Life License Qualification Program (LLQP) Practice Exam

Why are Association Plans that provide health benefits to members regulated by the state?

1. They conduct business in Florida

2. They provide a service to members

3. They are insured by an authorized insurer

4. They require a certain level of member participation

The correct answer is: They are insured by an authorized insurer

Association plans that provide health benefits to their members are regulated by the state largely because they are insured by an authorized insurer. This regulation ensures that these plans meet specific state requirements regarding consumer protection, financial solvency, and the operation of insurance products. When a plan is backed by an authorized insurer, it must comply with the laws and regulations that govern insurance, including the licensing of providers, financial reporting, claims processing, and the overall conduct of the insurance business. This helps to maintain a stable and trustworthy insurance market for consumers who rely on these benefits. Other options may pertain to different aspects but do not encompass the core reason for regulation. For instance, the notion of being based in a specific state (like Florida) doesn’t automatically lead to a regulatory requirement unless it involves state-specific laws for insurance. Similarly, while providing a service and requiring member participation can be important factors in the operation of such plans, they do not directly invoke the regulatory oversight that arises from engaging with state-sanctioned insurance practices. Therefore, the relationship with an authorized insurer is the primary reason for the state's regulatory involvement.