5(3): no policy may exclude a preexisting condition for more than 12 months after issue where the application does not seek disclosure of prior conditions and the condition is not specifically excluded by the policy.

A Medicare Supplement (Medigap) policy is designed to:

1. Pay only for outpatient prescription drug costs
2. Cover gaps like deductibles and coinsurance in Original Medicare ✓
3. Provide long-term custodial nursing-home care benefits for an indefinite period of time
4. Replace Original Medicare with a private network plan

Why: Medigap fills cost-sharing gaps in Original Medicare and is sold in standardized plans.

An approved Iowa continuing education provider runs a classroom course and also sells a self-study course with an examination at the end. One classroom attendee arrives an hour late; one self-study candidate returns an examination with no affidavit attached. What do the provider's responsibilities under IAC 191 chapter 11 require in relation to instructors, records, absent students and self-study examinations?

1. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least four years from the end of the year in which the course is offered. It is responsible for both the attendance of the students and their attention, and must refuse to award credit for time periods when the student was absent. It must verify that each self-study examination contains an affidavit from the producer that the examination was independently proctored and completed without outside assistance, and must refuse credit to a producer who fails to submit a properly completed examination or who fails to answer at least 70 percent of the questions correctly. ✓
2. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least four years from the end of the year in which the course is offered. It is responsible for the attendance of the students, attention being a matter for the student, and may award full credit to a student who was present for part of a course provided the student signed the attendance record on entry, since the attendance record is a record of entrance rather than a minute-by-minute account of presence and the rules leave the provider a discretion to disregard a short absence. It must verify that each self-study examination contains an affidavit from the producer and must refuse credit to a producer who fails to answer at least 70 percent of the questions correctly.
3. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least two years from the end of the year in which the course is offered, the four-year period in the chapter belonging to the producer's own certificates of completion rather than to the provider's records. It is responsible for both the attendance of the students and their attention, and must refuse to award credit for time periods when the student was absent. It must verify that each self-study examination contains an affidavit from the producer that the examination was independently proctored and completed without outside assistance, and must refuse credit to a producer who fails to answer at least 70 percent of the questions correctly.
4. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least four years from the end of the year in which the course is offered. It is responsible for both the attendance of the students and their attention, and must refuse to award credit for time periods when the student was absent. The affidavit that the examination was independently proctored and completed without outside assistance is a document the producer files with the division rather than with the provider, so the provider's only duty on a self-study examination is to mark it and to refuse credit to a producer who fails to answer at least 70 percent of the questions correctly.

Why: The first four subrules of IAC 191-11.10 put four duties on a provider. 11.10(1): A CE PROVIDER MUST ENSURE THAT EACH CLASSROOM COURSE IS CONDUCTED BY A QUALIFIED AND COMPETENT INSTRUCTOR. 11.10(2): A CE PROVIDER MUST OBTAIN AND MAINTAIN AN ATTENDANCE RECORD FOR EACH COURSE FOR AT LEAST FOUR YEARS FROM THE END OF THE YEAR IN WHICH THE COURSE IS OFFERED. UPON REQUEST BY THE DIVISION, A CE PROVIDER MUST SUBMIT COPIES OF ATTENDANCE RECORDS. Four years, not two - and this is a different four years from the producer's under 11.4(1)'b', which runs FOR FOUR YEARS AFTER THE END OF THE YEAR OF ATTENDANCE and applies to THE ORIGINAL CERTIFICATES OF COMPLETION. Two people, two documents, two identical periods measured from two different events. 11.10(3): A CE PROVIDER OF AN APPROVED COURSE IS RESPONSIBLE FOR BOTH THE ATTENDANCE OF THE STUDENTS AND THEIR ATTENTION. A CE PROVIDER MUST REFUSE TO AWARD CE CREDIT FOR TIME PERIODS WHEN THE STUDENT WAS ABSENT. BOTH attendance AND attention, and MUST REFUSE rather than may - so a discretion to overlook a late arrival is the opposite of the rule, and the attendance record defined in 11.2 as a sign-in at THE TIME OF ENTRANCE TO THE COURSE does not answer for the hour missed. 11.10(4): A CE PROVIDER MUST VERIFY THAT EACH EXAMINATION SUBMITTED FOR A SELF-STUDY COURSE CONTAINS AN AFFIDAVIT FOLLOWING THE NAIC CE GUIDELINES FROM THE PRODUCER THAT THE EXAMINATION WAS INDEPENDENTLY PROCTORED AND THAT THE EXAMINATION WAS COMPLETED WITHOUT ANY OUTSIDE ASSISTANCE. A CE PROVIDER MUST REFUSE TO AWARD CE CREDIT TO PRODUCERS WHO FAIL TO SUBMIT A PROPERLY COMPLETED EXAMINATION OR WHO FAIL TO CORRECTLY ANSWER AT LEAST 70 PERCENT OF THE QUESTIONS ON THE EXAMINATION. The affidavit goes to the PROVIDER, not to the division, which matches 11.3(4)'b'(1), where the producer SUBMITS AN AFFIDAVIT TO THE CE PROVIDER. There are two independent grounds for refusal here and the candidate in the stem has fallen at the first: a missing affidavit means the examination is not properly completed, whatever the score. The 70 percent is the same single threshold the producer's rule sets in 11.3(4)'b'(2), stated once from each side; it is the score required on a self-study continuing education examination.

An Iowa issuer designs a compensation schedule for producers selling its Medicare supplement policies. It proposes a first-year commission equal to three times the second-year commission, an identical commission in each renewal year, and payment of renewal commissions for three renewal years. A producer also asks whether a gift certificate awarded for hitting a sales target counts against these limits.

1. Only the renewal term fails: the first-year multiple is permissible because the rule caps first-year compensation at three hundred percent of second-year compensation, and the gift falls outside the limits because compensation is defined as pecuniary remuneration paid to the producer in respect of a named policy.
2. Only the first-year multiple fails: renewal compensation must be provided for no fewer than three renewal years, which the schedule satisfies, and the gift falls outside the limits because an award tied to an aggregate sales target rather than to the sale or renewal of a particular policy is a marketing expense of the issuer.
3. Nothing fails: the rule governs only the relationship between the compensation paid by a replacing issuer and that paid by the replaced issuer where an existing Medicare supplement policy is replaced, and imposes no ceiling on first-year compensation, no floor on the number of renewal years, and no restriction on gifts, prizes or awards made to an appointed producer.
4. Two elements fail: first-year compensation may be no more than two hundred percent of what is paid for selling or servicing the policy in the second year or period, and renewal compensation must be provided for no fewer than five renewal years; and the gift does count, because compensation includes nonpecuniary remuneration such as bonuses, gifts, prizes, awards and finder’s fees. ✓

Why: IAC 191—37.25(2) permits a commission or other compensation for the sale of a Medicare supplement policy or certificate only if the first-year commission or other first-year compensation is no more than two hundred percent of the commission or other compensation paid for selling or servicing the policy or certificate in the second year or period, so a three-times schedule is outside the cap. Subrule 37.25(3) requires the compensation provided in subsequent renewal years to be the same as that provided in the second year or period, and to be provided for no fewer than five renewal years; three renewal years is short. The issuer’s level renewal commission is the one element of the schedule that complies. Subrule 37.25(1) defines compensation broadly as pecuniary or nonpecuniary remuneration of any kind relating to the sale or renewal of the policy or certificate, including but not limited to bonuses, gifts, prizes, awards and finder’s fees, which is what pulls the gift certificate in. Subrule 37.25(4) is a separate rule for replacement: where an existing Medicare supplement policy or certificate is replaced, no issuer may provide and no producer may receive compensation greater than the renewal compensation payable by the replacing issuer on renewal policies — a restriction on top of the caps in 37.25(2) and 37.25(3), not a substitute for them.

An insured with a $4,000 monthly benefit suffers a residual disability causing a 50% loss of income. The residual benefit is about:

1. $2,000 ✓
2. $4,000
3. $1,000
4. $0

Why: Residual benefits are proportional to income lost: 50% income loss × $4,000 = $2,000.

Money left in a typical health flexible spending account (FSA) at year-end is:

1. Always rolled over indefinitely with no limit
2. Transferred automatically into the employee's HSA
3. Generally forfeited under the use-it-or-lose-it rule ✓
4. Paid out to the employee as taxable cash

Why: FSAs are generally use-it-or-lose-it, though plans may allow a limited carryover or grace period.

An Iowa viatical settlement provider has been using a contract form it never filed with the commissioner, and a pattern of unreasonably low payments to viators has come to light. The commissioner proposes to revoke its license. The provider argues that the commissioner approved its disclosure statement form two years ago and that this ends the matter. What do Iowa Code 508E.4 and 508E.5 provide?

1. The commissioner may refuse to issue, suspend, revoke or refuse to renew a provider's or broker's license on grounds that include a material misrepresentation in the application, conviction of fraudulent or dishonest practices, a pattern of unreasonable payments to viators, entering into a contract form that has not been approved, failure to honor contractual obligations set out in a contract, and violation of any provision of the chapter. A person shall not use a viatical settlement contract form or provide a viator a disclosure statement form unless first filed with and approved by the commissioner. Where the commissioner has approved a form, however, the approval is conclusive as to that form and bars any later administrative or civil proceeding founded on its contents, the licensee having relied on the regulator's own judgment. If the commissioner revokes a license the commissioner shall conduct a hearing in accordance with chapter 17A.
2. The commissioner may refuse to issue, suspend, revoke or refuse to renew a provider's or broker's license on grounds that include a material misrepresentation in the application, conviction of fraudulent or dishonest practices, a pattern of unreasonable payments to viators, entering into any viatical settlement contract form that has not been approved pursuant to the chapter, failure to honor contractual obligations set out in a contract, no longer meeting the requirements for initial licensure, and violation of any provision of the chapter. A person shall not use a contract form or provide a viator a disclosure statement form unless first filed with and approved by the commissioner - and the commissioner's approval of any of the materials shall not be a defense or otherwise preclude a civil action for fraud. If the commissioner revokes, the commissioner shall conduct a hearing in accordance with chapter 17A. ✓
3. The commissioner may refuse to issue, suspend, revoke or refuse to renew a provider's or broker's license on grounds that include a material misrepresentation in the application, conviction of fraudulent or dishonest practices, a plea of guilty or nolo contendere to a felony or to a misdemeanor involving fraud or moral turpitude, entering into a contract form that has not been approved, failure to honor contractual obligations, no longer meeting the requirements for initial licensure, and violation of any provision of the chapter. A pattern of unreasonable payments to viators is not among the grounds: the price a provider pays is a matter for the market and for the disclosure rules in section 508E.8, not for licensure. A person shall not use a contract form or disclosure statement form unless first filed with and approved by the commissioner, and the commissioner's approval is not a defense to a civil action for fraud. If the commissioner revokes a license the commissioner shall conduct a hearing in accordance with chapter 17A.
4. The commissioner may refuse to issue, suspend, revoke or refuse to renew a provider's or broker's license on grounds that include a material misrepresentation in the application, a pattern of unreasonable payments to viators, entering into a contract form that has not been approved, and violation of any provision of the chapter, and the commissioner's approval of a form is not a defense to or otherwise a bar to a civil action for fraud. Because a license is a privilege rather than a right, no hearing is required before the commissioner acts; the licensee's remedy is a petition for judicial review under chapter 17A after the order issues.

Why: Iowa Code 508E.4, subsection 1, lists nine grounds and the two that decide this item are in the middle of it. Paragraph "c": THE VIATICAL SETTLEMENT PROVIDER DEMONSTRATES A PATTERN OF UNREASONABLE PAYMENTS TO VIATORS - price is a licensure question in this chapter, which is what the answer leaving price to the market denies. Paragraph "e": THE VIATICAL SETTLEMENT PROVIDER HAS ENTERED INTO ANY VIATICAL SETTLEMENT CONTRACT FORM THAT HAS NOT BEEN APPROVED PURSUANT TO THIS CHAPTER. The rest of the list is worth reading as a whole: material misrepresentation in the application; the licensee or any officer, partner, member or key management personnel convicted of fraudulent or dishonest practices, subject to a final administrative action, or otherwise shown to be untrustworthy or incompetent; a guilty plea or plea of nolo contendere to any felony or to a misdemeanor involving fraud or moral turpitude, regardless of whether a judgment of conviction has been entered; failure to honor contractual obligations set out in a viatical settlement contract; no longer meeting the requirements for initial licensure; assigning, transferring or pledging a viaticated policy to a person outside the permitted list; and violating any provision of the chapter. Subsection 2 adds bad faith conduct with one or more viators as a ground against a broker or a life insurance producer operating as a broker. Subsection 3 is the procedural answer to the claim that no hearing is required: if the commissioner denies an application or suspends, revokes or refuses to renew, THE COMMISSIONER SHALL CONDUCT A HEARING IN ACCORDANCE WITH CHAPTER 17A. Section 508E.5 answers the provider's argument. A person shall not use a viatical settlement contract form or provide to a viator a disclosure statement form unless first filed with and approved by the commissioner, and the commissioner shall disapprove a form that fails to meet the requirements of sections 508E.8, 508E.10, 508E.14 and 508E.15, subsection 2, or is unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the viator. The section then closes: THE COMMISSIONER'S APPROVAL OF ANY OF THE MATERIALS SHALL NOT BE A DEFENSE OR OTHERWISE PRECLUDE A CIVIL ACTION FOR FRAUD. That single sentence is the whole answer to the claim that approval is conclusive - and note the approval the provider is relying on was of the disclosure statement, while the form it actually used was never filed at all.

Annuity suitability rules require a producer recommending an annuity to:

1. Recommend whichever annuity product happens to pay the producer the highest available commission
2. Have reasonable grounds that it fits the consumer's financial needs and situation ✓
3. Sell only immediate annuities to consumers over the age of sixty
4. Guarantee the annuity will outperform every available alternative

Why: Suitability standards require the recommendation be appropriate based on the consumer's financial situation, needs, and objectives.

Under the 'one-year term' (fifth) dividend option, the dividend is used to:

1. Permanently convert the policy into an extended-term form
2. Purchase one year of term insurance, often equal to the cash value ✓
3. Reduce the policy's death benefit for the following policy year
4. Surrender the policy and take its full cash value in cash

Why: The one-year term option buys a year of term coverage (commonly equal to the cash value), increasing the total death benefit for that year.

Four Iowa-licensed producers ask the division whether the continuing education rules apply to them. One is a nonresident who lives in a state that has its own continuing education requirement for producers. One is a resident who holds qualification in the surety and credit lines and nothing else. One is a licensed attorney. One spent most of the continuing education term on full-time active duty in the armed forces of the United States. Under IAC 191 chapter 11, which of them are outside the rules, and does any of them have to do anything to get there?

1. All four are outside the rules, and two of them must produce something to establish it. The nonresident is outside if the state or district of residence has a continuing education requirement for insurance producers. The surety and credit producer is outside without condition. The attorney is outside on submitting proof of completion of continuing legal education for the appropriate calendar years during the continuing education term and otherwise complying with the producer licence renewal procedures. The service member is outside on submitting evidence of the service. ✓
2. Only the nonresident and the service member are outside the rules. The nonresident is outside because the requirement of the state of residence governs, and the service member is outside on submitting evidence of the active duty. The surety and credit producer and the attorney are both inside: a line qualification does not excuse a resident from the credit requirement, and a producer who happens to be an attorney must complete the same credits as any other resident, continuing legal education being approved by a different body and directed at the practice of law.
3. All four are outside the rules and none of them has to submit anything. The rules list five categories to which they do not apply, and a producer who answers the description of a listed category is outside them from that moment; the division establishes the fact from its own licensing records at the time of renewal, and a producer asked to prove an exclusion may decline, because every one of the five exclusions is unconditional on its face.
4. Only the surety and credit producer and the attorney are outside the rules, and neither of them need submit anything to get there. A nonresident is inside the Iowa rules whatever the home state requires, because 11.1(1) adopts these rules for resident and nonresident insurance producers alike, and a producer on active duty is inside them too, military service being a ground on which to seek an extension of the continuing education term rather than an exclusion from the requirement.

