NEW QUESTION 1

The following statements are about carve-out programs. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

• A. In the type of carve-out in which entire categories of care are administered by independent organizations, a health plan typically reimburses these organizations under an FFS contract.
• B. Typically, a health plan will offer carved-out services to its enrollees, but will manage these services separately.
• C. Carve-outs are services that are excluded from a capitation payment, a risk pool, or a health benefit plan.
• D. The most rapidly growing area related to carve-outs is disease management (DM).

Answer: A

NEW QUESTION 2

The McGwire Health Plan is a for-profit health plan that issues stock. Events that will cause the owners' equity account of McGwire to change include

• A. McGwire's retention of net income
• B. McGwire's payment of cash dividends on the stock it issued
• C. McGwire's purchase of treasury stock
• D. All of the above

Answer: D

NEW QUESTION 3

The Titanium health plan's product has a unit price of $120 PMPM and a unit variable cost of $80 PMPM. Titanium has $100,000 in fixed costs per month. This information indicates that, for its product, Titanium's

• A. Unit contribution margin is $80
• B. Unit contribution margin is $200
• C. Break-even point is 500 members
• D. Break-even point is 2,500 members

Answer: D

NEW QUESTION 4

The following statement(s) can correctly be made about a health plan's cash receipts and cash disbursements budgets:

• A. To predict both the timing and the amount of its cash receipts, a health plan constructs the cash receipts budget using data from its sales forecast and investment forecasts.
• B. A health plan uses a cash disbursements budget in order to establish the amount, but not the timing, of all of its cash disbursements.
• C. Both A and B
• D. A only
• E. B only
• F. Neither A nor B

Answer: B

NEW QUESTION 5

The Essential Health Plan markets a product for which it assumed total expenses to equal 92% of premiums. Actual data relating to this product indicate that expenses equal 89% of premiums. This information indicates that the expense margin for this product has:

• A. a 3% favorable deviation
• B. a 3% adverse deviation
• C. an 11% favorable deviation
• D. an 11% adverse deviation

Answer: A

NEW QUESTION 6

The following statements illustrate common forms of capitation:
* 1. The Antler Health Plan pays the Epsilon Group, an integrated delivery system (IDS), a capitated amount to provide substantially all of the inpatient and outpatient services that Antler offers. Under this arrangement, Epsilon accepts much of the risk that utilization rates will behigher than expected. Antler retains responsibility for the plan's marketing, enrollment, premium billing, actuarial, underwriting, and member services functions.
* 2. The Bengal Health Plan pays an independent physician association (IPA) a capitated amount to provide both primary and specialty care to Bengal's plan members. The payments cover all physician services and associated diagnostic tests and laboratory work.
The physicians in the IPA determine as a group how the individual physicians will be paid for their services.
From the following answer choices, select the response that best indicates the form of capitation used by Antler and Bengal.

• A. Antler = subcapitation Bengal = full-risk capitation
• B. Antler = subcapitationBengal = full professional capitation
• C. Antler = global capitation Bengal = subcapitation
• D. Antler = global capitationBengal = full professional capitation

Answer: D

NEW QUESTION 7

The Sanford Group, a provider group, entered into a risk contract with a health plan. Sanford has purchased aggregate stop-loss coverage with an attachment point of 115% of the group's predicted healthcare costs of $2,000,000 for the year. Sanford has a copayment of 10% for any costs above the attachment point. If Sanford's actual costs for the year are $2,800,000, then, according to the terms of the aggregate stop-loss agreement, the amount that Sanford is responsible for is

• A. $2,080,000
• B. $2,300,000
• C. $2,350,000
• D. $2,380,000

Answer: C

NEW QUESTION 8

A health plan most likely would use benchmarking in order to

• A. Measure its performance and practices against those of other companies to help identify those practices that will lead to superior performance in a variety of financial and non- financial areas
• B. Calculate the percentage changes in its financial statement items over several consecutive accounting periods
• C. Determine both the direction and velocity of trends in its financial statements
• D. Display only percentage relationships in its financial statements

Answer: A

NEW QUESTION 9

The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series of adjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.
To prepare its cash flow statement, Caribou uses the direct method rather than the indirect method.

• A. True
• B. False

Answer: B

NEW QUESTION 10

In a fee-for-service (FFS) reimbursement method, providers are paid per treatment or per service that they provide. One typical benefit of FFS reimbursement is that it:

• A. Is highly effective in preventing excessive services that take the form of churning, unbundling, and upcoding
• B. Provides physicians who attempt to control costs with a higher rate of compensation than is provided to physicians who make the effort to control costs
• C. Is relatively easy to initiate, especially in markets where managed care penetration is low
• D. Guards against the practice of defensive medicine

Answer: B

NEW QUESTION 11

All publicly traded health plans in the United States are required to prepare financial statements for use by their external users in accordance with generally accepted accounting principles (GAAP). In addition, health insurers and health plans that fall under the jurisdiction of state insurance departments are required by law to prepare certain financial statements in accordance with statutory accounting practices (SAP). In a comparison of GAAP to SAP, it is correct to say that:

• A. GAAP is established and promoted by the National Association of Insurance Commissioners (NAIC), whereas SAP is established and promoted by the Financial Accounting Standards Board (FASB)
• B. The going-concern concept is an underlying premise of GAAP, whereas SAP tends to focus on the liquidation value of the MCO or the insurer
• C. GAAP provides for a single method of valuing all of a health plan’s assets, whereas SAP offers the health plan more than one method for valuing its assets
• D. The principle of conservatism is fundamental to GAAP, whereas SAP generally is not conservative in nature

Answer: B

NEW QUESTION 12

The Chamber Health Plan reimburses primary care physicians on a monthly basis by using a simple capitation method. Chamber assumes an annual utilization rate of three visits per year. The FFS rate per office visit is $75, and all plan members are required to make a $10 copayment for each office visit. This information indicates that the capitation rate that Chamber calculates per member per month (PMPM) is equal to:

• A. $6.25
• B. $16.25
• C. $18.75
• D. $21.25

Answer: B

NEW QUESTION 13

For this question, select the answer choice containing the terms that correctly complete blanks A and B in the paragraph below. The FASB mandates that accounting information must exhibit certain qualitative characteristics. One of these characteristics is ______ A _______, which means that a company's financial statements use the same accounting policies and procedures from one accounting period to the next, unless there is a sound reason for changing a policy or procedure. Another characteristic is ______ B _______, which requires a company to disclose in its financial statements all significant financial information about the company.

• A. A = reliability B = comparability
• B. A = reliability B = materiality
• C. A = consistency B = comparability
• D. A = consistency B = materiality

Answer: D

NEW QUESTION 14

The medical loss ratio (MLR) for the Peacock health plan is 80%. Peacock's expense ratio is 16%.
Peacock's MLR and its expense ratio indicate that Peacock

• A. Has a 4% potential profit margin
• B. Has a combined ratio of 64%
• C. Must increase its premium income in order to remain in business
• D. Must rely on investment income in order to avoid financial losses

Answer: A

NEW QUESTION 15

The ability of a health plan to effectively perform the rating and underwriting functions has become critical to the plan's success. In developing its pricing strategy, a health plan has to address the marketplace's ongoing trends and factors, which include

• A. a decreased focus on small to mid-size employer groups
• B. an improvement in the financial performance of health plans
• C. a consolidation of the key players in the health plan industry
• D. a decreased complexity of the products being offered.

Answer: C

NEW QUESTION 16

Doctors’ Care is an individual practice association (IPA) under contract to the Jasper Health Plan to provide primary and secondary care to Jasper’s members. Jasper’s capitation payments compensate Doctors’ Care for all physician services and associated diagnostic tests and laboratory work. The physicians at Doctors’ Care, as a group, determine how individual physicians in the group will be remunerated. The type of capitation used by Jasper to compensate Doctors’ Care is known as:

• A. PCP capitation
• B. Partial capitation
• C. Full professional capitation
• D. Specialty capitation

Answer: C

NEW QUESTION 17

Ways in which a company can increase its return on investment (ROI) include: 1.Reducing expenses to increase operating income 2.Increasing controllable investment

• A. Both 1 and 2
• B. 1 only
• C. 2 only
• D. Neither 1 nor 2

Answer: B

NEW QUESTION 18

The following statements are about the Health Insurance Portability and Accountability Act (HIPAA) as it relates to the small group market. Three of these statements are true and one statement is false. Select the answer choice containing the FALSE statement:

• A. A health plan that participates in the small group market is required to issue a contract to any employer that requests healthcare benefits, as long as the employer meets the statutory definition of a small group.
• B. A small group must consist of more than 10 employees in order to be underwritten on a group, rather than an individual, basis.
• C. A health plan is prohibited from canceling a small group’s healthcare coverage because of poor claims experience.
• D. A health plan that participates in the small group market is limited in placing restrictions such as waiting periods and pre-existing conditions exclusions to individuals in high risk categories.

Answer: B

NEW QUESTION 19
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