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NEW QUESTION 1
Providing services under Medicare or Medicaid can impose on health plans financial risks and costs that are greater than those related to providing services to the commercial population. Reasons that an health plan's financial risks and costs for providing services to Medicare and Medicaid enrollees tend to be higher include
- A. Most Medicare and Medicaid enrollees can disenroll from a health plan on a monthly basis
- B. The high incidences of chronic illness in both the Medicare and Medicaid populations results in higher costs related to coordinating care and case management
- C. Medicare and Medicaid enrollees tend to have a high level of costs in the first few months of enrollment as the health plan educates them about the health plan system and performs initial health screening to evaluate their health
- D. all of the above
Answer: D
NEW QUESTION 2
The following statements are about the capital budgeting technique known as the payback method. Select the answer choice containing the correct statement:
- A. The main benefit of the payback method is that it is simple to use.
- B. The payback method measures the profitability of a given capital project.
- C. The payback method considers the time value of money.
- D. The payback method states a proposed project’s cash flow in terms of present value for the life of the entire project.
Answer: A
NEW QUESTION 3
Costs that can be defined by behavior are most commonly classified as fixed costs, variable costs, and semi-variable costs. From the following answer choices, select the response that correctly indicates a fixed cost and a variable cost for a health plan.
- A. Fixed Cost = depreciation on computer equipment Variable Cost = selling expenses
- B. Fixed Cost = premium processing expenses Variable Cost = rent on a regional office
- C. Fixed Cost = the cost for building maintenance Variable Cost = the cost for electricity
- D. Fixed Cost = the cost for electricityVariable Cost = fire insurance on the home office facility
Answer: A
NEW QUESTION 4
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 5
Provider reimbursement methods that transfer some utilization risk from a health plan to providers affect the health plan's RBC formula. A health plan's use of these reimbursement methods is likely to result in
- A. An increase the health plan's underwriting risk
- B. A decrease the health plan's credit risk
- C. A decrease the health plan's net worth requirement
- D. All of the above
Answer: C
NEW QUESTION 6
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 7
The Landau health plan will switch from using top-down budgeting to using bottom-up budgeting. One potential advantage to Landau of making this switch is that, compared to top-down budgeting, bottom-up budgeting is more likely to
- A. Require little time or labor to complete
- B. Enable Landau to incorporate key changes in regulatory requirements on a timely basis
- C. Reflect top management's intentions for Landau
- D. Reflect the realities of day-to-day operations
Answer: B
NEW QUESTION 8
State A, which requires guaranteed issue of at least two mandated healthcare plans, has established a typical health coverage reinsurance program for small employer groups. One true statement about this reinsurance program is that it most likely
- A. is administered by a commercial reinsurance company that operates in State A
- B. allows a small employer carrier operating in State A to reinsure either an entire small group or specific individuals within the group
- C. has, for the coverage on a plan, a base premium, which is multiplied by a factor of 2 in the case of reinsurance on entire groups or a factor of 3 for reinsurance on individuals
- D. prohibits a small employer carrier operating in State A from placing individuals enrolled in small groups in a reinsurance pool
Answer: B
NEW QUESTION 9
The Sesame health plan uses a method of accumulating cost data that enables the health plan to satisfy financial reporting requirements for compiling financial statements and corporate tax returns. Although this method assists Sesame's managers in studying which types of costs are rising and falling over time, it does not explain which areas of Sesame incur each cost. This method, which is the most basic level of cost accumulation, is known as accumulating costs by
- A. Cost center
- B. Type of cost
- C. Lines of business
- D. Function
Answer: B
NEW QUESTION 10
If the operational budget prepared by the Satilla health plan is typical of most operational budgets, then
- A. Its purpose is to track Satilla's operations and short-term profitability
- B. The key information source for this operational budget is Satilla's external environment
- C. The time frame for this operational budget is three to five years
- D. Its focus is on the threats that Satilla faces from its external environment
Answer: A
NEW QUESTION 11
The theory of vicarious liability or ostensible agency can expose a health plan to the risk that it could be held liable for the acts of independent contractors. Factors that may give rise to the assumption that an agency relationship exists between a health plan and its independent contractors include:
- A. Requiring the providers to supply their own office space
- B. Employing nurses and other healthcare professionals to support the physician providers
- C. Requiring providers to maintain their own medical records
- D. All of the above
Answer: B
NEW QUESTION 12
The Wallaby Health Plan purchased an asset two years ago for $50,000. At the time of purchase, the asset had an appraised value of $52,000. The asset carries a value on Wallaby’s general ledger of $47,000, and its current market value is $80,000. According to the cost concept, Wallaby would report on its financial statements a value for this asset equal to:
- A. $47,000
- B. $50,000
- C. $52,000
- D. $80,000
Answer: B
NEW QUESTION 13
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 14
The following statements are about 501(c)(9) trusts. Select the answer choice containing the correct statement:
- A. In the event a 501(c)(9) trust is terminated, any funds remaining in the trust revert backto the employer.
- B. In order to satisfy Internal Revenue Code (IRC) requirements, membership in a 501(c)(9) trust is mandatory for all employees.
- C. Contributions made by an employer to a 501(c)(9) trust are deductible for federal income tax purposes.
- D. Typically, a 501(c)(9) trust is controlled solely by the employer that established the trust.
Answer: C
NEW QUESTION 15
The medical loss ratio (MLR) for the Peacock health plan is 80%. Peacock's expense ratio is 16%.
One characteristic of Peacock's MLR is that it
- A. Includes claims that have been paid but excludes claims that have not yet been reported
- B. Cannot adjust for growth in the health plan's business
- C. Is the percentage of Peacock's end-of-period surplus to its earned premiums
- D. Measures Peacock's overall claims levels
Answer: D
NEW QUESTION 16
The following paragraph contains an incomplete statement. Select the answer choice containing the term that correctly completes the statement. Health plans face four contingency risks (C-risks): asset risk (C-1), pricing risk (C-2), interest-rate risk (C-3), and general management risk (C-4). Of these risks, _______ is typically the most important risk that health plans face. This is true because a sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay for future medical costs, and the exact amount of these costs is not known when the healthcare coverage is priced.
- A. Asset risk (C-1)
- B. Pricing risk (C-2)
- C. Interest-rate risk (C-3)
- D. General management risk (C-4)
Answer: B
NEW QUESTION 17
A health plan may experience negative working capital whenever healthcare expenses generated by plan members exceed the premium income the health plan receives.
Ways in which a health plan can manage the volatility in claims payments, and therefore reduce the risk of negative working capital, include:
* 1.Accurately estimating incurred but not reported (IBNR) claims 2.Using capitation contracts for provider reimbursement
- A. Both 1 and 2
- B. 1 only
- C. 2 only
- D. Neither 1 nor 2
Answer: A
NEW QUESTION 18
The following statements are about risk management in health plans. Select the answer choice containing the correct response.
- A. Risk management is especially important to health plans because the Employee Retirement Income Security Act of 1974 (ERISA) allows plan members to recover punitive damages from healthcare plans.
- B. With regard to the relative risk for health plan structures based upon the degree of influence and relationships that health plans maintain with their providers, preferred provider organizations (PPOs) typically have a higher risk than do group HMOs and staff HMOs.
- C. Although there are clear risks associated with the provision of healthcare services and coverage decisions surrounding that care, the bulk of risk in health plans is associated with a health plan's benefit administration and contracting activities.
- D. A health plan generally structures its risk management process around loss reduction techniques and loss transfer techniques.
Answer: D
NEW QUESTION 19
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