Question 1

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

Accepted Answer

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

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.

Accepted Answer

A)  Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = yes 
B)  Results Included in Brookhaven's Statements? = no 
C)  Accounted for as Separate Entities? = no

Question 3

The Kayak Company self funds the health plan for its employees. This plan is an example of a type of self-funded plan known as a general asset plan. The fact that this is a completely selffunded plan indicates that

Accepted Answer

A)  The plan has no funding vehicle 
B)  Kayak passes to its employees the financial risk of providing healthcare coverage 
C)  The plan most likely is exempt from ERISA requirements concerning the limits on benefit discrimination for classes of employees 
D)  The plan is exempt from the state laws and regulations that apply to health insurance policies

Question 4

In order to cover some of the gap between FFS Medicare coverage and the actual cost of services, beneficiaries often rely on Medicare supplements. Which of the following statements about Medicare supplements is correct?

Accepted Answer

A)  The initial ten (A-J) Medigap policies offer a basic benefit package that includes coverage for Medicare Part A and Medicare Part B coinsurance. 
B)  Each insurance company selling Medigap must sell all the different Medigap policies. 
C)  Medicare SELECT is a Medicare supplement that uses a preferred provider organization (PPO) to supplement Medicare Part A coverage. 
D)  Medigap benefits vary by plan type (A through L), and are not uniform nationally.

Question 5

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

Accepted Answer

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.

Question 6

One true statement about cash-basis accounting is that

Accepted Answer

A)  Cash receipt, but not cash disbursement, is an important component of cash-basis accounting 
B)  Most companies use a pure cash-basis accounting system 
C)  Cash-basis accounting records revenue according to the realization principle and expenses according to the matching principle 
D)  Health insurance companies and health plans that fall under the jurisdiction of state insurance commissioners must report some items on a cash basis for statutory reporting purposes

Question 7

Although the process is voluntary for health plans, external accreditation is becoming more and more important as states and purchasers require health plans undergo some type of external review process. This process:

Accepted Answer

A)  Is voluntary for health plans. 
B)  Requires all change accreditation organizations to use the same standards of accreditation. 
C)  Typically requires the accrediting organization to conduct a medical record review and a review of a health plan's credentialing processes, but not an evaluation of the health plans' member service systems processes. 
D)  Cannot assure that a health plan meets a specified level of quality.

Question 8

Federal Employee Health Benefits Program (FEHBP) requires health plans offering services to federal employees and their dependents to provide:

Accepted Answer

A)  Immediate access to emergency services 
B)  Urgent Appointments within 24 hours 
C)  Routine appointments once a month 
D)  D 
E)  A
F) B & C
G) All of the listed options

Question 9

The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs. One true statement about this specific stop-loss coverage is that

Accepted Answer

A)  The carrier is Newfeld 
B)  The attachment point is $20,000 
C)  The shared-risk corridor is between $0 and $70,000 
D)  This coverage can also be activated when the total covered medical expenses generated by the hospitalizations of Azalea plan members reach a specified level

Question 10

Health savings accounts were created by which of the following laws:

Accepted Answer

A)  COBRA 
B)  HIPAA 
C)  Medicare Modernization Act 
D)  None of the Above

Question 11

A key factor that distinguishes the various types of health plans is the type and amount of risk that a health plan assumes with respect to the delivery and financing of healthcare benefits. An example of a type of health plan that typically assumes the financial risk of delivering and financing healthcare benefits is a

Accepted Answer

A)  Third party administrator (TP
A)  
B)  Utilization review organization (URO) 
C)  Preferred provider organization (PPO) 
D)  Pharmacy benefit management (PBM) plan

Question 12

Health plans require utilization review for all services administered by its participating physicians.

Accepted Answer

A) True 
 B)False

Question 13

In assessing the potential degree of risk represented by a proposed insured, a health underwriter considers the factor of antiselection. Antiselection can correctly be defined as the

Accepted Answer

A)  inability of a proposed insured to share with the insurer the financial risks of healthcare coverage 
B)  possibility that a proposed insured will profit from an illness by receiving benefits that exceed the total amount of his or her eligible medical expenses 
C)  inability of a proposed insured to provide sufficient evidence that proves he or she is an insurable risk 
D)  tendency of people who have a greater-than-average likelihood of loss to apply for or continue insurance protection to a greater extent than people who have an average or less than average likelihood of the same loss

Question 14

Dr. Milton Ware, a physician in the Riverside MCO's network of providers, is reimbursed under a fee schedule arrangement for medical services he provides to Riverside members. Dr. Ware's provider contract with Riverside contains a typical no-balance billing provision. One purpose of this provision is to:

Accepted Answer

A)  prevent Dr. Ware from requiring a Riverside member to pay any coinsurance, copayment, or deductibles that the member would normally pay under Riverside's plan 
B)  require Dr. Ware to accept the amount that Riverside pays for medical services as payment in full and not to bill plan members for additional amounts 
C)  prevent Dr. Ware from seeking compensation from patients if Riverside fails to compensate him because of the MCO's insolvency 
D)  prevent Dr. Ware from billing a Riverside member for medical services that are not included in Riverside's plan

Question 15

The Jasmine Company, which self funds the health plan for its 200 employees, has established a 501(c)(9) trust as a means of addressing possible claims fluctuations under the health plan. This plan is not a part of a collective bargaining process. A potential disadvantage to Jasmine of using a 501(c)(9) trust is that

Accepted Answer

A)  The cost of maintaining the trust may be prohibitive to Jasmine 
B)  The trust must always maintain enough assets to pay the health plan's claims that have been incurred but not yet paid 
C)  Jasmine is prohibited from earning any return on the trust assets 
D)  The contributions to this trust are not deductible for federal income tax purposes

Question 16

If Grace Wilson is eligible for benefits under both the Medicare and Medicaid programs, then

Accepted Answer

A)  Medicare is Ms. Wilson's primary insurer 
B)  A Medicare- or Medicaid-contracting health plan is allowed to lock-in Ms. Wilson's enrollment for a maximum period of 24 months 
C)  The BBA requires the state to guarantee Ms. Wilson's eligibility for a minimum of 18 months once she enrolls in a health plan network 
D)  Ms. Wilson can only receive Medicare- or Medicaid-covered services from a provider who participates in a health plan network

Question 17

Health plans sometimes contract with independent organizations to provide specialty services, such as vision care or rehabilitation services, to plan members. For health plan partners what is required?

Accepted Answer

A)  Low or stable costs. 
B)  Appropriate, rather than inappropriate, utilization rates. 
C)  A benefit that cannot be easily defined. 
D)  Defined patient population.

Question 18

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.

Accepted Answer

A) True 
 B)False

Question 19

Two sets of financial accounting standards are generally accepted accounting principles (GAAP) and statutory accounting practices (SAP). One true statement about these financial accounting standards is that

Accepted Answer

A)  State laws and regulations in the United States govern the implementation of GAAP, but not the implementation of SAP 
B)  Health plans must prepare their financial statements for their external users according to applicable laws, regulations, and accounting principles, particularly GAAP 
C)  GAAP specifically focuses on the requirements of insurance regulators and policyholder interests 
D)  The Financial Accounting Standards Board (FAS
B)  is a private organization whose purpose is to establish and promote SAP in the United States

Question 20

Beginning in the early 1980s, several factors contributed to increased demand for behavioral healthcare services. These factors included:

Accepted Answer

A)  increased stress on individuals and families 
B)  increased availability of behavioral healthcare services 
C)  greater awareness and acceptance of behavioral healthcare issues 
D)  all of the above

Exam 3: Health Plan Finance and Risk Management

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

The Kayak Company self funds the health plan for its employees. This plan is an example of a type of self-funded plan known as a general asset plan. The fact that this is a completely selffunded plan indicates that

In order to cover some of the gap between FFS Medicare coverage and the actual cost of services, beneficiaries often rely on Medicare supplements. Which of the following statements about Medicare supplements is correct?

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

One true statement about cash-basis accounting is that

Although the process is voluntary for health plans, external accreditation is becoming more and more important as states and purchasers require health plans undergo some type of external review process. This process:

Federal Employee Health Benefits Program (FEHBP) requires health plans offering services to federal employees and their dependents to provide:

Health savings accounts were created by which of the following laws:

Health plans require utilization review for all services administered by its participating physicians.

In assessing the potential degree of risk represented by a proposed insured, a health underwriter considers the factor of antiselection. Antiselection can correctly be defined as the

If Grace Wilson is eligible for benefits under both the Medicare and Medicaid programs, then

Health plans sometimes contract with independent organizations to provide specialty services, such as vision care or rehabilitation services, to plan members. For health plan partners what is required?

Two sets of financial accounting standards are generally accepted accounting principles (GAAP) and statutory accounting practices (SAP) . One true statement about these financial accounting standards is that

Beginning in the early 1980s, several factors contributed to increased demand for behavioral healthcare services. These factors included: