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NEW QUESTION 1
One true statement about mandated benefit laws is that they
- A. Apply equally to self-funded and fully funded groups
- B. Require a health plan to cover certain conditions or treatments or to pay a specified level of benefits for certain conditions or treatments
- C. Have no impact on a health plan's underwriting and rating decisions
- D. Typically decrease a health plan's risk because the health plan may need to delay premium rate decreases or may be prevented from increasing premium rates
Answer: B
NEW QUESTION 2
In the following paragraph, a sentence contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have selected.
The Igloo health plan recognizes the receipt of its premium income during the accounting
period in which the income is earned, regardless of when cash changes hands. However, Igloo recognizes its expenses when it earns the revenues related to those expenses, regardless of when it receives cash for the revenues earned. This information indicates that the (realization/capitalization) principle governs Igloo's revenue recognition, whereas the (matching/initial-recording) principle governs its expense recognition.
- A. realization / matching
- B. realization / initial-recording
- C. capitalization / matching
- D. capitalization / initial-recording
Answer: A
NEW QUESTION 3
Assume that the Lambda, Mesa, and Novella health plans are equal in every way except that the health plans have obtained equal amounts of net cash inflows from different sources, as shown below:
HealthPlan Source LambdaFinancing activities MesaInvesting activities NovellaOperating activities
From the following answer choices, select the response which indicates the health plan that would most likely be the most attractive to a potential plan sponsor, to a potential creditor, and to a potential investor.
- A. Potential Plan Sponsor = Lambda Potential Creditor = Mesa Potential Investor = Novella
- B. Potential Plan Sponsor = Lambda Potential Creditor = Novella Potential Investor = Mesa
- C. Potential Plan Sponsor = Novella Potential Creditor = Lambda Potential Investor = Mesa
- D. Potential Plan Sponsor = Novella Potential Creditor = Novella Potential Investor = Novella
Answer: D
NEW QUESTION 4
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 5
Over time, health plans and their underwriters have gathered increasingly reliable information about the morbidity experience of small groups.
Generally, in comparison to large groups, small groups tend to
- A. Have more frequent and larger claims fluctuations
- B. Generate lower administrative expenses as a percentage of the total premium amount the group pays
- C. More closely follow actuarial predictions regarding morbidity rates
- D. All of the above
Answer: A
NEW QUESTION 6
One true statement about variance analysis is that
- A. A price variance is the difference between the budgeted quantities to be sold and theactual quantities sold, multiplied by the budgeted amount
- B. Variance analysis suggests solutions to a particular problem
- C. Positive variances generally are favorable, from a health plan's point of view, for the plan's expenses but unfavorable for the plan's revenues
- D. An effective variance system typically focuses on matters that require management's attention
Answer: D
NEW QUESTION 7
The Poplar Company and a Blue Cross/Blue Shield organization have contracted to provide a typical fully funded health plan for Poplar's employees. One true statement about this health plan for Poplar's employees is that
- A. Poplar bears the entire financial risk if, during a given period, the dollar amount of services rendered to Poplar plan members exceeds the dollar amount of premiums collected for this health plan
- B. Poplar and the Blue Cross/Blue Shield organization share the financial risk of paying for claims under Poplar's health plan
- C. The Blue Cross/Blue Shield organization, upon acceptance of a premium, becomes the group plan sponsor for Poplar's health plan
- D. The Blue Cross/Blue Shield organization, upon acceptance of a premium, bears the entire financial risk of paying for the administrative expenses associated with health plan operations
Answer: D
NEW QUESTION 8
If the total asset turnover ratio for the Fjord health plan is 1.08 and the total asset turnover ratio for the Grove health plan is 1.35, then a financial analyst could correctly infer that Fjord has used its assets more effectively than has Grove.