Why: Rule IAC 191-11.1(3) is a list of five, and the drafting matters as much as the list: some entries are unconditional and some carry a condition the producer must satisfy. THESE RULES DO NOT APPLY TO: A NONRESIDENT PRODUCER WHO RESIDES IN A STATE OR DISTRICT HAVING A CONTINUING EDUCATION (CE) REQUIREMENT FOR INSURANCE PRODUCERS. A RESIDENT PRODUCER WHO HOLDS QUALIFICATION IN THE SURETY OR CREDIT LINES OF AUTHORITY. LICENSED ATTORNEYS WHO ARE ALSO PRODUCERS WHO SUBMIT PROOF OF COMPLETION OF CONTINUING LEGAL EDUCATION FOR THE APPROPRIATE CALENDAR YEARS DURING THE CE TERM AND OTHERWISE COMPLY WITH THE PRODUCER LICENSE RENEWAL PROCEDURES SET FORTH IN 191-CHAPTER 10. A PRODUCER WHO SERVES FULL-TIME IN THE ARMED FORCES OF THE UNITED STATES OF AMERICA ON ACTIVE DUTY DURING A SUBSTANTIAL PART OF THE CE TERM AND WHO SUBMITS EVIDENCE OF SUCH SERVICE. And a fifth the stem does not raise: A RESIDENT PRODUCER WHO HOLDS QUALIFICATION ONLY FOR A CROP INSURANCE LINE OF AUTHORITY AND WHO COMPLIES WITH SUBRULE 11.3(8). The attorney and the service member each have something to submit and the answer requiring nobody to submit anything deletes both submissions, which is the trap. The nonresident exclusion turns on what the STATE OF RESIDENCE requires, not on what the producer chooses, so the answer putting nonresidents inside is wrong; 11.1(1) does say the rules are adopted FOR RESIDENT AND NONRESIDENT INSURANCE PRODUCERS, but 11.1(3)'a' then takes most nonresidents back out again. The surety and credit exclusion is unconditional and the crop exclusion is not, which is worth holding side by side. Note also what the attorney entry does NOT say: it does not excuse the attorney from renewing, only from these rules - THE ATTORNEY MUST OTHERWISE COMPLY WITH THE PRODUCER LICENSE RENEWAL PROCEDURES, which live in 191-Chapter 10.

An Iowa small employer carrier wants to stop offering one of its small group products, and is separately considering leaving the Iowa small group market altogether. A small employer on its books has fallen below the carrier's minimum participation requirement, and another's trade association membership - the basis of its coverage - has lapsed. What does Iowa Code 513B.5 provide?

1. Coverage is renewable with respect to all eligible employees or their dependents at the option of the small employer except for the listed reasons, which include nonpayment, fraud or intentional misrepresentation of a material fact, noncompliance with the carrier's minimum participation requirements, noncompliance with employer contribution requirements, and cessation of the employer's membership in an association through which the coverage is provided, but only if that termination occurs uniformly without regard to any health status-related factor. To discontinue a particular type of coverage the carrier must give the commissioner notice at least three days before notifying affected parties, give those parties no less than ninety days notice, offer each plan sponsor any other coverage it currently offers to other employers in this state, and act uniformly. To discontinue all its small group coverage it must give the commissioner three days' notice, give affected parties no less than one hundred eighty days notice, and discontinue everything - and it shall not write any new business in the small employer market in this state for five years after the date of notice to the commissioner. ✓
2. Coverage is renewable with respect to all eligible employees or their dependents at the option of the small employer except for the listed reasons, which include nonpayment or failure to make timely payment, fraud or intentional misrepresentation of a material fact, noncompliance with the carrier's minimum participation requirements, noncompliance with its employer contribution requirements, and cessation of the employer's membership in an association through which the coverage is provided. To discontinue a particular type of coverage the carrier must give the commissioner notice no less than three days before notifying affected parties, give those parties no less than ninety days' notice, offer each plan sponsor the option to purchase any other coverage it currently offers to other employers in this state, and act uniformly. To discontinue all of its small group coverage it must give affected parties no less than one hundred eighty days' notice and discontinue every such coverage, but may re-enter the small employer market at any time, no period of abstention applying to a carrier that has left in an orderly way and given every notice the paragraph requires to the commissioner.
3. Coverage is renewable with respect to all eligible employees or their dependents at the option of the small employer except for the listed reasons, which include nonpayment, fraud or intentional misrepresentation of a material fact, noncompliance with the carrier's minimum participation requirements, noncompliance with its employer contribution requirements, and cessation of the employer's membership in an association through which the coverage is provided, that last ground operating only where the termination occurs uniformly without regard to any health status-related factor. To discontinue a particular type of coverage the carrier must give the commissioner notice no less than three days before notifying affected parties, give those parties no less than ninety days' notice, and act uniformly without regard to the claims experience of the sponsors; it need not offer the plan sponsor any replacement coverage. To discontinue all of its small group coverage it must give one hundred eighty days' notice and may not write new small group business in this state for five years after the date of notice to the commissioner.
4. Coverage is renewable at the option of the small employer except for the listed reasons, which include nonpayment, fraud or intentional misrepresentation of a material fact, and noncompliance with the carrier's minimum participation or employer contribution requirements, so the employer that has fallen below the participation requirement may be nonrenewed. Cessation of the employer's membership in an association through which the coverage is provided is not a ground for nonrenewal, the coverage having been issued to the employer rather than to the association. To discontinue a particular type of coverage the carrier must give three days' notice to the commissioner, ninety days' notice to affected parties, offer replacement coverage and act uniformly; a total withdrawal requires one hundred eighty days' notice and carries a five-year bar on new small group business.

Why: Iowa Code 513B.5 is the small group counterpart of IAC 191-35.26 for large groups, and the two carry the same figures. Subsection 1 states the right: HEALTH INSURANCE COVERAGE SUBJECT TO THIS CHAPTER IS RENEWABLE WITH RESPECT TO ALL ELIGIBLE EMPLOYEES OR THEIR DEPENDENTS, AT THE OPTION OF THE SMALL EMPLOYER, EXCEPT FOR ONE OR MORE OF THE FOLLOWING REASONS. The employer chooses whether to renew; the carrier may refuse only on a listed ground. Those grounds are failure to pay or make timely payment; AN ACT OR PRACTICE CONSTITUTING FRAUD OR AN INTENTIONAL MISREPRESENTATION OF A MATERIAL FACT; NONCOMPLIANCE WITH THE CARRIER'S MINIMUM PARTICIPATION REQUIREMENTS; NONCOMPLIANCE WITH THE CARRIER'S EMPLOYER CONTRIBUTION REQUIREMENTS - two separate grounds, and the employer in the stem that has fallen below the participation requirement is squarely within the third; the two discontinuance routes; cessation of association membership; and a finding by the commissioner that CONTINUATION OF THE COVERAGE IS NOT IN THE BEST INTERESTS OF THE POLICYHOLDERS OR CERTIFICATE HOLDERS, OR WOULD IMPAIR THE CARRIER'S ABILITY TO MEET ITS CONTRACTUAL OBLIGATIONS. Paragraph 'g' answers the second employer and defeats the answer saying lapsed association membership is no ground: THE MEMBERSHIP OF AN EMPLOYER IN AN ASSOCIATION, WHICH IS THE BASIS FOR THE COVERAGE WHICH IS PROVIDED THROUGH SUCH ASSOCIATION, CEASES, BUT ONLY IF THE TERMINATION OF COVERAGE UNDER THIS PARAGRAPH OCCURS UNIFORMLY WITHOUT REGARD TO ANY HEALTH STATUS-RELATED FACTOR RELATING TO ANY COVERED INDIVIDUAL. It is a ground, but a conditional one. Paragraph 'e' governs discontinuing one type of coverage and carries four conditions, of which the answer excusing any replacement offer deletes the one that matters: advance notice to the commissioner NO LESS THAN THREE DAYS PRIOR TO THE NOTICE to affected parties; notice to all affected small employers, participants and beneficiaries NO LESS THAN NINETY DAYS PRIOR TO THE NONRENEWAL; an offer TO EACH PLAN SPONSOR OF THE DISCONTINUED COVERAGE, THE OPTION TO PURCHASE ANY OTHER COVERAGE CURRENTLY OFFERED BY THE CARRIER TO OTHER EMPLOYERS IN THIS STATE; and uniform action in both discontinuing and offering, WITHOUT REGARD TO THE CLAIMS EXPERIENCE OF THE SPONSORS ... OR TO A HEALTH STATUS-RELATED FACTOR. Paragraph 'f' governs leaving the market entirely: the same three days to the commissioner, ONE HUNDRED EIGHTY DAYS to affected parties, and discontinuance of ALL health insurance coverage issued or delivered for issuance to small employers in this state. Subsection 2 supplies the price of that choice and the answer letting the carrier re-enter at any time removes it: A CARRIER THAT ELECTS NOT TO RENEW HEALTH INSURANCE COVERAGE UNDER SUBSECTION 1, PARAGRAPH 'F', SHALL NOT WRITE ANY NEW BUSINESS IN THE SMALL EMPLOYER MARKET IN THIS STATE FOR A PERIOD OF FIVE YEARS AFTER THE DATE OF NOTICE TO THE COMMISSIONER. Subsection 3 confines the section, for a carrier doing business in one established geographic service area, to that carrier's operations in that area. Paragraph 'i' separately allows a carrier to MODIFY a product at renewal where the modification is consistent with state law and EFFECTIVE ON A UNIFORM BASIS among coverage with that product.

Three further terms in IAC 191 chapter 16 decide what has to be produced and to whom: 'policy summary', 'sales material' and 'direct-response solicitation'. Which statement matches the rules?

1. A policy summary is a single written statement in the same form for every kind of policy, containing the current death benefit, the annual contract premium, the current cash surrender value, the current dividend, the application of the current dividend and the amount of any outstanding loan, universal life contracts being summarised on that same list rather than on one of their own. Sales material is a sales illustration and any other written, printed or electronically presented information created by the company that is used in the presentation to the policy or contract owner; material a producer has prepared is not the company's sales material and falls outside the definition, which is why the rules elsewhere distinguish between insurer-approved sales material and material prepared individually for a particular prospect. A direct-response solicitation is a solicitation made without the involvement of any producer at all, individually or through a sponsoring or endorsing entity, and made solely through the mails, by telephone, over the Internet or by other mass communication media.
2. A policy summary for policies other than universal life is a written statement containing, to the extent applicable, the current death benefit, the annual contract premium, the current cash surrender value, the current dividend, the application of the current dividend and the amount of outstanding loan; for universal life policies it is a written statement containing at least the report period dates, the policy value at the end of the previous and current report periods, the amounts credited or debited during the current report period identified by type, the current death benefit on each life covered, the net cash surrender value and outstanding loans. Sales material is a sales illustration and any other written, printed or electronically presented information created, completed or provided by the company or producer that is used in the presentation to the owner. A direct-response solicitation is a solicitation made without the involvement of any producer; a solicitation made through a sponsoring or endorsing entity is not one, because the entity's endorsement is itself a form of personal recommendation to the members it reaches.
3. A policy summary for policies or contracts other than universal life is a written statement containing, to the extent applicable, current death benefit, annual contract premium, current cash surrender value, current dividend, application of current dividend and amount of outstanding loan; for universal life policies it is a written statement containing at least the report period dates, the policy value at the end of the previous and current report periods, the total amounts credited or debited during the current report period identified by type, the current death benefit on each life covered, the net cash surrender value and the amount of outstanding loans. Sales material is a sales illustration and any other written, printed or electronically presented information created, completed or provided by the company or producer that is used in the presentation to the policy or contract owner. A direct-response solicitation is a solicitation through a sponsoring or endorsing entity or individually solely through mails, telephone, the Internet or other mass communication media. ✓
4. A policy summary for policies other than universal life is a written statement containing, to the extent applicable, the current death benefit, the annual contract premium, the current cash surrender value, the current dividend, the application of the current dividend and the amount of outstanding loan; for universal life policies it is a written statement containing at least the report period dates, the policy value at the end of the previous and current report periods, the amounts credited or debited during the current report period identified by type, the current death benefit on each life covered, the net cash surrender value and outstanding loans. Sales material means written or printed information only: information presented electronically is not sales material, since the rules require the producer to leave material with the applicant and nothing can be left behind that was only displayed on a screen. A direct-response solicitation is a solicitation through a sponsoring or endorsing entity or individually solely through mails, telephone, the Internet or other mass communication media.

Why: Rule IAC 191-16.22 defines all three. POLICY SUMMARY has TWO forms, not one - and they map exactly onto the two annual report lists in IAC 191-14.10(1): the non-universal list is CURRENT DEATH BENEFIT, ANNUAL CONTRACT PREMIUM, CURRENT CASH SURRENDER VALUE, CURRENT DIVIDEND, APPLICATION OF CURRENT DIVIDEND, AND AMOUNT OF OUTSTANDING LOAN, and the universal life list is the report period dates, the policy value at the end of the previous and current periods, THE TOTAL AMOUNTS THAT HAVE BEEN CREDITED OR DEBITED TO THE POLICY VALUE DURING THE CURRENT REPORT PERIOD, IDENTIFYING EACH BY TYPE, the current death benefit ON EACH LIFE COVERED BY THE POLICY, the net cash surrender value, and outstanding loans. Note the different qualifiers: the first is required TO THE EXTENT APPLICABLE and NEED NOT BE LIMITED TO those items, the second AT LEAST those items. SALES MATERIAL MEANS A SALES ILLUSTRATION AND ANY OTHER WRITTEN, PRINTED OR ELECTRONICALLY PRESENTED INFORMATION CREATED, COMPLETED OR PROVIDED BY THE COMPANY OR PRODUCER THAT IS USED IN THE PRESENTATION TO THE POLICY OR CONTRACT OWNER RELATED TO THE POLICY OR CONTRACT THAT IS PURCHASED. Three verbs - CREATED, COMPLETED OR PROVIDED - and two sources, THE COMPANY OR PRODUCER. The answer confining sales material to company material would take a producer's own hand-drawn comparison outside the rules; the distinction it appeals to is real but does different work, in 16.24(4) and 16.26(3), where the producer must identify PREPRINTED OR ELECTRONICALLY PRESENTED INSURER-APPROVED SALES MATERIALS USED and separately supply COPIES OF ANY INDIVIDUALIZED SALES MATERIALS. The answer confining it to written or printed information drops ELECTRONICALLY PRESENTED, which is expressly there. DIRECT-RESPONSE SOLICITATION MEANS A SOLICITATION THROUGH A SPONSORING OR ENDORSING ENTITY OR INDIVIDUALLY SOLELY THROUGH MAILS, TELEPHONE, THE INTERNET OR OTHER MASS COMMUNICATION MEDIA. The sponsoring-or-endorsing-entity limb is what the answer excluding solicitations through an entity removes; it matters because association and affinity marketing is the commonest form of direct response, and rule 16.28 imposes a distinct set of duties on insurers in that channel.

A Medicare beneficiary delayed Part D for three years without other creditable drug coverage. The result is:

1. A one-time penalty collected at the first prescription fill
2. A permanent late-enrollment surcharge added to the Part D premium ✓
3. No consequence, because Part D enrollment is voluntary
4. A permanent bar from enrolling in any Part D drug plan

Why: Going without creditable coverage adds a permanent late-enrollment surcharge to the Part D premium.

Which dividend option purchases small amounts of additional paid-up insurance?

1. Reduction of premium
2. Accumulate at interest
3. Paid-up additions ✓
4. Cash

Why: Paid-up additions use dividends to buy small single-premium amounts of permanent insurance, increasing both death benefit and cash value.

