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NEW QUESTION 1
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.
Because Kayak's plan is a general asset plan, the funds that Kayak sets aside for the health plan are
- A. subject to the claims of Kayak's creditors
- B. available to Kayak solely for the purpose of paying for the healthcare expenses of Kayak's covered employees
- C. placed in a trust fund established by Kayak to pay for the health plan
- D. considered separate from Kayak's current operating funds
Answer: A
NEW QUESTION 2
The following paragraph contains two pair of terms enclosed in parentheses. Determine which term in each pair correctly completes the statements. Then select the answer choice containing the two terms you have chosen.
In a typical health plan, an (actuary / underwriter) is ultimately responsible for the determination of the appropriate rate to charge for a given level of healthcare benefits and administrative services in a particular market. The (actuary / underwriter) assesses and classifies the degree of risk represented by a proposed group or individual.
- A. actuary / actuary
- B. actuary / underwriter
- C. underwriter / actuary
- D. underwriter / underwriter
Answer: B
NEW QUESTION 3
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
- 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 expensesgenerated by the hospitalizations of Azalea plan members reach a specified level
Answer: B
NEW QUESTION 4
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 5
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 6
One difference between the internal and external analysis of a health plan's financial information is that
- A. Internal analysis of the health plan can be more detailed and more specific than can external analysis
- B. Internal analysts are more likely than external analysts to want comparative financial data about the health plan
- C. Only internal analysts use trend analysis to analyze the health plan's financial statements
- D. Only internal analysts typically conduct the financial analysis of the health planthemselves
Answer: A
NEW QUESTION 7
Ways in which a company can increase its return on investment (ROI) include: 1.Reducing expenses to increase operating income 2.Increasing controllable investment
- A. Both 1 and 2
- B. 1 only
- C. 2 only
- D. Neither 1 nor 2
Answer: B
NEW QUESTION 8
With regard to a health plan's underwriting of groups, it can correctly be stated that, generally, a
- 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
Answer: B
NEW QUESTION 9
When pricing its product, the Panda Health Plan assumes a 4% interest rate on its investments. Panda also assumes a crediting interest rate of 4%.
The actual interest rate earned by Panda on the assets supporting its product is 6%. The following statements can correctly be made about the investment margin and interest margin for Panda's products.
- A. Panda most likely built the crediting interest rate of 4% into the investment margin of its product.
- B. Panda's investment margin is the difference between its actual benefit costs and the benefit costs that it assumes in its pricing.
- C. The interest margin for this product is 2%.
- D. All of these statements are correct.
Answer: C
NEW QUESTION 10
Analysts will use the capital asset pricing model (CAPM) to determine the cost of equity for the Maxim health plan, a for-profit plan. According to the CAPM, Maxim's cost of equity is equal to
- A. The average interest rate that Maxim is paying to debt holders, adjusted for a tax shield
- B. Maxim's risk-free rate minus its beta
- C. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of systematic (non diversifiable) risk
- D. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of nonsystematic (diversifiable) risk
Answer: C
NEW QUESTION 11
Health plans have access to a variety of funding sources depending on whether they are operated as for-profit or not-for-profit organizations. The Verde Health Plan is a for-profit health plan and the Noir Health Plan is a not-for-profit health plan. From the answer choices below, select the response that correctly identifies whether funds from debt markets and equity markets are available to Verde and Noir:
- A. Funds from Debt Markets: available to Verde and Noir Funds from Equity Markets: available to Verde and Noir
- B. Funds from Debt Markets: available to Verde and Noir Funds from Equity Markets: available to Verde only
- C. Funds from Debt Markets: available to Verde only Funds from Equity Markets: available to Noir only
- D. Funds from Debt Markets: available to Noir only Funds from Equity Markets: available to Verde only
Answer: B
NEW QUESTION 12
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 13
The sentence below contains two pairs of terms enclosed in parentheses.
Determine which term in each pair correctly completes the statement. Then select the answer choice containing the two terms that you have selected. In analyzing its financial data, a health plan would use (horizontal/common size financial statement) analysis to measure the numerical amount that corresponding items change from one financial statement to another over consecutive accounting periods, and the health plan would use (trend/vertical) analysis to show the relationship of each financial statement item to another financial statement item.
- A. Horizontal / trend
- B. Horizontal / vertical
- C. Common-size financial statement / trend
- D. Common-size financial statement / vertical
Answer: B
NEW QUESTION 14
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 15
If the Ascot health plan's accountants follow the going-concern concept under GAAP, then these accountants most likely
- A. Assume that Ascot will pay its liabilities immediately or in full during the current accounting period
- B. Defer certain costs that Ascot has incurred, unless these costs contribute to the healthplan's future earnings
- C. Assume that Ascot is not about to be liquidated, unless there is evidence to the contrary
- D. Value Ascot's assets more conservatively than they would under SAP
Answer: C
NEW QUESTION 16
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