Question 1

The methods of alternative funding for health coverage can be divided into the following general categories: Category A-Those methods that primarily modify traditional fully insured group insurance contracts Category B-Those methods that have either partial or total self funding Typically, small employers are able to use some of the alternative funding methods in

Accepted Answer

A)  Both Category A and Category B 
B)  Category A only 
C)  Category B only 
D)  Neither Category A nor Category B

Question 2

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

Accepted Answer

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

Question 3

The provider contract that Dr. Timothy Meyer, a pediatrician, has with the Cardigan health plan states that Cardigan will compensate him under a capitation arrangement. However, the contract also includes a typical low enrollment guarantee provision. Statements that can correctly be made about this arrangement include that the low enrollment guarantee provision most likely:

Accepted Answer

A)  Causes Dr. Meyer's capitation contract with Cardigan to transfer more risk to him than the contract otherwise would transfer 
B)  Specifies that Cardigan will pay Dr. Meyer under an arrangement other than capitation until a specified number of children covered by the plan use him as their PCP 
C)  Both A and B 
D)  A only 
E)  B only
F) Neither A nor B

Question 4

Bart Vereen is insured by both a traditional indemnity health insurance plan, which is his primary plan, and a managed care plan. Both plans have a typical coordination of benefits (COB) provision, but neither plan has a nonduplication of benefits provision

Accepted Answer

A)  380 
B)  130 
C)  0 
D)  550

Question 5

In accounting terminology, the items of value that a company owns-such as cash, cash equivalents, and receivables-are generally known as the company's

Accepted Answer

A)  revenue 
B)  net income 
C)  surplus 
D)  assets

Question 6

In most cases, medical errors are caused by breakdowns in the healthcare system rather than by provider mistakes.

Accepted Answer

A) True 
 B)False

Question 7

Federal law addresses the relationship between Medicare- or Medicaid contracting health plans and providers who are at "substantial financial risk." Under federal law, Medicare- or Medicaid-contracting health plans

Accepted Answer

A)  Place a provider at "substantial risk" whenever incentive arrangements put the provider at risk for amounts in excess of 10% of his or her total potential reimbursement for providing services to Medicare and Medicaid enrollees 23 
B)  Must provide stop-loss coverage to a provider who is placed at "substantial financial risk" for services that the provider does not directly provide to Medicare or Medicaid enrollees 
C)  Both A and B 
D)  A only 
E)  B only
F) Neither A nor B

Question 8

A product is often described as having a thin margin or a wide margin. With regard to the factors that help determine the size of the margin of a health plan's product, it can correctly be stated that the

Accepted Answer

A)  greater the risk a health plan assumes in a health plan, the thinner the product margin should be 
B)  more that competition acts to force prices down, the wider the product margins tend to become 34 
C)  greater the demand for the product, the thinner the margin for this product tends to become 
D)  longer the premium rates are guaranteed to a group, the wider the health plan's margin should

Question 9

Dr. Julia Phram is a cardiologist under contract to Holcomb HMO, Inc., a typical closed-panel plan. The following statements are about this situation. Select the answer choice containing the correct statement.

Accepted Answer

A)  All members of Holcomb HMO must select Dr. Phram as their primary care physician (PCP). 
B)  Any physician who meets Holcomb's standards of care is eligible to contract with Holcomb HMO as a provider. 
C)  Dr. Phram is either an employee of Holcomb HMO or belongs to a group of physicians that has contracted with Holcomb HMO 
D)  Holcomb HMO plan members may self-refer to Dr. Phram at full benefits without first obtaining a referral from their PCPs.

Question 10

Al Marak, a member of the Frazier Health Plan, has asked for a typical Level One appeal of a decision that Frazier made regarding Mr. Marak's coverage. One true statement about this Level One appeal is that:

Accepted Answer

A)  Mr. Marak has the right to appeal to the next level if the Level One appeal upholds the original decision 
B)  It requires Frazier and Mr. Marak to submit to arbitration in order to resolve the dispute 
C)  It is considered to be an informal appeal 
D)  It will be handled by an independent review organization (IRO)

Question 11

A particular health plan offers a higher level of benefits for services provided in-network than for out-of-network services. This health plan requires preauthorization for certain medical services.  With regard to the steps that the health plan's claims enforcement policy, clients:

Accepted Answer

A)  should assume that all services requiring preauthorization have been preauthorized 
B)  should investigate any conflicts between diagnostic codes and treatment codes before approving the claim to ensure that the appropriate payment is made for the claim 
C)  need not verify that the provider is part of the health plan's network before approving the claim at the in-network level of benefits 
D)  need not determine whether the member is covered by another health plan that allows for coordination of benefits

Question 12

The Harp Company self-funds the health plan for its employees. The plan is administered under a typical administrative-services-only (ASO) arrangement. One true statement about this ASO arrangement is that

Accepted Answer

A)  This arrangement prevents Harp from purchasing stop-loss coverage for its health plan 
B)  The amount that Harp pays the administrator to provide the ASO services is not subject to state premium taxes 
C)  The administrator is responsible for paying claims from its own assets if Harp's account is insufficient 
D)  The charges for the ASO services must be stated as a percentage of the amount of claims paid for medical expenses incurred by Harp's covered employees and their dependents

Question 13

Experience rating and manual rating are two rating methods that the Cheshire health plan uses to determine its premium rates. One difference between these two methods is that, under experience rating, Cheshire

Accepted Answer

A)  Uses a purchaser's actual experience to estimate the group's expected experience, whereas, under manual rating, Cheshire uses its own average experience-and sometimes the experience of other plans-to estimate the group's expected experience 
B)  can establish rates for groups that have no previous plan experience, whereas, under manual rating, Cheshire cannot establish rates for groups with no previous plan experience 
C)  charges each group in the same class the same premium whereas, under manual rating, Cheshire charges lower premiums to groups that have experienced lower utilization rates 
D)  can use group demographics to help determine the rate for a block of business, whereas, under manual rating, Cheshire cannot use group demographics when determining the rate for a block of business

Question 14

With regard to a health plan's underwriting of groups, it can correctly be stated that, generally, a

Accepted Answer

A)  Health plan will require that contributory healthcare plans have a participation level of between 50% and 70% 
B)  Health plan will decline to cover a group that has been formed for the sole purpose of obtaining healthcare coverage 
C)  Health plan's underwriters will not examine the age spread of the entire group being underwritten 
D)  Health plan would expect a group with a large proportion of young females to have lower healthcare costs than does a similar group with a large proportion of young males

Question 15

HMOs typically employ several techniques to manage provider utilization and member utilization of medical services. One technique that an HMO uses to manage member utilization is

Accepted Answer

A)  the use of physician practice guidelines 
B)  the requirement of copayments for office visits 
C)  capitation 
D)  risk pools

Question 16

A stop-loss contract may provide that claims are settled using a paid claims method or an incurred claims method. The Concord Company provides health coverage to its employees through a selffunded health plan. On March 17, a Concord employee who is enrolled in this plan underwent surgery, and the surgery was sufficiently expensive to trigger Concord's specific stop-loss coverage. On April 10, Concord paid the medical expenses associated with the surgery. The term of the stop-loss contract ended on April 1. This information indicates that the stop-loss carrier is responsible for paying a portion of the cost of the surgery under

Accepted Answer

A)  both the paid claims method and the incurred claims method 
B)  the paid claims method but not the incurred claims method 
C)  the incurred claims method but not the paid claims method 
D)  neither the paid claims method nor the incurred claims method

Question 17

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.

Accepted Answer

A)  Measuring-unit concept 
B)  Full-disclosure concept 
C)  Cost concept 
D)  Time-period concept

Question 18

An exclusive provider organization (EPO) operates much like a PPO. However, one difference between an EPO and a PPO is that an EPO

Accepted Answer

A)  Is regulated under federal HMO legislation 
B)  Generally provides no benefits for out-of-network care 
C)  Has no provider network of physicians 
D)  Is not subject to state insurance laws

Question 19

According to the IRS, which of the following is not an allowable preventive care service?

Accepted Answer

A)  Smoking cessation programs. 
B)  Periodic health examinations. 
C)  Health club memberships. 
D)  Immunizations for children and adults.

Question 20

Appropriateness of treatment provided is determined by developing criteria that if unmet will prompt further investigation of a claim which are also called:

Accepted Answer

A)  Codes 
B)  Lists 
C)  Edits 
D)  Checks

Exam 3: Health Plan Finance and Risk Management