The board of directors of the association calls an assessment to meet its obligations arising from a particular insolvent member insurer. A member insurer receiving the notice asks what class of assessment this is, when it must pay, what happens if it pays late, and whether there is a ceiling on what it can be assessed in a single calendar year.

1. It is a class A assessment, because an assessment called to meet the association's obligations is administrative in character whatever insolvency gives rise to it; it is due immediately on receipt of the notice and accrues interest at five percent per annum from the date of receipt; and the ceiling for each account is two percent of that insurer's premiums received in this state during the single calendar year immediately preceding the year in which the member insurer became impaired or insolvent, a one-year base being the only figure the insurer can verify from its own annual statement.
2. It is a class B assessment; it is due not less than sixty days after prior written notice was sent and bears no interest, the association's remedy for late payment being confined to the administrative penalty the commissioner may levy after notice and hearing; and there is no annual ceiling, the board being obliged to assess whatever the account requires to meet anticipated claims and to draw on the other three accounts without limit whenever one of them is exhausted by a single insolvency.
3. It is a class B assessment; it is due not less than thirty days after prior written notice was sent and accrues interest at ten percent per annum from the due date; and for each account the total assessments in any one calendar year may not exceed two percent of that insurer’s average annual premiums received in this state on the covered policies during the three calendar years preceding the year of impairment or insolvency. ✓
4. It is a class A assessment; it is due not less than thirty days after prior written notice was sent and accrues interest at ten percent per annum from the due date; and the two percent ceiling is measured across all four accounts combined rather than account by account, so that an insurer writing in several accounts is assessed once against a single premium base.

Why: Iowa Code 508C.9(2) draws the class line by purpose, not by size. Class A assessments meet administrative and legal costs and other expenses and may be called whether or not related to a particular impaired or insolvent insurer; CLASS B assessments are called to the extent necessary to carry out the association’s powers and duties under section 508C.8 with regard to a particular impaired or insolvent insurer — which is what the facts describe. Subsection 1 fixes timing and interest: an assessment is due not less than thirty days after prior written notice has been sent, and accrues interest at ten percent per annum commencing on the due date. Subsection 5“a”(1) is the ceiling, and it is per account: the total of all assessments authorised with respect to a member insurer for EACH of the four accounts shall not in any one calendar year exceed two percent of that insurer’s average annual premiums received in this state on the policies covered by the account during the three calendar years preceding the year in which the insurer became impaired or insolvent. The same three-year premium base governs the proportion each insurer bears under subsection 3“d”. If the maximum assessment plus other assets is insufficient, subsection 5“a”(3) sends the shortfall into succeeding years rather than lifting the ceiling. Two further points: subsection 3“c” requires the class B assessment for LONG-TERM CARE written by the failed insurer to be allocated fifty percent to accident and health member insurers and fifty percent to life and annuity member insurers; and subsection 4 lets the board abate or defer an assessment that would endanger a member insurer’s ability to meet its own contractual obligations, the abated amount falling on the others and being repaid later under an approved repayment plan.

An applicant pays the first premium with the application and receives a conditional receipt, but underwriting later finds the applicant was NOT insurable as applied for. The insurer:

1. Is bound to the coverage as originally applied for
2. Returns the premium and provides no coverage ✓
3. Issues the policy at a higher premium automatically
4. Must pay a partial death benefit anyway

Why: A conditional receipt provides coverage only if the applicant was insurable as applied for; if not, there is no coverage and the premium is refunded.

An Iowa insurer is working out which of its products the life insurance illustration rules reach. Its book includes variable life insurance, individual and group annuity contracts, credit life insurance, a group whole life plan with certificates of $50,000, and individual policies with initial face amounts of $8,000. It also asks from when the rules run. What does IAC 191 chapter 14 provide?

1. The rules apply to all group and individual life insurance policies and certificates except variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies or certificates with initial face amounts of $10,000 or less - so only the group whole life certificates are within them. The rules are effective as of April 24, 2024, and apply to policies sold on or after February 1, 1997. ✓
2. The rules apply to all group and individual life insurance policies and certificates except variable life insurance, individual and group annuity contracts, and credit life insurance - so the group whole life certificates and the $8,000 individual policies are both within them. There is no exclusion by face amount: an exclusion of that kind would leave the buyers of the smallest policies, who are the least able to evaluate a nonguaranteed projection for themselves, without the protection of the chapter, and the figure a candidate may remember belongs to the identification requirement for policy forms rather than to the scope rule. The rules are effective as of April 24, 2024, and apply to policies sold on or after that date.
3. The rules apply to all group and individual life insurance policies and certificates except variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies or certificates with initial face amounts of $10,000 or less - so only the group whole life certificates are within them. The rules are effective as of April 24, 2024, and apply only to policies sold on or after that date, a rule of practice having no application to a sale made before it existed.
4. The rules apply to individual life insurance policies only; group policies and certificates are outside them, the chapter's protections running to the person who buys a policy rather than to a certificate holder under a contract bought by somebody else. The exclusions are variable life insurance, individual and group annuity contracts, credit life insurance, and policies with initial face amounts of $10,000 or less. The rules are effective as of April 24, 2024, and apply to policies sold on or after February 1, 1997.

Why: Rule IAC 191-14.3 is short and exhaustive: THESE RULES APPLY TO ALL GROUP AND INDIVIDUAL LIFE INSURANCE POLICIES AND CERTIFICATES EXCEPT: VARIABLE LIFE INSURANCE; INDIVIDUAL AND GROUP ANNUITY CONTRACTS; CREDIT LIFE INSURANCE; OR LIFE INSURANCE POLICIES OR CERTIFICATES WITH INITIAL FACE AMOUNTS OF $10,000 OR LESS. GROUP AND INDIVIDUAL, which the answer confining the rules to individual policies cuts to individual only, and note that the chapter runs on CERTIFICATES as well as policies - which is why 14.4 defines POLICYOWNER as THE OWNER NAMED IN THE POLICY OR THE CERTIFICATE HOLDER IN THE CASE OF A GROUP POLICY. FOUR exclusions, and the fourth is the face-amount one the answer with no face-amount exclusion argues away. Its reasoning is a good policy argument and it is not the rule; the $10,000 figure is in rule 14.3 and nowhere else in the chapter, so it cannot be relocated to the identification requirement in 14.5(1), which carries a DATE rather than an amount. On the stem's facts the $8,000 policies fall out and the $50,000 group certificates stay in. Rule 14.14 supplies the dates and they are the oddity of the chapter: THESE RULES ARE EFFECTIVE AS OF APRIL 24, 2024, AND APPLY TO POLICIES SOLD ON OR AFTER FEBRUARY 1, 1997. A rule taking effect in 2024 that reaches back twenty-seven years is exactly what a candidate reads past, and the answers applying the rules only to policies sold on or after April 24, 2024 collapse the two dates into one. The 1997 date is not arbitrary: it is the same date that appears in 14.5(1), under which FOR POLICY FORMS FILED AFTER FEBRUARY 1, 1997, THE ILLUSTRATION IDENTIFICATION SHALL BE MADE AT THE TIME OF FILING. Rule 14.1 states the purpose the chapter serves - to PROTECT CONSUMERS AND FOSTER CONSUMER EDUCATION, to ENSURE THAT ILLUSTRATIONS DO NOT MISLEAD PURCHASERS OF LIFE INSURANCE AND TO MAKE ILLUSTRATIONS MORE UNDERSTANDABLE, with insurers to ELIMINATE THE USE OF FOOTNOTES AND CAVEATS as far as possible. Rule 14.2 records the authority: IOWA CODE SECTION 507B.4.

'Balance billing' occurs when a provider bills the patient for:

1. The full cost of medical services that were never actually rendered to the patient
2. A penalty for missing a scheduled appointment
3. The difference between the provider's charge and the plan's allowed amount ✓
4. The full premium owed for the health plan that month

Why: Balance billing is charging the patient the gap between the billed amount and what the plan considers allowable (common with out-of-network providers).

'Unfair discrimination' in insurance means:

1. Setting premiums using actuarially sound mortality tables
2. Declining an applicant who genuinely presents a substandard risk
3. Offering preferred rates to applicants who do not use tobacco
4. Charging different rates to individuals of the same class and risk ✓

Why: Unfair discrimination is applying different rates or terms to insureds of the same class and equal risk; risk-based distinctions are permitted.

An applicant classified as a 'preferred' risk:

1. Is declined for individual coverage and steered to a guaranteed-issue plan
2. Must buy through an employer group plan, because individual underwriting is closed
3. Pays the lowest premium because of better-than-average risk factors ✓
4. Pays a rated premium reflecting poor health or hazardous habits

Why: Preferred risks (e.g., ideal build, nonsmoker) present lower-than-average mortality and qualify for the lowest premiums; standard and substandard pay more.

Life insurance is generally a 'valued' (not indemnity) contract because it pays:

1. A benefit reduced by other coverage in force
2. Nothing unless the beneficiary documents expenses
3. Only the actual financial loss the family proves
4. A stated face amount, not the measured economic loss ✓

Why: Life insurance pays the agreed face amount regardless of proven loss; medical expense insurance instead indemnifies actual costs.

A life insurer domiciled in Iowa is placed in liquidation. One policy owner lives in Iowa. A second lives in a neighbouring state which has a guaranty association of its own, and is not eligible for coverage there because the insurer was never licensed in that state at the time that state’s guaranty law specifies. The liquidator asks who the Iowa association covers.

1. Only the Iowa resident is covered, because coverage under the chapter turns on residence in this state at the date the order of liquidation is entered, and a nonresident policy owner must look to the association of the state in which the policy was delivered, whatever the domicile of the member insurer that issued it.
2. Both are covered: the resident is covered outright, and the nonresident is covered because all three statutory conditions are met — the state of residence has a similar association, the person is not eligible for coverage there because the insurer was not licensed in that state at the time that state’s law specifies, and the member insurer is domiciled in Iowa. ✓
3. Both are covered, but on different footings: the resident is covered by the chapter outright, while the nonresident is covered only to the extent that the association of the state of residence declines the claim in writing, the Iowa association standing as payer of last resort wherever a similar association exists.
4. Only the nonresident, whose insurer was never licensed in his state, is covered, as the section specifies, because a person eligible for coverage by the association of the state in which the member insurer is domiciled takes coverage there, while an Iowa resident whose insurer is domiciled in Iowa is covered by the receivership estate directly and falls outside the association's obligations under the chapter altogether.

Why: Iowa Code 508C.3(1)“b” covers persons who own, or hold certificates or are enrollees under, the policies specified in subsection 2, and who are either residents of this state or nonresidents meeting three cumulative conditions in subparagraph (2): the state of residence has an association similar to Iowa’s; the person is not eligible for coverage by that association in any other state because the insurer or health maintenance organization was not licensed there at the time that state’s guaranty law specifies; and the member insurer that issued the policy is domiciled in this state. The facts given satisfy all three. Paragraph “a” extends coverage to beneficiaries, assignees and payees of those persons regardless of where they reside — including health care providers rendering services covered under health policies — but expressly excepts nonresident certificate holders under group policies. Paragraph “e” supplies the anti-duplication principle that drives the whole scheme: a person who would otherwise be covered here but is covered under another state’s law is not covered here, and where more than one association could cover a person the chapter is construed with other states’ laws so that only one association covers. Subsection 2 fixes the instruments: direct life insurance, health insurance and annuities, supplemental contracts, certificates under group policies, and unallocated annuity contracts issued by member insurers — with health insurance including health maintenance organization subscriber contracts and certificates, long-term care insurance, and disability insurance policies.

An Iowa producer meets a prospective buyer who already holds one Medicare supplement policy and is currently enrolled in Medicare Part C. The producer proposes to sell her a second Medicare supplement policy to sit alongside the first, and to write the new policy with an effective date falling while the Part C coverage is still running.

1. Neither feature is prohibited, provided the producer first makes reasonable efforts to determine that the recommended purchase is appropriate for the buyer, that determination being the whole of the producer’s obligation and the point at which the rule leaves the arrangement to the judgment of the buyer and the producer between them.
2. The second policy is permitted but the overlapping effective date is not, because the rule against duplication reaches only a sale that duplicates benefits already provided by Medicare itself rather than one that leaves the buyer holding two supplement policies from the same or different issuers at the same time.
3. Both features are prohibited: any sale that will provide an individual more than one Medicare supplement policy or certificate is barred outright, and an issuer may not issue a Medicare supplement policy to an individual enrolled in Medicare Part C unless the effective date of the coverage is after the termination date of that Part C coverage. ✓
4. The overlapping effective date is permitted but the second policy is not, because an issuer may write a Medicare supplement policy to run concurrently with Part C so long as the policy’s benefits are coordinated with the Part C plan, and the buyer may then surrender whichever of the two contracts she finds to be the less advantageous to her once both have been in force long enough for the benefits actually paid under each to be compared.

Why: IAC 191—37.31 carries three separate commands in three short subrules. Subrule 37.31(1) requires a producer recommending the purchase or replacement of any Medicare supplement policy or certificate to make reasonable efforts to determine the appropriateness of that recommendation — a duty of inquiry, not a permission slip that cures what the other two subrules forbid. Subrule 37.31(2) prohibits any sale of a Medicare supplement policy or certificate that will provide an individual more than one such policy or certificate; the bar is on the second supplement policy itself, whoever issued the first. Subrule 37.31(3) prohibits an issuer from issuing a Medicare supplement policy or certificate to an individual enrolled in Medicare Part C unless the effective date of the new coverage is after the termination date of the individual’s Part C coverage, so the sequence matters and concurrent running is exactly what is excluded. The duplication addressed by 37.31(2) is duplication among supplement policies, and it sits alongside a different prohibition in rule 191—37.5(3), which bars a Medicare supplement policy in force in this state from containing benefits that duplicate benefits provided by Medicare insurance.

A withdrawal from a nonqualified deferred annuity is taxed:

1. Principal first, with no tax until basis is gone
2. Gain first (LIFO), as ordinary income ✓
3. Only when the contract is fully surrendered
4. At long-term capital-gains rates entirely

Why: Nonqualified annuity withdrawals come out earnings-first (LIFO) and are taxed as ordinary income (plus a possible penalty before 59½).

An employee elects COBRA after termination. The employee generally must pay:

1. Nothing, because the employer continues to pay
2. Only the share they paid as an active employee
3. Triple the active-employee premium
4. Up to 102% of the full group premium ✓

Why: COBRA lets the individual continue coverage by paying up to 102% of the full premium (the group cost plus a 2% administration charge).

An Iowa insurer is issuing an individual health policy to an applicant whose previous coverage ended forty days ago. The policy has a preexisting condition exclusion period. The applicant also wants to keep her twenty-three-year-old unmarried son, who lives in Iowa and is not a student, on the policy. And the insured of another policy has died, leaving several months of premium paid in advance. What do Iowa Code 514A.3B and 514A.3A provide?

1. An insurer that accepts an individual for coverage under an individual accident and health policy shall waive any time period applicable to a preexisting condition exclusion or limitation with respect to particular services for the period the individual was previously covered by qualifying previous coverage that provided benefits with respect to those services, provided the coverage was continuous to a date not more than thirty days prior to the effective date of the new policy - so a forty-day gap defeats the credit and the exclusion period runs in full. An insurer whose individual policy covers children of the insured shall permit continuation or reenrollment for a qualifying unmarried child at least through the policy anniversary date on or after the date the child marries, ceases to be a resident of this state or attains the age of twenty-five years, whichever occurs first. On the death of the insured the insurer shall refund the unearned premium prorated to the month of death on notice supported by a certified copy of a valid death certificate and a request by a party entitled to claim. The creditable coverage definition excludes a short-term limited duration policy and a state risk pool.
2. An insurer that accepts an individual for coverage under an individual accident and health policy shall waive any time period applicable to a preexisting condition exclusion or limitation with respect to particular services for the period the individual was previously covered by qualifying previous coverage that provided benefits with respect to those services, provided the coverage was continuous to a date not more than sixty-three days prior to the effective date of the new policy, so this applicant's forty-day gap is inside the window. An insurer whose individual policy covers children of the insured shall permit continuation or reenrollment for a qualifying unmarried child, but only while the child maintains full-time status as a student in an accredited institution of postsecondary education, the student condition being the foundation of the continuation right rather than an alternative to it - so this twenty-three-year-old son does not qualify. On the death of the insured the insurer shall refund the unearned premium prorated to the month of death on notice supported by a certified copy of a valid death certificate and a request by a party entitled to claim, without prejudice to any claim originating before the death. The same student condition governs reenrollment.
3. An insurer that accepts an individual for coverage under an individual accident and health policy shall waive any time period applicable to a preexisting condition exclusion or limitation with respect to particular services for the period of time the individual was previously covered by qualifying previous coverage that provided benefits with respect to those services, provided the coverage was continuous to a date not more than sixty-three days prior to the effective date of the new policy - so a forty-day gap is within the window. An insurer whose individual policy covers children of the insured shall permit continuation or reenrollment for a qualifying unmarried child who so elects, at least through the policy anniversary date on or after the date the child marries, ceases to be a resident of this state, or attains the age of twenty-five years, whichever occurs first, or so long as the unmarried child maintains full-time student status at an accredited postsecondary institution. And on the death of the insured, the insurer, on notice supported by a certified copy of a valid death certificate and a request by a party entitled to claim, shall refund the unearned premium prorated to the month of death, without prejudice to any claim originating before the death. ✓
4. An insurer that accepts an individual for coverage under an individual accident and health policy shall waive any time period applicable to a preexisting condition exclusion with respect to particular services for the period the individual was previously covered by qualifying previous coverage, provided the coverage was continuous to a date not more than sixty-three days prior to the effective date of the new policy. An insurer whose individual policy covers children shall permit continuation or reenrollment for a qualifying unmarried child at least through the policy anniversary date on or after the date the child marries, ceases to be a resident of this state or attains the age of twenty-five, whichever occurs first, or so long as the child maintains full-time student status. On the death of the insured the unearned premium is forfeited to the insurer, the policy having terminated by operation of law with no party entitled to claim a refund of it.

Why: Iowa Code 514A.3B, subsections 1 and 2, and section 514A.3A. Subsection 1 is a CREDIT rule, not a prohibition: an insurer that accepts an individual for coverage SHALL WAIVE ANY TIME PERIOD APPLICABLE TO A PREEXISTING CONDITION EXCLUSION OR LIMITATION PERIOD REQUIREMENT OF THE POLICY OR CONTRACT WITH RESPECT TO PARTICULAR SERVICES IN AN INDIVIDUAL HEALTH BENEFIT PLAN FOR THE PERIOD OF TIME THE INDIVIDUAL WAS PREVIOUSLY COVERED BY QUALIFYING PREVIOUS COVERAGE ... THAT PROVIDED BENEFITS WITH RESPECT TO SUCH SERVICES, PROVIDED THAT THE COVERAGE WAS CONTINUOUS TO A DATE NOT MORE THAN SIXTY-THREE DAYS PRIOR TO THE EFFECTIVE DATE OF THE NEW POLICY OR CONTRACT. SIXTY-THREE days, not thirty, and the applicant's forty-day gap is comfortably inside it. Note the credit is service-specific: it runs only where the previous coverage provided benefits with respect to the same services. Subsection 2 is the child continuation rule and the answer confining it to full-time students collapses it into its student limb: an insurer whose policy provides coverage for children SHALL PERMIT CONTINUATION OF EXISTING COVERAGE OR REENROLLMENT IN PREVIOUSLY EXISTING COVERAGE for a qualifying UNMARRIED CHILD OF AN INSURED OR ENROLLEE WHO SO ELECTS, AT LEAST THROUGH THE POLICY ANNIVERSARY DATE ON OR AFTER THE DATE THE CHILD MARRIES, CEASES TO BE A RESIDENT OF THIS STATE, OR ATTAINS THE AGE OF TWENTY-FIVE YEARS OLD, WHICHEVER OCCURS FIRST, OR SO LONG AS THE UNMARRIED CHILD MAINTAINS FULL-TIME STATUS AS A STUDENT IN AN ACCREDITED INSTITUTION OF POSTSECONDARY EDUCATION. The word is OR - the student route is an ALTERNATIVE that can carry a child past twenty-five, not a condition of the basic right. A twenty-three-year-old unmarried Iowa resident qualifies whether or not he is studying. Do not confuse the twenty-five here with the NINETEEN in section 514A.2, subsection 1, paragraph 'c', which caps the specified age for children insured, ORIGINALLY OR BY SUBSEQUENT AMENDMENT, on a family policy: one is about which children a family policy may insure, the other about how long an existing child's coverage must be allowed to continue. Subsection 3 defines CREDITABLE COVERAGE for the purposes of accident and sickness policies issued in this state, and lists twelve kinds: a group health plan; health insurance coverage; Part A or Part B Medicare; Medicaid, other than coverage consisting solely of section 1928 benefits; 10 U.S.C. ch. 55; a health or medical care program provided through the Indian health service or a tribal organization; a state health benefits risk pool; a health plan under 5 U.S.C. ch. 89; a public health plan as defined under federal regulations; a health benefit plan under section 5(e) of the federal Peace Corps Act; A SHORT-TERM LIMITED DURATION POLICY; and the Hawki program. Section 514A.3A answers the death case and defeats the answer forfeiting the unearned premium: on receipt of NOTICE OF THE INSURED'S DEATH SUPPORTED BY A CERTIFIED COPY OF A VALID DEATH CERTIFICATE AND A REQUEST FOR A PRO RATA REFUND BY A PARTY ENTITLED TO CLAIM SUCH A REFUND, the insurer SHALL REFUND THE UNEARNED PREMIUM PRORATED TO THE MONTH OF THE INSURED'S DEATH; refund and termination are WITHOUT PREJUDICE TO ANY CLAIM ORIGINATING PRIOR TO THE DATE OF THE INSURED'S DEATH; and the commissioner adopts by rule THE MINIMUM AMOUNT REQUIRED FOR ISSUANCE OF A REFUND.

Eligibility for Medicaid is based primarily on:

1. Enrollment in a private health plan
2. Financial need (limited income and assets) ✓
3. Reaching age 65 regardless of income
4. Having paid 40 quarters into the system

Why: Medicaid is a means-tested, joint federal-state program for low-income individuals; eligibility varies by state.

The uniform 'claim forms' provision requires that, after receiving notice of a claim, the insurer:

1. Conduct a mandatory in-person investigation before issuing forms
2. Pay the claim in full within 24 hours of being notified of the loss
3. Require the insured to use only the insurer's online claim portal
4. Furnish claim forms within 15 days, or accept proof in any form ✓

Why: If the insurer does not supply claim forms within 15 days of notice, the insured may submit written proof of loss in any form.

An applicant for a large policy must justify the amount with their income and net worth. This is:

1. Field underwriting
2. Reinsurance
3. Medical underwriting
4. Financial underwriting ✓

Why: Financial underwriting confirms the requested coverage is reasonable relative to the applicant's financial circumstances.

An 'other-insured' (e.g., spouse) rider on a life policy provides:

1. Automatic conversion of the base policy into a survivorship plan
2. A second death benefit payable only if both spouses die together
3. Waiver of premium whenever the additional insured is hospitalized
4. Term life coverage on a family member other than the base insured ✓

Why: An other-insured rider adds term coverage on a spouse or other family member to the base insured's policy.

Iowa Code 507B.12 gives the commissioner power to make rules under the trade practices chapter and then says something about how that power relates to the rest of the law. What does it provide?

1. The commissioner may, after notice and hearing, promulgate reasonable rules as are necessary or proper to identify methods of competition or acts or practices which are prohibited by section 507B.4, 507B.4A or 507B.5, and the rules may enlarge upon those sections so far as is necessary to reach practices they did not anticipate; they are subject to review under chapter 17A. The powers vested in the commissioner by the chapter are additional to any other powers to enforce penalties, fines or forfeitures authorised by law with respect to the acts and practices declared to be unfair or deceptive.
2. The commissioner may, without notice or hearing, promulgate reasonable rules as are necessary or proper to identify specific methods of competition or acts or practices which are prohibited by any section of the chapter, but the rules shall not enlarge upon or extend the provisions of those sections, and shall be subject to review in accordance with chapter 17A. The powers vested in the commissioner by the chapter are additional to any other powers to enforce any penalties, fines or forfeitures authorised by law with respect to the methods, acts and practices declared to be unfair or deceptive.
3. The commissioner may, after notice and hearing, promulgate reasonable rules as are necessary or proper to identify specific methods of competition or acts or practices which are prohibited by section 507B.4, 507B.4A or 507B.5, but the rules shall not enlarge upon or extend the provisions of those sections, and shall be subject to review under chapter 17A. The powers vested in the commissioner by the chapter are exclusive of any other powers to enforce penalties, fines or forfeitures authorised by law with respect to the methods, acts and practices declared to be unfair or deceptive.
4. The commissioner may, after notice and hearing, promulgate reasonable rules as are necessary or proper to identify specific methods of competition or acts or practices which are prohibited by section 507B.4, 507B.4A or 507B.5, but the rules shall not enlarge upon or extend the provisions of those sections, and shall be subject to review in accordance with chapter 17A. The powers vested in the commissioner by the chapter are additional to any other powers to enforce any penalties, fines or forfeitures authorised by law with respect to the methods, acts and practices declared to be unfair or deceptive. ✓

Why: Iowa Code 507B.12 is two subsections and each carries one half of the item. Subsection 1: THE COMMISSIONER MAY, AFTER NOTICE AND HEARING, PROMULGATE REASONABLE RULES, AS ARE NECESSARY OR PROPER TO IDENTIFY SPECIFIC METHODS OF COMPETITION OR ACTS OR PRACTICES WHICH ARE PROHIBITED BY SECTION 507B.4, 507B.4A, OR 507B.5, BUT THE RULES SHALL NOT ENLARGE UPON OR EXTEND THE PROVISIONS OF SUCH SECTIONS. SUCH RULES SHALL BE SUBJECT TO REVIEW IN ACCORDANCE WITH CHAPTER 17A. Four things. The procedure is AFTER NOTICE AND HEARING, which the answer allowing rules without notice or hearing removes. The subject matter is three named sections, not the whole chapter - 507B.4, 507B.4A and 507B.5 - which that answer also widens. The limit is the important clause: THE RULES SHALL NOT ENLARGE UPON OR EXTEND THE PROVISIONS OF SUCH SECTIONS. A rule under this chapter may only IDENTIFY what those sections already prohibit; it cannot add a practice to the list. The answer letting the rules enlarge on the sections denies exactly that, and its reasoning - that a rulemaking power is there to catch what the drafter did not anticipate - is the argument the clause was written to defeat. Note that some sections of this chapter give their own separate and wider rulemaking directions, and where they do they say so: 507B.4B(3) tells the commissioner to make rules ESTABLISHING PROCEDURES AND STANDARDS for annuity suitability, 507B.4C(4) to make rules TO ADMINISTER that section, and 507B.9(2) to make rules that DEFINE the sale of duplicate Medicare supplement coverage. Subsection 2: THE POWERS VESTED IN THE COMMISSIONER BY THIS CHAPTER SHALL BE ADDITIONAL TO ANY OTHER POWERS TO ENFORCE ANY PENALTIES, FINES, OR FORFEITURES AUTHORIZED BY LAW WITH RESPECT TO THE METHODS, ACTS, AND PRACTICES DECLARED TO BE UNFAIR OR DECEPTIVE. ADDITIONAL TO, not exclusive of, which is the error of the answer calling the powers exclusive; the chapter adds to whatever else the law provides and takes nothing away.

A 'mutual' insurance company is:

1. A producer-owned brokerage firm
2. A government agency that pays claims of insolvent insurers
3. Owned by outside stockholders seeking profit
4. Owned by its policyholders, who may receive policy dividends ✓

Why: A mutual insurer is owned by its policyowners; dividends paid to them are treated as a nontaxable return of premium.

An Iowa insurer wants to defend a claim on an individual sickness policy by producing the application, a copy of which was never given to the policyholder. It also wants to rely on an innocent immaterial error in that application, and it points out that it acknowledged the claim notice and sent claim forms without reserving its rights. What do Iowa Code 514A.5, 514A.6 and 514A.4 provide?

1. The insured shall not be bound by any statement made in an application unless a copy of the application is endorsed on the policy when issued as a part of it or is furnished to the policyholder within thirty days after the policy is issued. Where a policy is reinstated or renewed and the insured, beneficiary or assignee makes written request for a copy of the reinstatement or renewal application, the insurer shall deliver or mail it within fifteen days of receipt, failing which it is precluded from introducing the application as evidence in any action or proceeding. The falsity of any statement in the application bars the right to recovery whether or not it materially affected the acceptance of the risk or the hazard assumed, an applicant's own answers being the basis on which the insurer agreed to write the contract. And the insurer's acknowledgment of notice, furnishing of proof-of-loss forms, acceptance of proofs or investigation of a claim shall not operate as a waiver of any of its rights in defense of a claim.
2. The insured shall not be bound by any statement made in an application unless a copy is endorsed on the policy when issued as a part of it or is furnished to the policyholder within thirty days after the policy is issued. Where a policy is reinstated or renewed and a copy of that application is requested in writing, the insurer shall deliver or mail it within fifteen days of receipt, failing which it is precluded from introducing the application as evidence. The falsity of a statement in the application may not bar the right to recovery unless it materially affected the acceptance of the risk or the hazard assumed. But an insurer that acknowledges notice of a claim, furnishes proof-of-loss forms or investigates the claim without reserving its rights waives any defense it then knew of, the insured being entitled to rely on the insurer's conduct in handling the claim. An insurer that has never furnished a copy of the original application may nevertheless produce it in evidence where the policyholder can be shown to have kept his own copy, the preclusion going to the insurer's failure to deliver rather than to the insured's knowledge of what he signed.
3. The insured shall not be bound by any statement made in an application unless a copy is endorsed on the policy when issued as a part of it or is furnished to the policyholder within ninety days after the policy is issued. Where a policy is reinstated or renewed and a copy of that application is requested in writing, the insurer shall deliver or mail it within thirty days of receipt, failing which it is precluded from introducing the application as evidence. The falsity of a statement may not bar the right to recovery unless it materially affected the acceptance of the risk or the hazard assumed. The insurer's acknowledgment of notice, furnishing of forms, acceptance of proofs or investigation of a claim shall not operate as a waiver of any of its rights.
4. The insured shall not be bound by any statement made in an application unless a copy of the application is endorsed on the policy when issued as a part of it or is furnished to the policyholder within thirty days after the policy is issued. Where a policy is reinstated or renewed and the insured, beneficiary or assignee makes written request for a copy of the reinstatement or renewal application, the insurer shall deliver or mail it within fifteen days of receipt, and if it does not the insurer is precluded from introducing the application as evidence in any action or proceeding. The falsity of any statement in the application may not bar the right to recovery unless it materially affected either the acceptance of the risk or the hazard assumed. And the insurer's acknowledgment of notice, furnishing of proof-of-loss forms, acceptance of proofs or investigation of a claim shall not operate as a waiver of any of its rights in defense of a claim. ✓

