Arizona Life and Health Practice Exam

If a person is covered under multiple group health insurance plans, what is avoided by the 'No-loss No-gain' provision?

1. Insurance fraud and abuse

2. Premium inflation and policy duplication

3. Overinsurance and duplicated benefits

4. Underinsurance and premium hikes

The correct answer is: Overinsurance and duplicated benefits

The 'No-loss No-gain' provision is designed to prevent situations where an insured individual could potentially receive benefits that exceed the total expenses incurred for their health care. This provision ensures that when a person is covered under multiple group health insurance plans, they do not benefit more from the insurance than what they would actually incur in medical expenses. By applying this principle, the provision effectively manages the risk of overinsurance, which occurs when someone has more insurance than necessary for the potential financial loss they may face. Additionally, it helps avoid duplicated benefits that could arise from having multiple policies that cover the same medical expenses. This mechanism is in place to maintain a fair insurance system while discouraging individuals from seeking coverage beyond what is warranted by their actual health care needs.