- A. True
- B. False
Answer: B
NEW QUESTION 9
Health plans seeking to provide comprehensive healthcare plans must contract with a variety of providers for ancillary services. One characteristic of ancillary services is that
- A. Physician behavior typically does not impact the utilization rates for these services
- B. Package pricing is the preferred reimbursement method for ancillary service providers
- C. These services include physical therapy, behavior therapy, and home healthcare, but not diagnostic services such as laboratory tests
- D. Few plan members seek these services without first being referred to the ancillary provider by a physician
Answer: D
NEW QUESTION 10
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 11
The Savanna health plan used a risk analysis technique which defines the key assumptions of Savanna's strategic financial plan in terms of mathematical formulas that can be correlated to each other or analyzed independently. This technique allowed Savanna to simulate probable future events on a computer and produce a distribution of possible outcomes. This risk analysis technique, which can be used to predict Savanna's distribution of expected claims, is known as
- A. A hurdle rate simulation
- B. Optimistic, most likely, pessimistic scenario modeling
- C. A Monte Carlo simulation
- D. Debt covenant modeling
Answer: C
NEW QUESTION 12
For a given healthcare product, the Magnolia Health Plan has a premium of $80 PMPM and a unit variable cost of $30 PMPM. Fixed costs for this product are $30,000 per month. Magnolia can correctly calculate the break-even point for this product to be:
- A. 274 members
- B. 375 members
- C. 600 members
- D. 1,000 members
Answer: C
NEW QUESTION 13
One way that a health plan can protect itself against case stripping is by requiring:
- A. Employees covered by a small group plan to contribute 100% of the cost of the healthcare coverage
- B. The small group to have no more than 10 members
- C. A minimum level of participation in order for a small group to be eligible for healthcare coverage
- D. Its underwriters to consider the characteristics of the employer, but not of the group members, when underwriting the group
Answer: C
NEW QUESTION 14
This concept, which holds that a company should record the amounts associated with its business transactions in monetary terms, assumes that the value of money is stable over time. This concept provides objectivity and reliability, although its relevance may fluctuate.
From the following answer choices, choose the name of the accounting concept that matches the description.
- A. Measuring-unit concept
- B. Full-disclosure concept
- C. Cost concept
- D. Time-period concept
Answer: A
NEW QUESTION 15
The Atoll Health Plan must comply with a number of laws that directly affect the plan's contracts. One of these laws allows Atoll's plan members to receive medical services from certain specialists without first being referred to those specialists by a primary care provider (PCP). This law, which reduces the PCP's ability to manage utilization of these specialists, is known as ______.
- A. A due process law
- B. An any willing provider law
- C. A direct access law
- D. A fair procedure law
Answer: C
NEW QUESTION 16
Health plans sometimes use global fees to reimburse providers. Health plans would use this method of provider reimbursement for all of the following reasons EXCEPT that global fees
- A. Eliminate any motivation the providermay have to engage in churning
- B. Transfer some of the risk of overutilization of care from the health plan to the providers
- C. Eliminate the practice of upcoding within specific treatments
- D. Reward providers who deliver cost-effective care
Answer: A
NEW QUESTION 17
In the following paragraph, a sentence contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the sentence. Then select the answer choice containing the two words that you have selected.
Budgeting approaches can be classified as static or flexible budgets, or as rolling or period budgets. A health plan most likely would use a (static / flexible) budget when a budget's objective is to reduce or limit expenses, and the health plan most likely would use a (rolling / period) budget if it would like to continually maintain projections for a certain time period into the future.
- A. static / rolling
- B. static / period
- C. flexible / rolling
- D. flexible / period
Answer: A
NEW QUESTION 18
The Fairway health plan is a for-profit health plan that issues stock. The following data was taken from Fairway's financial statements:
✑ Current assets.....$5,000,000
✑ Total assets.....6,000,000
✑ Current liabilities.....2,500,000
✑ Total liabilities.....3,600,000
✑ Stockholders' equity.....2,400,000
Fairway's total revenues for the previous financial period were $7,200,000, and its net income for that period was $180,000.
For the previous financial period, Fairway's net profit margin was
- A. 2.50%
- B. 3.00%
- C. 3.60%
- D. 7.50%
Answer: A
NEW QUESTION 19
In evaluating the claims experience during a given rating period of the Lucky Company, the Calaway Health Plan determined that the claims incurred by Lucky were lower than Calaway anticipated when it established Lucky’s premium rate for the rating period. Calaway, therefore,refunded a portion of Lucky’s premium to reflect the better-than- anticipated claims experience. This rating method is known as:
- A. durational rating
- B. retrospective experience rating
- C. blended rating
- D. prospective experience rating
Answer: B
NEW QUESTION 20
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