Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

Service Based Contracts in health insurance are characterized by the direct payments made to healthcare providers, such as doctors and hospitals, for the services they render. This model is designed to simplify the payment process and ensure that providers are compensated directly for their services, reducing the financial burden on the insured at the point of care.

In this context, the contract specifies that the insurer will handle payments to healthcare professionals directly, allowing patients to focus on receiving care without worrying about upfront costs. This arrangement can facilitate more efficient healthcare delivery, as it streamlines billing and payments.

The other options do not accurately describe the characteristics of Service Based Contracts. Some may cover only specific types of services, while others may involve payment arrangements that do not include direct payments to providers. Understanding this model is crucial for recognizing how health insurance operates and what benefits can be expected under different types of contracts.