Why: Iowa Code 514A.5, 514A.6 and, behind them, 514A.4. Section 514A.5, subsection 1, ties the application to the contract: THE INSURED SHALL NOT BE BOUND BY ANY STATEMENT MADE IN AN APPLICATION FOR A POLICY UNLESS A COPY OF SUCH APPLICATION IS ENDORSED ON THE POLICY WHEN ISSUED AS A PART THEREOF OR IS FURNISHED TO THE POLICYHOLDER WITHIN THIRTY DAYS AFTER THE POLICY IS ISSUED. Thirty days, not ninety - and on these facts no copy was ever given, so the insured is not bound by the statement at all and the insurer's defence fails at the first step. The subsection then adds a separate rule for reinstatement and renewal applications: on written request by the insured, beneficiary or assignee the insurer has FIFTEEN DAYS AFTER THE RECEIPT OF SUCH REQUEST to deliver or mail a copy, and IF SUCH COPY SHALL NOT BE SO DELIVERED OR MAILED, THE INSURER SHALL BE PRECLUDED FROM INTRODUCING SUCH APPLICATION AS EVIDENCE IN ANY ACTION OR PROCEEDING BASED UPON OR INVOLVING SUCH POLICY OR ITS REINSTATEMENT OR RENEWAL. Subsection 2 bars alteration of a written application by anyone but the applicant WITHOUT THE APPLICANT'S WRITTEN CONSENT, except that the insurer may make insertions FOR ADMINISTRATIVE PURPOSES ONLY, in a manner that indicates clearly that they are not to be ascribed to the applicant. Subsection 3 is the materiality rule and the answer barring recovery on any false statement reverses it: THE FALSITY OF ANY STATEMENT IN THE APPLICATION FOR ANY POLICY COVERED BY THIS CHAPTER MAY NOT BAR THE RIGHT TO RECOVERY THEREUNDER UNLESS SUCH FALSE STATEMENT MATERIALLY AFFECTED EITHER THE ACCEPTANCE OF THE RISK OR THE HAZARD ASSUMED BY THE INSURER. An innocent immaterial error does not defeat the claim. Section 514A.6 answers the waiver argument and defeats the answer finding a waiver in the claim handling, which states the ordinary insurance-law intuition the section displaces: THE ACKNOWLEDGMENT BY ANY INSURER OF THE RECEIPT OF NOTICE GIVEN UNDER ANY POLICY COVERED BY THIS CHAPTER, OR THE FURNISHING OF FORMS FOR FILING PROOFS OF LOSS, OR THE ACCEPTANCE OF SUCH PROOFS, OR THE INVESTIGATION OF ANY CLAIM THEREUNDER SHALL NOT OPERATE AS A WAIVER OF ANY OF THE RIGHTS OF THE INSURER IN DEFENSE OF ANY CLAIM ARISING UNDER SUCH POLICY. The insurer may process a claim without being taken to have admitted it. Section 514A.4 sits underneath all of this in two parts: a policy provision NOT subject to section 514A.3 shall not make the policy or any portion of it LESS FAVORABLE IN ANY RESPECT to the insured or the beneficiary than the provisions that are subject to the chapter; and a policy issued in violation of the chapter SHALL BE HELD VALID BUT SHALL BE CONSTRUED AS PROVIDED IN THIS CHAPTER, with the rights, duties and obligations of insurer, insured and beneficiary governed by the chapter wherever a policy provision conflicts with it. Two more sections complete the group. Section 514A.7 deals with an age limit reached inside a paid-for period: the coverage CONTINUES IN FORCE, subject to any right of cancellation, UNTIL THE END OF THE PERIOD FOR WHICH PREMIUM HAS BEEN ACCEPTED, and where the age was misstated so that coverage would never have attached or would already have ceased, the insurer's liability is LIMITED TO THE REFUND, UPON REQUEST, OF ALL PREMIUMS PAID FOR THE PERIOD NOT COVERED. Section 514A.8 puts four things outside the chapter altogether: workers' compensation or liability insurance with or without supplementary expense coverage; reinsurance; ANY BLANKET OR GROUP POLICY; and life, endowment or annuity contracts whose only accident and sickness provisions give additional benefits for death, dismemberment or loss of sight by accident, or safeguard the contract against lapse or give a special surrender value, benefit or annuity on total and permanent disability.

An Iowa agent is selling an individual sickness policy to a client who will drop her existing accident and sickness cover to pay for it. The same insurer separately sells accident only policies and single premium nonrenewable policies by mail. What does IAC 191-36.8 require, and of which sales?

1. Application forms shall include a question designed to elicit information as to whether the insurance to be issued is intended to replace any other accident and sickness insurance presently in force, and a supplementary application or other form signed by the applicant may be used. On determining that a sale will involve replacement, an insurer other than a direct response insurer, or its agent, shall furnish the applicant the prescribed notice prior to issuance or delivery of the policy, one copy retained by the applicant and a signed copy retained by the insurer. A direct response insurer shall deliver its own form of notice upon issuance of the policy, that notice telling the applicant the new policy provides 30 days within which the applicant may decide without cost whether to keep it. The notice is required in the solicitation of every accident and sickness policy, including accident only and single premium nonrenewable policies.
2. Application forms shall include a question designed to elicit information as to whether the insurance to be issued is intended to replace any other accident and sickness insurance presently in force, and a supplementary application or other form signed by the applicant may be used. On determining that a sale will involve replacement, an insurer other than a direct response insurer, or its agent, shall furnish the applicant the prescribed notice prior to issuance or delivery of the policy; one copy is retained by the applicant and an additional copy signed by the applicant is retained by the insurer. A direct response insurer shall deliver its own form of notice upon issuance of the policy, that notice telling the applicant the new policy provides 30 days within which the applicant may decide without cost whether to keep it. In no event is such a notice required in the solicitation of accident only and single premium nonrenewable policies. ✓
3. Application forms shall include a question designed to elicit information as to whether the insurance to be issued is intended to replace any other accident and sickness insurance presently in force. On determining that a sale will involve replacement, an insurer other than a direct response insurer, or its agent, shall furnish the applicant the prescribed notice prior to issuance or delivery of the policy, one copy retained by the applicant and a signed copy retained by the insurer. A direct response insurer must also furnish its notice before the policy is issued, the timing being the same whatever the channel of distribution; that notice tells the applicant the new policy provides 30 days within which to decide without cost whether to keep it. In no event is such a notice required in the solicitation of accident only and single premium nonrenewable policies.
4. Application forms shall include a question designed to elicit whether the insurance to be issued is intended to replace any other accident and sickness insurance presently in force. On determining that a sale will involve replacement, an insurer other than a direct response insurer, or its agent, shall furnish the prescribed notice prior to issuance or delivery of the policy. A direct response insurer delivers its own form of notice upon issuance, that notice telling the applicant the new policy provides ten days within which the applicant may decide without cost whether to keep it. In no event is such a notice required in the solicitation of accident only and single premium nonrenewable policies.

Why: IAC 191-36.8 is the accident and sickness counterpart of the life replacement machinery in IAC 191 chapter 16, and it is much shorter because it does only two things: it makes the insurer ASK, and it makes the insurer WARN. Subrule 36.8(1): APPLICATION FORMS SHALL INCLUDE A QUESTION DESIGNED TO ELICIT INFORMATION AS TO WHETHER THE INSURANCE TO BE ISSUED IS INTENDED TO REPLACE ANY OTHER ACCIDENT AND SICKNESS INSURANCE PRESENTLY IN FORCE, and A SUPPLEMENTARY APPLICATION OR OTHER FORM TO BE SIGNED BY THE APPLICANT CONTAINING SUCH A QUESTION MAY BE USED. Subrule 36.8(2) splits the duty by distribution channel, and the split is what the answer requiring a direct response insurer to give notice before issue collapses. An insurer OTHER THAN A DIRECT RESPONSE INSURER, or its agent, must furnish the notice PRIOR TO ISSUANCE OR DELIVERY OF THE POLICY, with ONE COPY ... RETAINED BY THE APPLICANT AND AN ADDITIONAL COPY SIGNED BY THE APPLICANT ... RETAINED BY THE INSURER. A DIRECT RESPONSE INSURER SHALL DELIVER TO THE APPLICANT UPON ISSUANCE OF THE POLICY the different notice in subrule 36.8(4) - later, because there is no agent at the kitchen table to hand anything over, and the missing warning is made up for by the sentence that appears only in the direct response form: YOUR NEW POLICY PROVIDES 30 DAYS WITHIN WHICH YOU MAY DECIDE WITHOUT COST WHETHER YOU DESIRE TO KEEP THE POLICY. Thirty days there, against the ten days of the ordinary free-look notice required by rule 191-36.7(1)'g' - the answer giving ten days confuses the two. Subrule 36.8(2) closes with the exemption the answer requiring notice for every policy removes: IN NO EVENT, HOWEVER, WILL SUCH A NOTICE BE REQUIRED IN THE SOLICITATION OF THE FOLLOWING TYPES OF POLICIES: ACCIDENT ONLY AND SINGLE PREMIUM NONRENEWABLE POLICIES. Both of the insurer's mail-order lines in the stem are therefore outside the rule. The prescribed notice itself, in subrule 36.8(3), makes three points and they are the substance of what a replacing producer must get across: HEALTH CONDITIONS WHICH YOU MAY PRESENTLY HAVE (PREEXISTING CONDITIONS) MAY NOT BE IMMEDIATELY OR FULLY COVERED UNDER THE NEW POLICY. THIS COULD RESULT IN DENIAL OR DELAY OF A CLAIM FOR BENEFITS UNDER THE NEW POLICY, WHEREAS A SIMILAR CLAIM MIGHT HAVE BEEN PAYABLE UNDER YOUR PRESENT POLICY; that the applicant MAY WISH TO SECURE THE ADVICE OF YOUR PRESENT INSURER OR ITS AGENT regarding the proposed replacement; and that FAILURE TO INCLUDE ALL MATERIAL MEDICAL INFORMATION ON AN APPLICATION MAY PROVIDE A BASIS FOR THE COMPANY TO DENY ANY FUTURE CLAIMS AND TO REFUND YOUR PREMIUM AS THOUGH YOUR POLICY HAD NEVER BEEN IN FORCE, with the instruction to reread the application before signing. The direct response version carries the same first two points and, where the application is attached to the policy, tells the applicant to check it and WRITE TO THE COMPANY WITHIN 30 DAYS if anything is incorrect, incomplete or omitted.

An Iowa viatical settlement broker's file clerk notices that a medical record and an insurance application in the same file cannot both be true. The broker asks whether it must report this, whether it can be sued for reporting it, and what its own antifraud programme must contain. Its contracts carry no fraud warning at all. What does Iowa Code 508E.15 provide?

1. Any person engaged in the business of viatical settlements having knowledge or a reasonable suspicion that a fraudulent viatical settlement act is being, will be, or has been committed may provide the commissioner with the information required by rule, reporting being permissive throughout section 508E.15 so that a licensee is never compelled to accuse its own client on a suspicion it cannot yet prove. No civil liability shall be imposed on a person who, acting reasonably and in good faith, furnishes such information. A provider or broker shall have antifraud initiatives including a fraud investigator and an antifraud plan submitted to the commissioner, the plan describing procedures for resolving material inconsistencies between medical records and insurance applications. The lack of the required fraud warning in a contract or application is not a defense in any prosecution for a fraudulent viatical settlement act.
2. Any person engaged in the business of viatical settlements having knowledge or a reasonable suspicion that a fraudulent viatical settlement act is being, will be, or has been committed shall provide the commissioner with the information required by rule, while any other person having knowledge or a reasonable belief may do so. No civil liability shall be imposed on a person who, acting reasonably and in good faith, furnishes such information. A provider or broker shall have antifraud initiatives including a fraud investigator and an antifraud plan submitted to the commissioner. Where the contract and the application omit the fraud warning required by subsection 2, no prosecution for a fraudulent viatical settlement act arising out of that contract may be brought, the warning being the notice on which the offense depends; the reporting duty and the antifraud plan requirement fall away with it, the chapter's antifraud machinery resting on the warning as its foundation. Any document or evidence the broker furnishes the commissioner in an investigation of a suspected fraudulent act becomes a public record under chapter 22 once the investigation is concluded.
3. Any person engaged in the business of viatical settlements having knowledge or a reasonable suspicion that a fraudulent viatical settlement act is being, will be, or has been committed shall provide the commissioner with the information required by rule, while any other person having knowledge or a reasonable belief may do so. A person who furnishes that information to the commissioner, to a law enforcement or regulatory official or to the life insurer that issued the policy enjoys immunity from civil liability without qualification, the protection being absolute so that no informant is deterred by the prospect of a suit, and bad faith or actual malice goes only to the weight the commissioner gives the report. A provider or broker shall have antifraud initiatives including a fraud investigator and an antifraud plan submitted to the commissioner. The lack of the required fraud warning is not a defense in any prosecution for a fraudulent viatical settlement act.
4. Any person engaged in the business of viatical settlements having knowledge or a reasonable suspicion that a fraudulent viatical settlement act is being, will be, or has been committed shall provide the commissioner with the information required by rule, while any other person having knowledge or a reasonable belief may do so. No civil liability shall be imposed on and no cause of action shall arise from a person who, acting reasonably and in good faith, furnishes such information to the listed recipients, that immunity not applying to a statement made in bad faith or with actual malice. A provider or broker shall have antifraud initiatives including a fraud investigator and an antifraud plan submitted to the commissioner, the plan describing procedures for detecting and investigating possible fraudulent acts and for resolving material inconsistencies between medical records and insurance applications, procedures for reporting to the commissioner, the plan for antifraud education and training, and the organizational arrangement of antifraud personnel. The lack of the required fraud warning is not a defense in any prosecution for a fraudulent viatical settlement act. ✓

Why: Iowa Code 508E.15 is the chapter's antifraud machinery and it turns on four distinctions. Subsection 3 splits the reporting duty in two: paragraph "a" says ANY PERSON ENGAGED IN THE BUSINESS OF VIATICAL SETTLEMENTS HAVING KNOWLEDGE OR A REASONABLE SUSPICION THAT A FRAUDULENT VIATICAL SETTLEMENT ACT IS BEING, WILL BE, OR HAS BEEN COMMITTED SHALL PROVIDE TO THE COMMISSIONER SUCH INFORMATION AS REQUIRED BY AND IN A MANNER PRESCRIBED BY RULES, while paragraph "b" says ANY OTHER PERSON having knowledge or a REASONABLE BELIEF MAY do so. Shall for the industry, may for everyone else - which is what the answer making reporting permissive flattens; and note the threshold words differ too, suspicion inside the business and belief outside it. Subsection 4 is the immunity and it is conditional, not absolute: no civil liability shall be imposed on and no cause of action shall arise from a person who, ACTING REASONABLY AND IN GOOD FAITH, furnishes information to the commissioner and staff, to federal, state or local law enforcement or regulatory officials, to a person involved in the prevention and detection of fraudulent viatical settlement acts, to the national association of insurance commissioners, the financial industry regulatory authority, inc., the North American securities administrators association or another regulatory body, or to a life insurer that issued the policy. Paragraph "b" then says the immunity DOES NOT APPLY TO A STATEMENT MADE IN BAD FAITH OR WITH ACTUAL MALICE, and requires a plaintiff to plead bad faith or malice specifically - which is what the answer making the immunity absolute removes. Paragraph "c" adds an award of attorney fees and costs to a prevailing informant where the action was not substantially justified, except to a person furnishing information about the person's own fraudulent act. Subsection 7 is the antifraud programme: initiatives REASONABLY CALCULATED TO DETECT, PROSECUTE, AND PREVENT FRAUDULENT VIATICAL SETTLEMENT ACTS, which SHALL INCLUDE a fraud investigator - who may be the provider or broker itself, an employee, or an independent contractor - and an antifraud plan submitted to the commissioner describing the procedures for detecting and investigating possible fraudulent acts AND PROCEDURES FOR RESOLVING MATERIAL INCONSISTENCIES BETWEEN MEDICAL RECORDS AND INSURANCE APPLICATIONS, the procedures for reporting to the commissioner, the plan for antifraud education and training of underwriters and other personnel, and a description or chart of the organizational arrangement of the antifraud personnel. That first item is exactly the clerk's discovery. The plan itself is privileged and confidential notwithstanding chapter 22, is not a public record, and is not subject to discovery or subpoena. Subsection 2 requires every contract and application to carry the statement that ANY PERSON WHO KNOWINGLY PRESENTS FALSE INFORMATION IN AN APPLICATION FOR INSURANCE OR VIATICAL SETTLEMENT CONTRACT IS GUILTY OF A CRIME AND MAY BE SUBJECT TO FINES AND CONFINEMENT IN PRISON, or a substantially similar statement - and then closes the door the answer barring prosecution without the warning opens: THE LACK OF A STATEMENT AS REQUIRED IN PARAGRAPH "A" DOES NOT CONSTITUTE A DEFENSE IN ANY PROSECUTION FOR A FRAUDULENT VIATICAL SETTLEMENT ACT.

An Iowa health insurer routinely tells claimants that their policies exclude a category of treatment that the policies in fact cover, and routinely leaves letters and telephone messages about pending claims unanswered for long periods. Which of the unfair claim settlement practices listed in Iowa Code 507B.4 does that conduct fall within?

1. Misrepresenting pertinent facts or insurance policy provisions relating to coverages of issue; and failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies.
2. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies, but not misrepresentation of policy provisions. A misrepresentation about what a policy covers is dealt with by the misrepresentation and false advertising paragraph at the head of the section, which reaches material misrepresenting the benefits, advantages, conditions or terms of any insurance policy, and the claim settlement paragraph is confined to how a claim is handled once the coverage position has been stated, so that the two paragraphs divide between them according to whether the statement was made in selling the policy or in dealing with the claim.
3. Misrepresenting pertinent facts or insurance policy provisions relating to coverages of issue; and failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies. ✓
4. Misrepresenting pertinent facts or insurance policy provisions relating to coverages of issue; and failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies. But neither is engaged here, because both require that the insurer's conduct was directed at compelling the claimant to accept less than the amount to which the claimant was entitled.

Why: Paragraph 'j' of Iowa Code 507B.4(3) lists fifteen unfair claim settlement practices and the first two are the ones in point. Subparagraph (1): MISREPRESENTING PERTINENT FACTS OR INSURANCE POLICY PROVISIONS RELATING TO COVERAGES OF ISSUE. Subparagraph (2): FAILING TO ACKNOWLEDGE AND ACT REASONABLY PROMPTLY UPON COMMUNICATIONS WITH RESPECT TO CLAIMS ARISING UNDER INSURANCE POLICIES. Two verbs in the second - ACKNOWLEDGE and ACT - so an insurer that sends a holding acknowledgement and then does nothing has satisfied half of it and breached the other half. The argument that a coverage misrepresentation belongs only to the misrepresentation paragraph is the interesting one and it is wrong: subparagraph (1) is expressly about misrepresenting policy provisions RELATING TO COVERAGES OF ISSUE, which is a claims-handling context, and the misrepresentation paragraph at the head of the section runs on material MADE, ISSUED OR CIRCULATED - an estimate, illustration, circular, statement, sales presentation, omission or comparison. The two paragraphs overlap rather than divide, and a false coverage position stated to a claimant is squarely inside subparagraph (1). The answer pointing to reasonable investigation standards swaps subparagraph (2) for subparagraph (3), which is about FAILING TO ADOPT AND IMPLEMENT REASONABLE STANDARDS FOR THE PROMPT INVESTIGATION OF CLAIMS - a systems failure rather than a failure to answer the post, and a different practice. The answer saying neither is engaged adds a requirement of coercive purpose that appears nowhere in either subparagraph; several of the fifteen do turn on pressing a claimant towards a smaller settlement, but these two do not. One requirement does govern all fifteen, and the stem is drafted to satisfy it rather than to test it: paragraph 'j' opens by defining the practice as COMMITTING OR PERFORMING WITH SUCH FREQUENCY AS TO INDICATE A GENERAL BUSINESS PRACTICE any of the listed acts, which is why the stem says the insurer does both things ROUTINELY.

Iowa Code 507B.1 states the purpose of the insurance trade practices chapter. What is that purpose?

1. To regulate trade practices in the business of insurance in accordance with the intent of Congress expressed in the Act of Congress of March 9, 1945, by defining, or providing for the determination of, the practices that constitute unfair methods of competition or unfair or deceptive acts or practices, and by prohibiting them. ✓
2. To bring the business of insurance in this state within the general federal antitrust laws, so that an unfair method of competition or an unfair or deceptive act or practice in the business of insurance is investigated and prosecuted by the federal authorities as such conduct is dealt with in any other industry.
3. To create a private right of action for a policyholder injured by an insurer's trade practices, the chapter defining the practices that are actionable and fixing the damages a court may award for each of them.
4. To regulate the rates insurers may charge for property and casualty insurance in this state, by defining the practices that constitute unfair methods of competition in the setting and filing of those rates and by prohibiting them.

Why: Iowa Code 507B.1 says the purpose IS TO REGULATE TRADE PRACTICES IN THE BUSINESS OF INSURANCE IN ACCORDANCE WITH THE INTENT OF CONGRESS AS EXPRESSED IN THE ACT OF CONGRESS OF MARCH 9, 1945, PUB. L. NO. 79-15, 59 STAT. 33, CODIFIED AT 15 U.S.C. §1011 - 1015, BY DEFINING, OR PROVIDING FOR THE DETERMINATION OF, ALL SUCH PRACTICES IN THIS STATE WHICH CONSTITUTE UNFAIR METHODS OF COMPETITION OR UNFAIR OR DECEPTIVE ACTS OR PRACTICES AND BY PROHIBITING THE TRADE PRACTICES SO DEFINED OR DETERMINED. The chapter is the state's own regulation of these practices, which is why the answer handing them to federal antitrust enforcement is wrong. Note the phrase OR PROVIDING FOR THE DETERMINATION OF, which is why the chapter is not merely a list: 507B.3 also prohibits a practice DETERMINED PURSUANT TO SECTION 507B.6 to be unfair. The section says nothing about rates or about a private cause of action.

A terminally ill insured accesses the accelerated death benefit for $40,000 on a $100,000 policy. At death, the beneficiary receives:

1. $40,000, matching the amount already advanced
2. $140,000 (the face amount plus the advance)
3. $60,000 (the death benefit reduced by the advance) ✓
4. $100,000, because an accelerated payment is treated as a policy loan

Why: The accelerated benefit advances part of the face amount; the death benefit is reduced accordingly: $100,000 − $40,000 = $60,000.

A life insurance company's certificate of authority in Iowa has been revoked. Its producer, not knowing this, collects a premium from a prospect for a new policy. What does Iowa Code 511.17 provide about the arrangement and about what the payer can recover, and from whom?

1. All such contracts are null and void, and all payments of premium or assessments advanced or made on account of any such policy may be recovered from the company, and in addition the plaintiff may recover an equal amount as liquidated damages together with a reasonable fee for the plaintiff's attorney. The agent who received the money is not liable: an agent who takes a premium in ignorance of a revocation has done nothing wrong and holds the money for a disclosed principal, so the remedy lies against the company whose authority was revoked and whose duty it was to stop its producers writing, and it would be a harsh rule that made a producer personally answerable for a fact the producer had no means of knowing.
2. All such contracts are voidable at the option of the payer, who may elect instead to affirm the arrangement and hold the company to the policy, and all payments of premium or assessments advanced or made on account of any such policy may be recovered from the company or its agent to whom payment was advanced or made, or from both of them. There is no provision for liquidated damages or for an attorney fee anywhere in the section: the payer who rescinds is restored to the position the payer occupied before the payment was made and no more, a penal recovery being something the legislature confers in express words where it intends it, and nothing in this section speaks of damages, of doubling, or of the costs of bringing the action.
3. All contracts, promises and agreements made by any person to or with the company concerning any premium, policy or certificate of new business after the revocation of its certificates or denial of authority to do business are null and void, and all payments of premium or assessments advanced or made by any person on account of any such policy, certificate of new business, or upon any arrangement for one, may be recovered from the company or its agent to whom payment was advanced or made, or from both of them, and in addition the plaintiff may recover an equal amount as liquidated damages together with a reasonable fee for the plaintiff's attorney. ✓
4. All such contracts are null and void, and all payments of premium or assessments advanced or made on account of any such policy may be recovered from the company or its agent to whom payment was advanced or made, or from both of them, together with an equal amount as liquidated damages, but only where the person making the payment knew or ought to have known of the revocation.

Why: Iowa Code 511.17 is one sentence and it is one of the sharpest remedies in the Iowa insurance code: ALL CONTRACTS, PROMISES, AND AGREEMENTS MADE BY ANY PERSON TO OR WITH ANY SUCH COMPANY OR ASSOCIATION CONCERNING ANY PREMIUM, POLICY, OR CERTIFICATE OF NEW BUSINESS, AFTER THE REVOCATION OF ITS CERTIFICATES OR DENIAL OF AUTHORITY TO DO BUSINESS, SHALL BE NULL AND VOID, AND ALL PAYMENTS OF PREMIUM OR ASSESSMENTS ADVANCED OR MADE BY ANY PERSON ON ACCOUNT OF ANY SUCH POLICY, CERTIFICATE OF NEW BUSINESS, OR UPON ANY ARRANGEMENT THEREFOR, MAY BE RECOVERED FROM SUCH COMPANY OR ASSOCIATION, OR ITS AGENT TO WHOM PAYMENT WAS ADVANCED OR MADE, OR FROM BOTH OF THEM, AND IN ADDITION THERETO PLAINTIFF MAY RECOVER AN EQUAL AMOUNT AS LIQUIDATED DAMAGES, TOGETHER WITH A REASONABLE FEE TO PLAINTIFF'S ATTORNEY FOR SERVICES IN THE CASE. Four things. The contracts are NULL AND VOID, not voidable at the payer's option, which matters because a void contract cannot be affirmed and no policy comes into existence at all. Recovery lies against THE COMPANY, OR ITS AGENT, OR BOTH: the producer who took the money is personally exposed, which the answer excusing the agent argues away on grounds that are humane and are not the statute. There is no knowledge requirement anywhere in the section, on either side - the answer requiring the payer's knowledge adds one for the payer, and the answer excusing the agent assumes one for the agent; the section operates on the bare fact of revocation or denial. And the remedy is DOUBLE plus costs of suit: the premium back, AN EQUAL AMOUNT AS LIQUIDATED DAMAGES, and A REASONABLE FEE TO PLAINTIFF'S ATTORNEY. Note the trigger words NEW BUSINESS, which appear twice: the section is aimed at a company that keeps writing after its authority has gone, not at the servicing of business already on the books. That is the same distinction chapter 508 draws when it says, in 508.14(2) and again in 508.15, that a defaulting company's RIGHT TO TRANSACT FURTHER NEW BUSINESS IN THIS STATE SHALL IMMEDIATELY CEASE.

An insurer files an individual long-term care insurance policy form for delivery in Iowa. The form is not issued to any group of the kind the chapter describes. It defines a preexisting condition as one for which medical advice or treatment was recommended or received within twelve months preceding the effective date of coverage, and it excludes coverage for any loss or confinement resulting from such a condition where the loss begins within twelve months after the effective date.

1. Both periods are unobjectionable as filed, because twelve months is the outer limit the chapter sets for an individual long-term care policy on both the look-back and the exclusion, and the six-month figure governs only a certificate issued under a group long-term care policy delivered to an employer, a labor organization or a trust maintained by either, whose members are not individually underwritten.
2. Both periods are too long as filed: the definition may be no more restrictive than a six-month look-back, and the exclusion may reach only a loss or confinement that begins within six months following the effective date, although the commissioner may extend those limitation periods as to specific age group categories in specific policy forms on finding the extension to be in the best interest of the public. ✓
3. The definition is too restrictive but the exclusion is not, because the chapter caps only the look-back used to identify a preexisting condition and leaves the length of the resulting exclusion to the policy form as filed, subject to the outline of coverage disclosing the period plainly to the applicant before the policy is delivered.
4. Neither period may appear in the form at all, because an individual long-term care policy delivered in this state may not limit coverage for a preexisting condition by any means, and an insurer concerned about adverse selection must decline the application outright rather than issue a policy carrying a waiting period of any kind.

Why: Iowa Code 514G.105(2) governs both halves. Paragraph “a” forbids a policy or certificate other than one issued to a group described in section 514G.103(9) from using a definition of “preexisting condition” more restrictive than the definition in section 514G.103(15), which is a condition for which medical advice or treatment was recommended by, or received from, a provider of health care services within six months preceding the effective date of coverage. Paragraph “b” forbids the same policies from excluding coverage for a loss or confinement resulting from a preexisting condition unless the loss or confinement begins within six months following the effective date of coverage. So both twelve-month figures fail, and both are capped rather than one. Paragraph “c” supplies the only relief: the commissioner may extend the limitation periods in paragraphs “a” and “b” as to specific age group categories in specific policy forms upon finding the extension in the best interest of the public. Paragraph “d” preserves ordinary underwriting — an insurer may still use an application designed to elicit a complete health history and underwrite on the answers — but bars the use of waivers or riders of any kind to exclude, limit or reduce coverage for specifically named or described preexisting diseases or physical conditions beyond the waiting period in paragraph “b”. That is why a limitation is not forbidden outright; it is bounded.

To be 'fully insured' for Social Security retirement benefits, a worker generally needs:

1. A minimum of 30 years of continuous full-time employment
2. Only a single quarter of covered earnings at any point in life
3. 20 quarters earned within the most recent five-year period
4. 40 quarters (about 10 years) of covered earnings ✓

Why: Fully insured status requires 40 quarters of coverage (roughly 10 years of work in covered employment).

The board of directors of the association comes to believe in good faith, from information reaching it, that a particular Iowa member insurer may be an impaired or insolvent insurer. It asks what it may do with that belief, whether it can compel an examination, and who bears the cost if one is made.

1. The board may order an examination of the member insurer directly, the commissioner’s role being confined to designating the persons who conduct it; the cost is assessed against the member insurer examined in the same way as the cost of an ordinary financial examination; and the report is furnished to the board before it is released to the public so that the board may act on it.
2. The board must refer the information to the commissioner but has no power to request an examination, that power belonging to the commissioner alone; if the commissioner examines, the cost falls on the member insurer examined; and the board learns the outcome only through the commissioner's report to it once the examination has been completed and made public.
3. Upon majority vote the board shall notify the commissioner of the information, and upon majority vote it may request that the commissioner order an examination of the member insurer; the request is a request rather than a command, the cost of any examination is paid by the association, and the examination report is not released to the board before its release to the public. ✓
4. Upon majority vote the board shall notify the commissioner and may request an examination, but only after it has first given the member insurer written notice of the information and an opportunity of not less than thirty days to respond; the cost is shared equally between the association and the member insurer; and the request is a public record from the moment it is filed with the commissioner.

Why: Iowa Code 508C.12(4) requires the board, upon majority vote, to notify the commissioner of any information indicating that a member insurer may be an impaired or insolvent insurer. Subsection 5 then lets the board, again upon majority vote, REQUEST that the commissioner order an examination of a member insurer which the board in good faith believes may be impaired or insolvent. The examination may be conducted as a national association of insurance commissioners examination or by persons the commissioner designates; “the cost of the examination shall be paid by the association”, which is the reverse of the ordinary rule for a financial examination and is the point the answers putting the cost on the member insurer get wrong; the report is treated as other examination reports are; and it “shall not be released to the board of directors prior to its release to the public”, though the commissioner must notify the board when the examination is completed. The request itself is kept on file by the commissioner but is not a public record pursuant to chapter 22 until the examination report is released to the public. The section’s other half runs the other way, from the commissioner to the board: subsection 1 requires the commissioner to notify other states’ commissioners within thirty days when a member insurer’s licence is revoked or suspended or a formal restricting order is made, to report such actions and any equivalent report from another state to the board with all significant details, to report reasonable cause believed from an examination that an insurer may be impaired or insolvent, and to furnish the board the national association of insurance commissioners’ insurance regulatory information system ratios, which the board must keep confidential until made public by the commissioner or other lawful authority. Subsections 3 and 6 let the board, on majority vote, make reports and recommendations on solvency matters and on the detection and prevention of insolvencies.

A disability policy has a 14-day elimination period and a $200 weekly benefit. If the insured is disabled for 10 weeks, the total paid is:

1. $1,600 ✓
2. $2,000
3. $1,400
4. $1,800

Why: The first 2 weeks (14-day elimination) pay nothing; 8 weeks × $200 = $1,600.

An employee gets married, a HIPAA 'special enrollment' event. The employee may:

1. Never add a new spouse to an existing plan
2. Only enroll at the next annual open enrollment period
3. Enroll only after a 12-month waiting period
4. Enroll in the group plan outside the normal open enrollment ✓

Why: HIPAA special enrollment lets employees enroll after qualifying life events (marriage, birth, loss of other coverage) without waiting for open enrollment.

The distinction between accident and sickness coverage is that an 'accident' involves:

1. Any loss the insured suffers, expected or unexpected, so long as it produces a medical expense
2. A condition that develops gradually over months, while sickness means a sudden onset
3. Only injuries sustained on the job, which is why workers compensation responds to them
4. A sudden, unforeseen injury, while sickness involves illness or disease ✓

Why: Accident coverage applies to sudden, unforeseen injuries; sickness coverage applies to illness or disease, and many policies cover both.

A business partner takes a life policy on a co-owner to fund a buy-sell agreement. Insurable interest:

1. Does not exist, because business associates are strangers under insurable interest law
2. Exists only if the two partners are also related by blood, marriage, or legal adoption
3. Must be re-proven at each policy anniversary
4. Exists, because the partner would suffer financial loss at the co-owner's death ✓

Why: Business partners have an insurable interest in each other for buy-sell purposes; insurable interest need only exist at policy inception.

A person turns 65 and enrolls in Part B. During the six months that follow, they apply for a Medigap policy. The insurer must:

1. Issue any plan offered, regardless of health ✓
2. Charge a surcharge for pre-existing conditions
3. Require a full medical exam before issuing
4. Decline if the applicant has a chronic illness

Why: During the six-month Medigap open enrollment period (age 65 + enrolled in Part B), coverage is guaranteed issue regardless of health.

Omar went 14 months after his Initial Enrollment Period without Part D or other creditable drug coverage. His Part D late enrollment penalty equals what percentage of the national base beneficiary premium?

1. 1%
2. 10%
3. 14% ✓
4. 20%

Why: Part D charges 1% of the national base beneficiary premium for each full month without creditable coverage, so 14 months gives 14%. Candidates who pick 10% are applying the Part B rule, which counts whole 12-month periods.

A stock life insurance company wants to be authorised to transact business in Iowa. It also plans to increase its capital stock next year, and it expects to undergo a change of control the year after. What does Iowa Code 508.5 require of it at each of those points?

1. It must have not less than five million dollars of capital and surplus paid in cash or invested as provided by law; it shall not increase its capital stock unless the amount of the increase is fully paid in cash; and having undergone a change of control as defined under chapter 521A it must satisfy the minimum capital and surplus requirements afresh as though it were a new applicant for authority, which is a stricter test than merely continuing to maintain them.
2. It must have not less than five million dollars of capital and surplus paid in cash or invested as provided by law; it shall not increase its capital stock unless the amount of the increase is fully paid in cash; and having undergone a change of control as defined under chapter 521A it must maintain the minimum capital and surplus requirements mandated by the section. It must also comply with the minimum capital and surplus requirements of chapter 508 or chapter 521E, whichever is greater. ✓
3. It must have not less than five million dollars of capital and surplus paid in cash or invested as provided by law; it may increase its capital stock either in cash or by the capitalisation of surplus already held; and having undergone a change of control as defined under chapter 521A it must maintain the minimum capital and surplus requirements mandated by the section. Where chapter 508 and chapter 521E differ, chapter 508 governs as the more specific of the two.
4. It must have not less than one million dollars of capital and surplus paid in cash or invested as provided by law; it shall not increase its capital stock unless the amount of the increase is fully paid in cash; and having undergone a change of control as defined under chapter 521A it must maintain the minimum capital and surplus requirements mandated by the section. It must also comply with the minimum capital and surplus requirements of chapter 508 or chapter 521E, whichever is greater.

Why: Iowa Code 508.5(1) contains three sentences and each answers one part of the stem. A STOCK LIFE INSURANCE COMPANY SHALL NOT BE AUTHORIZED TO TRANSACT BUSINESS UNDER THIS CHAPTER WITH LESS THAN FIVE MILLION DOLLARS OF CAPITAL AND SURPLUS PAID IN CASH OR INVESTED AS PROVIDED BY LAW. Five million, not one, and note the phrase CAPITAL AND SURPLUS together, which is a single combined test rather than five million of each. A STOCK LIFE INSURANCE COMPANY SHALL NOT INCREASE ITS CAPITAL STOCK UNLESS THE AMOUNT OF THE INCREASE IS FULLY PAID IN CASH: cash only, which forecloses the capitalisation of surplus that the answer allowing capitalisation of surplus permits. A STOCK LIFE INSURANCE COMPANY AUTHORIZED TO DO BUSINESS IN IOWA THAT UNDERGOES A CHANGE OF CONTROL AS DEFINED UNDER CHAPTER 521A SHALL MAINTAIN THE MINIMUM CAPITAL AND SURPLUS REQUIREMENTS MANDATED BY THIS SECTION - MAINTAIN, which is the ordinary continuing duty, and re-applying as though a new applicant is an invention, however sensible it sounds. Subsection 2 is the tie-breaker: NOTWITHSTANDING SUBSECTION 1, A STOCK LIFE INSURANCE COMPANY, OR ANY OTHER LIFE INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS UNDER THIS CHAPTER, SHALL COMPLY WITH THE MINIMUM CAPITAL AND SURPLUS REQUIREMENTS OF THIS CHAPTER OR CHAPTER 521E, WHICHEVER IS GREATER. WHICHEVER IS GREATER, so the higher of the two governs - the answer making chapter 508 govern reverses it by making the more specific chapter win. Chapters 521A and 521E are named here. Do not confuse the five million dollars in this section with the five million dollars in 508.9(1): that one is a SECURITY FUND deposited with the commissioner by a MUTUAL company for the protection of policyholders, and it is a different requirement on a different kind of company.

An Iowa life insurer proposes to run its in-force business against a commercial database of reported deaths rather than against the United States social security administration's own file, and asks what will count as a hit. What do the definitions in Iowa Code 507B.4C say about the file it must use and about what amounts to a match?

1. 'Death master file' means the United States social security administration's death master file and nothing else, the definition naming a single federal source so that every insurer doing business in the state searches the same records and no insurer can be heard to argue about the comprehensiveness of some privately compiled substitute for it. 'Death master file match' means a search of that file which results in a match of an authorized person's name and social security number, or of an authorized person's name and date of birth.
2. 'Death master file' means the United States social security administration's death master file or any other database or service that is at least as comprehensive as that file for determining that a person has died, so a commercial database may be used if it meets that standard. 'Death master file match' means a search of the death master file that results in a match of an authorized person's name, social security number and date of birth, all three identifiers being required before the insurer's duties under the section are engaged.
3. 'Death master file' means the United States social security administration's death master file or any other database or service that is at least as comprehensive as that file for determining that a person has died, so a commercial database may be used if it meets that standard. 'Death master file match' means a search of the death master file that results in a match of a beneficiary's name and social security number, or of a beneficiary's name and date of birth, the beneficiary being the person the insurer must ultimately pay.
4. 'Death master file' means the United States social security administration's death master file or any other database or service that is at least as comprehensive as that file for determining that a person has died, so a commercial database may be used if it meets that standard. 'Death master file match' means a search of the death master file that results in a match of an authorized person's name and social security number, or of an authorized person's name and date of birth. ✓

Why: Two definitions in Iowa Code 507B.4C(2) do the technical work of the section. Paragraph 'd': 'DEATH MASTER FILE' MEANS THE UNITED STATES SOCIAL SECURITY ADMINISTRATION'S DEATH MASTER FILE OR ANY OTHER DATABASE OR SERVICE THAT IS AT LEAST AS COMPREHENSIVE AS THE UNITED STATES SOCIAL SECURITY ADMINISTRATION'S DEATH MASTER FILE FOR DETERMINING THAT A PERSON HAS DIED. The definition is deliberately open: it names one source and then admits any other that meets a COMPARATIVE standard, so the question about a commercial database is answered by whether it is AT LEAST AS COMPREHENSIVE, not by whether it is the federal file. The answer confining the file to the federal one closes the definition, and its reasoning - uniformity across insurers - is a good policy argument that the drafter did not adopt. Paragraph 'e': 'DEATH MASTER FILE MATCH' MEANS A SEARCH OF THE DEATH MASTER FILE THAT RESULTS IN A MATCH OF AN AUTHORIZED PERSON'S NAME AND SOCIAL SECURITY NUMBER OR AN AUTHORIZED PERSON'S NAME AND DATE OF BIRTH. Two pairs, joined by OR: name plus social security number, OR name plus date of birth. Either pair is enough, and requiring all three would defeat the section for every record where one identifier is missing - which is precisely the case 507B.4C(3)'c' addresses when it requires procedures to account for INCOMPLETE SOCIAL SECURITY NUMBERS. One answer matches on the BENEFICIARY instead of the AUTHORIZED PERSON, and that is the single most important distinction in the section: an authorized person is a POLICY OWNER, INSURED, ANNUITY OWNER, ANNUITANT, OR ACCOUNT HOLDER under 507B.4C(2)'c', that is, the person whose death makes money payable; the beneficiary is who the insurer must then locate. This explanation does not say what the social security administration's file contains or how it is compiled: it is a federal record, and the only thing 507B.4C tells us about it is that it is the benchmark against which any substitute is measured.

An Explanation of Benefits (EOB) sent to an insured is:

1. A bill the insured must pay before any care is delivered
2. A government form used to enroll in a new health plan
3. A statement showing what the plan paid and what the insured owes ✓
4. The legally binding insurance contract between the parties

Why: An EOB is not a bill; it itemizes the charge, the plan's allowed amount, what the plan paid, and the patient's remaining responsibility.

A business has an insurable interest in a key employee because:

1. Every employer is legally required to insure all of its workers
2. Insurable interest exists between any two parties at any time
3. The firm would suffer a financial loss if that employee died ✓
4. The employee personally requested the coverage in writing

Why: A business has insurable interest in employees whose death would cause it economic loss, supporting key person and buy-sell coverage.

A self-funded employer buys aggregate stop-loss insurance. It pays once total claims for the year exceed a set amount, protecting the employer from:

1. A single catastrophic individual claim only
2. The administrative fees of the plan
3. Higher-than-expected total claims ✓
4. The cost of routine preventive care

Why: Aggregate stop-loss caps the employer's exposure to total claims exceeding an attachment point; specific stop-loss covers individual large claims.

Under the capitation method of provider payment used by many HMOs, a provider receives:

1. A percentage of the total premiums the HMO collects annually
2. A fixed amount per enrolled member per month, regardless of services used ✓
3. A separate fee for each individual service actually performed
4. Reimbursement calculated from the usual, customary, and reasonable charges in the local area

Why: Capitation pays the provider a set amount per member per month (PMPM) regardless of how much care that member uses.

Backdating a life insurance policy is sometimes done to:

1. Obtain a lower premium based on a younger age ✓
2. Guarantee that the policy can never lapse for non-payment
3. Avoid the need for any medical underwriting of the applicant
4. Extend the contestable period well beyond the legal limit

Why: Backdating dates the policy to an earlier date so the insured qualifies at a younger age (and lower premium); states typically limit it to about six months.

An Iowa small employer with a poor claims history applies to a small employer carrier for coverage. The carrier would rather not take it. One of its employees was treated for a condition four months before her enrollment date; another is a late enrollee; a third had eighteen months of continuous coverage that ended fifty days ago. What does Iowa Code 513B.10 provide?

1. A carrier that offers coverage in the small group market shall accept every small employer that applies and shall accept for enrollment every eligible individual who applies when first eligible, subject to the carrier's employer contribution rules and group participation rules. A network plan carrier may limit applicants to employers with eligible individuals who live, work or reside in the service area or deny coverage there for lack of capacity, and any carrier may deny for lack of financial reserves; in either case it may resume offering coverage as soon as the constraint has passed, no fixed period of abstention applying to a carrier that has acted uniformly. A preexisting condition exclusion turns on a six-month look-back ending on the enrollment date, runs not more than twelve months or eighteen for a late enrollee, and is reduced by creditable coverage continuous to a date not more than sixty-three days before the new coverage. A carrier is required to issue coverage to a self-employed individual who is already covered under an employer's plan, the guarantee of issue admitting of no exception of that kind anywhere in this state's small group market.
2. A carrier that offers coverage in the small group market shall accept every small employer that applies and every eligible individual who applies when first eligible, subject to employer contribution and group participation rules; a network plan carrier may limit by service area or deny for lack of capacity, and any carrier may deny for lack of financial reserves, each denial carrying a one hundred eighty day bar on offering coverage in that market. A preexisting condition exclusion may relate only to a condition for which advice, diagnosis, care or treatment was recommended or received within the twelve-month period ending on the enrollment date, may extend not more than twenty-four months - thirty-six for a late enrollee - and is reduced by the aggregate of the periods of creditable coverage continuous to a date not more than sixty-three days before the new coverage. Genetic information is treated as a preexisting condition even where no diagnosis of the condition has been made, the look-back reaching what the carrier can learn of a risk as well as what has been treated; and the employee treated four months before her enrollment date may accordingly be excluded for up to twenty-four months.
3. A carrier that offers coverage in the small group market shall accept every small employer that applies and shall accept for enrollment every eligible individual who applies during the period in which the individual first becomes eligible - though this does not preclude the carrier from establishing employer contribution rules or group participation rules. A network plan carrier may limit applicants to employers with eligible individuals who live, work, or reside in the service area, or deny coverage there on demonstrating a lack of capacity applied uniformly; and a carrier may deny coverage on demonstrating it lacks the financial reserves to underwrite more - in either case it may not offer coverage in that market or service area for one hundred eighty days. A preexisting condition exclusion may relate only to a condition for which advice, diagnosis, care or treatment was recommended or received within the six-month period ending on the enrollment date, may extend not more than twelve months - eighteen for a late enrollee - and is reduced by creditable coverage continuous to a date not more than sixty-three days before the new coverage. ✓
4. A carrier may decline any small employer whose claims history it considers unacceptable, guaranteed issue in the small group market being confined to those employers the carrier has chosen to quote, though it must then accept for enrollment every eligible individual of an employer it has accepted, subject to its employer contribution and group participation rules. A network plan carrier may limit applicants to employers with eligible individuals who live, work or reside in the service area or deny coverage there for lack of capacity, and any carrier may deny for lack of financial reserves, in either case resuming after ninety days. A preexisting condition exclusion may relate only to a condition for which advice, diagnosis, care or treatment was recommended or received within the six-month period ending on the enrollment date, may extend not more than twelve months or eighteen months for a late enrollee, and is reduced by the aggregate of the periods of creditable coverage continuous to a date not more than sixty-three days before the new coverage, so the employee with eighteen months of coverage ending fifty days ago comes in clear of any exclusion at all.

