NEW QUESTION 1

The Arista Health Plan is evaluating the following four groups that have applied for group
healthcare coverage:
✑ The Blaise Company, a large private employer
✑ The Colton County Department of Human Services (DHS)
✑ A multiple-employer group comprised of four companies
✑ The Professional Society of Daycare Providers
With respect to the relative degree of risk to Arista represented by these four companies, the company that would most likely expose Arista to the lowest risk is the:

• A. Blaise Company
• B. Colton County DHS
• C. Multiple-employer group
• D. Professional Society of Daycare Providers

Answer: A

NEW QUESTION 2

The Brookhaven Company is the parent company of two subsidiaries: an HMO and an insurance company. The headings on Brookhaven's financial statements read "Consolidated Financial Statements of Brookhaven Company." From the following answer choices, select the response that correctly indicates, under the entity concept, whether the HMO and the insurance company are accounted for as separate entities and whether the subsidiaries' financial results would be included in Brookhaven's consolidated financial statements.

• A. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = yes
• B. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = no
• C. Accounted for as Separate Entities? = noResults Included in Brookhaven's Statements? = yes
• D. Accounted for as Separate Entities? = no Results Included in Brookhaven's Statements? = no

Answer: A

NEW QUESTION 3

With regard to alternative funding arrangements, the part of a health plan premium that is intended to contribute to the claims reserve that a health plan maintains to pay for unusually high utilization is known as the:

• A. Interest charge
• B. Retention charge
• C. Risk charge
• D. Surplus

Answer: C

NEW QUESTION 4

The sentence below 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 chosen. Purchasing stop-loss coverage most likely (increases / reduces) a health plan's underwriting risk and (increases / reduces) the health plan’s affiliate risk.

• A. increases / increases
• B. increases / reduces
• C. reduces / increases
• D. reduces / reduces

Answer: C

NEW QUESTION 5

The Northwest Company offers its employees the option of choosing to receive their
healthcare benefits from an HMO or from a traditional indemnity plan. The premiums for the HMO are lower than for the traditional indemnity plan. In this situation, it is correct to assume that:
* 1.Individual low utilizers are more likely to enroll in the traditional indemnity plan 2.Individual high utilizers are more likely to enroll in the HMO

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

Answer: D

NEW QUESTION 6

Most organizations that obtain group healthcare coverage can be classified as one of three types of groups: employer-employee groups, multiple employer groups, and professional associations. One true statement about these types of groups is that

• A. Anti selection risk is higher for both multiple-employer groups and professional associations than it is for an employer-employee group
• B. Private employers typically present a higher underwriting risk to health plans than do public employers
• C. Individual members of a multiple-employer group or a professional association typically are required to obtain healthcare coverage through the group or association
• D. I health plan is prohibited, when evaluating the risks represented by a professional association, from considering the industry experience of the agent or broker that sells a group plan to the association

Answer: A

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

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 9

Juan Ramirez, a licensed social worker, and Dr. Laura Lui, a licensed psychiatrist, are under contract to the Peninsula Health Plan. Peninsula has contracted with CMS to provide services to Medicare and Medicaid beneficiaries. Both Mr. Ramirez and Dr. Lui provide the same type of counseling services to Peninsula's enrollees. With respect to amendments made to the Balanced Budget Act (BBA) of 1997 that impact provider reimbursement, the amount by which Peninsula will reimburse Mr. Ramirez will be equal to:

• A. 50% of D
• B. Lui's reimbursement
• C. 75% of D
• D. Lui's reimbursement
• E. 90% of D
• F. Lui's reimbursement
• G. 100% of D
• H. Lui's reimbursement

Answer: D

NEW QUESTION 10

The following statements are about state health coverage reinsurance programs.

• A. The reinsurance offered through these programs is administered on a for-profit basis by the federal government.
• B. The purpose of these programs is to reinsure MCOs and other carriers who offer guaranteed healthcare plans to small employers.
• C. These programs must reinsure only an entire small group, not specific individuals within a group.
• D. Any shortfalls in the pool established by these programs are funded by the state government.

Answer: B

NEW QUESTION 11

As part of the first step in its strategic planning process, the Trout health plan developed the following statements:
✑ Statement A—Trout will deliver quality healthcare to our customers at a reasonable cost.
✑ Statement B—Within five years, Trout will be recognized as the industry leader in
all of our markets.
Statement A can best be described as a

• A. Vision statement, and Statement B also can best be described as a vision statement
• B. Vision statement, whereas Statement B can best be described as a mission statement
• C. Mission statement, whereas Statement B can best be described as a vision statement
• D. Mission statement, and Statement B also can best be described as a mission statement

Answer: C

NEW QUESTION 12

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 13

The Longview Hospital contracted with the Carlyle Health Plan to provide inpatient services to Carlyle’s enrolled members. Carlyle provides Longview with a type of stop-loss coverage that protects, on a claims incurred and paid basis, against losses arising from significantly higher than anticipated utilization rates among Carlyle’s covered population. The stop-loss coverage specifies an attachment point of 130% of Longview’s projected $2,000,000 costs of treating Carlyle plan members and requires Longview to pay 15% of any costs above the attachment point. In a given plan year, Longview incurred covered costs totaling $3,000,000.
For the year in which Longview’s incurred covered costs were $3,000,000, the amount for which Longview will be responsible is:

• A. $2,000,000
• B. $2,600,000
• C. $2,660,000
• D. $3,900,000

Answer: C

NEW QUESTION 14

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 15

One typical characteristic of zero-based budgeting (ZBB) is that this budgeting approach

• A. Treats each activity as though it is a new project under consideration
• B. Applies only to income budgets
• C. Is the least time-consuming of all of the budgeting approaches
• D. Requires the input of top-level employees only

Answer: A

NEW QUESTION 16

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
The following statements are about Puma's evaluation of these investment centers. Select the answer choice containing the correct statement.

• A. Investment Center Y's RI is greater than Investment Center X's RI.
• B. The ROI for Investment Center X is 16.7%, and the ROI for Investment Center Y is 20.0%.
• C. Because Investment Centers X and Y are different sizes, Puma should not use ROI to compare these investment centers.
• D. According to the evaluation of ROI, Investment Center Y achieves a higher return on its available resources than does Investment Center X.

Answer: D

NEW QUESTION 17
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