Why: Iowa Code 513B.10 is the guaranteed issue section and the answer letting the carrier decline an employer on claims history denies its central sentence: A CARRIER THAT OFFERS HEALTH INSURANCE COVERAGE IN THE SMALL GROUP MARKET SHALL ACCEPT EVERY SMALL EMPLOYER THAT APPLIES FOR HEALTH INSURANCE COVERAGE AND SHALL ACCEPT FOR ENROLLMENT UNDER SUCH COVERAGE EVERY ELIGIBLE INDIVIDUAL WHO APPLIES FOR ENROLLMENT DURING THE PERIOD IN WHICH THE INDIVIDUAL FIRST BECOMES ELIGIBLE ... AND SHALL NOT PLACE ANY RESTRICTION WHICH IS INCONSISTENT WITH ELIGIBILITY RULES ESTABLISHED UNDER THIS CHAPTER. A poor claims history is not a ground for refusal; it is a rating question, and section 513B.4 caps how far it can move the price. Paragraph 'f' preserves the carrier's ability to set EMPLOYER CONTRIBUTION RULES OR GROUP PARTICIPATION RULES - which is why noncompliance with those rules is a nonrenewal ground under section 513B.5. Three narrow escapes follow. A NETWORK PLAN carrier may limit applicants to employers with eligible individuals who LIVE, WORK, OR RESIDE IN THE SERVICE AREA, or deny coverage within the service area on demonstrating to the applicable state authority that it WILL NOT HAVE THE CAPACITY TO DELIVER SERVICES ADEQUATELY to additional groups because of its obligations to existing contract holders, applied UNIFORMLY TO ALL EMPLOYERS without regard to claims experience or health status. Any carrier may deny coverage on demonstrating to the commissioner that it DOES NOT HAVE THE FINANCIAL RESERVES NECESSARY TO UNDERWRITE ADDITIONAL COVERAGE, again applied uniformly. Both escapes carry the same price, and the answer letting the carrier resume at once removes it: on denying for lack of capacity the carrier SHALL NOT OFFER COVERAGE IN THE SMALL GROUP MARKET WITHIN SUCH SERVICE AREA FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS, and on denying for lack of reserves it shall not offer coverage in the small group market in this state FOR ONE HUNDRED EIGHTY DAYS ... OR UNTIL THE CARRIER HAS DEMONSTRATED ... SUFFICIENT FINANCIAL RESERVES, WHICHEVER IS LATER. Subsection 2 requires the carrier to issue to an eligible small employer that applies and AGREES TO MAKE THE REQUIRED PREMIUM PAYMENTS AND SATISFY THE OTHER REASONABLE PROVISIONS, and adds that a carrier IS NOT REQUIRED TO ISSUE ... TO A SELF-EMPLOYED INDIVIDUAL WHO IS COVERED BY, OR IS ELIGIBLE FOR COVERAGE UNDER, HEALTH INSURANCE COVERAGE OFFERED BY AN EMPLOYER. Subsection 3 is the preexisting condition code, and it is the same code IAC 191-35.26, subrule 4, applies to large groups: the look-back is SIX MONTHS ENDING ON THE ENROLLMENT DATE, with GENETIC INFORMATION NOT TREATED AS A CONDITION IN THE ABSENCE OF A DIAGNOSIS; the exclusion extends NOT MORE THAN TWELVE MONTHS, OR EIGHTEEN MONTHS IN THE CASE OF A LATE ENROLLEE; and the period is REDUCED BY THE AGGREGATE OF THE PERIODS OF CREDITABLE COVERAGE as of the enrollment date, with a waiver required where the creditable coverage WAS CONTINUOUS TO A DATE NOT MORE THAN SIXTY-THREE DAYS PRIOR TO THE EFFECTIVE DATE. The answer with a twelve-month look-back doubles it and both exclusion periods. Work the stem: the employee treated four months before enrollment is inside the six-month look-back and may be excluded for up to twelve months; the late enrollee for up to eighteen; and the employee with eighteen months of coverage ending fifty days ago has enough credit to wipe out either. Paragraph 'b' bars any exclusion for a child adopted or placed for adoption before eighteen who is covered under creditable coverage as of the last day of the THIRTY-DAY period beginning on the adoption or placement, for an individual covered as of the last day of the THIRTY-DAY period beginning with the date of birth, and RELATING TO PREGNANCY.

An 'open enrollment' period in health insurance is a time when individuals can:

1. File claims that were missed earlier in the year
2. Only switch from one network doctor to another
3. Enroll without medical underwriting ✓
4. Cancel coverage and receive a full premium refund

Why: During open enrollment, eligible individuals may enroll or change plans without health underwriting; a special enrollment period follows qualifying life events.

A Medicare Part A benefit period begins when a patient is admitted and ends:

1. 60 days after the patient has been discharged ✓
2. On the last calendar day of that same month
3. Only when the patient changes to a different hospital
4. After exactly one full year from the admission date

Why: A benefit period starts at admission and ends after the patient has been out of a hospital/SNF for 60 consecutive days; a new period (and deductible) can then begin.

Joint life (first-to-die) insurance pays the death benefit:

1. In equal installments to each surviving insured person
2. Upon the first death among the insureds covered ✓
3. When both insureds covered by the policy have died
4. Only if the insureds die within thirty days of each other

Why: Joint (first-to-die) life pays at the first death of the covered insureds; survivorship (second-to-die) pays at the second death.

An Iowa member insurer fails to pay a guaranty association assessment when it falls due. Separately, the same insurer wishes to challenge a final action of the association’s board taken three weeks ago. It asks what the commissioner may do about the unpaid assessment and how the challenge is brought.

1. The commissioner must suspend the certificate of authority to transact business in this state, without notice or hearing and without any alternative penalty, the sanction following automatically on the association's certification that the assessment is unpaid; and a final action of the board is not appealable to the commissioner at all, the insurer's only remedy being an action against the association in a court of competent jurisdiction brought within one year of the action complained of and tried as an original proceeding rather than on the board's record.
2. After notice and hearing the commissioner may suspend or revoke the certificate of authority, or may as an alternative levy an administrative penalty not exceeding one percent of the unpaid assessment per month, the chapter fixing no minimum sum; and a final action of the board may be appealed to the commissioner if the appeal is taken within thirty days of the date the action was taken rather than of the insurer's receipt of notice.
3. The commissioner may levy an administrative penalty not exceeding five percent of the unpaid assessment per month and not less than one hundred dollars per month, but may not suspend or revoke a certificate of authority for nonpayment of an assessment, that sanction being reserved for a member insurer which fails to comply with the plan of operation; and a final action of the board must be taken directly to a court of competent jurisdiction rather than to the commissioner in the first instance, the chapter fixing no time limit for that action.
4. After notice and hearing the commissioner may suspend or revoke the insurer’s certificate of authority, or as an alternative may levy an administrative penalty not exceeding five percent of the unpaid assessment per month and not less than one hundred dollars per month; and a final action of the board or the association may be appealed to the commissioner if the appeal is taken within sixty days of the insurer’s receipt of notice of that action. ✓

Why: Iowa Code 508C.11(2) gives the commissioner a choice of sanctions against a member insurer which fails to pay an assessment when due OR fails to comply with the plan of operation: after notice and hearing, suspension or revocation of the certificate of authority to transact business in this state; or, as an alternative, an administrative penalty on a member insurer which fails to pay an assessment when due. That penalty is bounded at both ends — not more than five percent of the unpaid assessment per month, and not less than one hundred dollars per month — so it has a floor as well as a ceiling, and nonpayment reaches both sanctions rather than only the penalty. Subsection 3 fixes the appeal: a final action of the board of directors or of the association may be appealed to the commissioner if taken within sixty days of the MEMBER INSURER’S RECEIPT OF NOTICE of the action, not from the date of the action itself; and a final action or order of the commissioner is then subject to judicial review pursuant to chapter 17A in a court of competent jurisdiction. Subsection 1 sets out what the commissioner SHALL do: on request of the board, provide a statement of premiums for each member insurer; and, when an impairment is declared and quantified, serve a demand on the impaired insurer to make the impairment good within a reasonable time, notice to the insurer being notice to its shareholders, with the insurer’s failure to comply not excusing the association from performing its own duties. A separate sixty-day period governs a different dispute: under 508C.9(9) an insurer protesting an assessment must pay it in full when due with a written statement of the grounds, and the association then has sixty days from that payment to notify the protesting insurer of its determination.

An applicant for an Iowa certificate of authority as a health maintenance organization has satisfied the commissioner that the persons responsible for its affairs are competent and trustworthy, that its proposed plan of operation meets the requirements of section 514B.4, and that it is fiscally sound. Its proposed contracts would impose a deductible and a coinsurance percentage on certain services.

1. The charges are fatal to the application, because the statute requires basic health care services to be provided or arranged wholly on a prepaid basis and admits of no enrollee cost sharing of any kind once a certificate of authority has issued to the organization.
2. The charges are permissible, but only subject to the commissioner’s approval, and the commissioner has authority to establish by rule reasonable maximum deductible and coinsurance charges. ✓
3. The deductible may be imposed without any approval, but the coinsurance percentage must be approved separately by the commissioner, because the statute distinguishes charges fixed in advance from charges that vary with the cost of the particular service rendered.
4. The charges are permissible only if the applicant first obtains from the commissioner a written waiver of the protection-against-insolvency requirement, which the commissioner may grant on being satisfied that the applicant’s working capital is adequate to the risk.

Why: Iowa Code 514B.5(1)“c” requires, as one of the six conditions for issuance, that the organization provide or arrange for basic health care services on a prepaid basis, “except that the health maintenance organization may impose deductible and coinsurance charges subject to approval by the commissioner”, and gives the commissioner authority to promulgate rules establishing reasonable maximum deductible and coinsurance charges. So cost sharing is neither forbidden nor free-standing; it is permitted on approval, and the statute draws no line between a fixed deductible and a percentage coinsurance. The other conditions in 514B.5(1) are competent and trustworthy management (paragraph “a”), a plan of operation meeting section 514B.4 (paragraph “b”), fiscal soundness (paragraph “d”), enrollee participation in matters of policy and operation under section 514B.7 (paragraph “e”), and a method of operation not contrary to the public interest (paragraph “f”). The surety bond or deposit required by section 514B.16 is one of the things the commissioner may weigh in judging fiscal soundness under paragraph “d”(5), not something a certificate applicant trades away for permission to charge a deductible.

An immediate annuity is characterized by income payments that begin:

1. On the contract anniversary after the annuitant turns 59 1/2
2. Within one payment interval of purchase (generally within a year) ✓
3. After a deferral period of at least ten accumulation years
4. Once the annuitant submits satisfactory proof of insurability

Why: A single-premium immediate annuity (SPIA) starts payments within one payment period — usually within 12 months — of the lump-sum purchase.

Naming a qualified charity as the owner and beneficiary of a life insurance policy may allow the donor to:

1. Take an income-tax deduction for the gift of the policy and premiums ✓
2. Avoid ever paying any premiums on the donated policy at all
3. Exclude the policy's eventual proceeds from the charity's own income
4. Continue to control and borrow against the policy's full cash value

Why: Donating ownership of a policy to a charity can produce an income-tax deduction; the donor gives up control of the policy.

A key feature of convertible term insurance is that it can be changed to a permanent policy:

1. Only if the insured becomes totally disabled first
2. Only after a new medical exam confirms insurability
3. Only during the first policy year
4. Without providing evidence of insurability ✓

Why: Convertible term can be converted to permanent coverage without evidence of insurability.

An enrollee in an Iowa prepaid individual health maintenance organization plan falls behind on the charges due under the plan. The organization prepares a cancellation notice and asks what the statute requires of the notice, and whether the enrollee retains any means of putting the coverage back in force once the notice has gone out.

1. The notice takes effect on the day it is placed in the mail, the statute fixing no minimum interval before cancellation of an individual plan and asking only that a statement of the reason appear somewhere in the body of the notice; what the enrollee may afterwards tender is left to the organization's own evidence of coverage.
2. The notice is ineffective unless delivered in the manner the commissioner prescribes, at least thirty days before the effective date of cancellation, and accompanied by a statement of the reason; and at any time before cancellation for nonpayment the enrollee may pay the full amount due, including court costs if any, whereupon coverage revives. ✓
3. Cancellation for nonpayment is not open to the organization at all: an enrollee in a prepaid individual plan may be cancelled only for a material false statement or misrepresentation in the application for membership, and then only by written notice sent by certified mail within two years after enrollment.
4. The notice must give thirty days and state the reason, but the enrollee's power to restore the coverage by tendering the full amount due lapses thirty days after the notice is delivered, after which the organization may decline the payment and treat the cancellation as final, that second period running alongside the notice period.

Why: Iowa Code 514B.17(1) allows cancellation of an enrollee in a prepaid individual plan for failure to pay the charges permitted under section 514B.10, or for other reasons stated in the commissioner’s rules, so nonpayment is a permitted ground and material misstatement is not the only one. The same subsection makes notice ineffective unless it is delivered in a manner prescribed by the commissioner, at least thirty days before the effective date of cancellation, and accompanied by a statement of reason. It then gives the enrollee a revival right that runs “at any time before cancellation of the policy for nonpayment”: on payment of the full amount due, including court costs if any, or on collection of the judgment, coverage revives and is in full force and effect. The right is bounded by the cancellation itself, not by a separate thirty-day clock. Two neighbouring provisions round this out. 514B.17(2) sends the group case elsewhere: for a prepaid group plan, the effect of cancellation and the duty to give notice and bear liability for benefits are the same as under section 509B.5(2), which requires the employer or group policyholder to give written notice at least ten days before termination or substantial modification and makes it solely liable for benefits until that notice is given. And 514B.17A treats rescission separately: an organization may rescind a membership for a material false statement or misrepresentation in the application, by written notice sent by certified mail stating the reason, but not more than two years after the date of the enrollee’s enrollment.

Under Iowa Code 522B.16A, what records must an Iowa producer keep, for how long, and on what terms may the commissioner see them?

1. Usual and customary records of the producer's transactions, kept at the producer's place of business and open to the commissioner or the commissioner's representative at any hour on demand, including records prepared in anticipation of litigation and privileged records; kept for three years after each transaction.
2. Usual and customary records of the producer's transactions, kept at the producer's place of business or at any other place the producer notifies to the commissioner, and open during regular business hours; kept for a minimum of five years after completion of a transaction.
3. Usual and customary records of the producer's transactions, kept at the producer's place of business and open to the commissioner during regular business hours, but not records prepared in anticipation of litigation or privileged under chapter 622; kept for a minimum of three years after completion of a transaction. ✓
4. Only records of premiums received and remitted, kept at the producer's place of business and open to the commissioner during regular business hours; kept for as long as the producer holds a licence and for three years after it is surrendered.

Why: Iowa Code 522B.16A(1) imposes A CONTINUING DUTY AND OBLIGATION TO KEEP, AT THE INSURANCE PRODUCER'S PLACE OF BUSINESS, USUAL AND CUSTOMARY RECORDS PERTAINING TO TRANSACTIONS UNDERTAKEN BY THE INSURANCE PRODUCER. Those records must be KEPT AVAILABLE AND OPEN FOR INSPECTION BY THE COMMISSIONER OR THE COMMISSIONER'S REPRESENTATIVE AT ANY TIME DURING REGULAR BUSINESS HOURS - so the access is broad but it is bounded by the working day, and it is bounded again by the proviso that the commissioner IS NOT ENTITLED TO INSPECT ANY RECORDS PREPARED IN ANTICIPATION OF LITIGATION OR THAT ARE SUBJECT TO ANY PRIVILEGE RECOGNIZED IN CHAPTER 622. The retention period is a floor: SUCH RECORDS SHALL BE MAINTAINED FOR A MINIMUM OF THREE YEARS FOLLOWING THE COMPLETION OF AN INSURANCE TRANSACTION, measured from the transaction and not from the life of the licence. By 522B.16A(2), a producer WHO WILLFULLY FAILS TO COMPLY WITH THIS SECTION COMMITS A VIOLATION OF THIS CHAPTER AND IS SUBJECT TO SANCTIONS UNDER SECTION 522B.11.