AHM-520 Health Plan Finance and Risk Management Questions and Answers

The following statements illustrate the use of different rating methods by health plans:

• The Dover health plan established rates for small groups by using a rating method which requires that the average premium in each group cannot be more than 120% of the average premium for any other group. Under this method, all members of each group pay the same premium, which is based on the experience of the group.
• Under the rating method used by the Rolling Hills health plan, the health plan calculates the ratio of a group's experience to the group's historical manual rate. Rolling Hills then multiplies this ratio by the group's future manual rate. Rolling Hills cannot consider the group's experience in determining premium rates.

From the following answer choices, select the response that correctly indicates the rating methods used by Dover and Rolling Hills.

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

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

The Zane health plan uses a base of accounting known as accrual-basis accounting. With regard to this base of accounting, it can correctly be stated that accrual-basis accounting

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 cost for which a benefit is forfeited in choosing one decision alternative over another alternative is known as

Geena Falk is eligible for both Medicare and Medicaid coverage. If Ms. Falk incurs a covered expense, then:

The Jamal Health Plan operates in a state that mandates that a health plan either allow providers to become part of its network or reimburse those providers at the health plan’s negotiated-contract rate, so long as the non-contract provider is willing to perform the services at the contract rate. This type of law is known as:

Costs that can be defined by behavior are most commonly classified as fixed costs, variable costs and semi-variable costs. Examples of fixed costs include:

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

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.

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:

Residual trend is the difference between total trend and the portion of the total trend caused by changes in provider reimbursement levels.

Consider the following events that could affect an health plan’s provider reimbursement levels:

Event 1 — The disenrollment of a large group with unusually high utilization rates

Event 2 — The introduction of a new treatment for infertility

Event 3 — A serious flu epidemic

Event 4 — A shift in inpatient medical services from obstetrical care to neonatal intensive care

One cause of residual trend is change in intensity, which would be represented by:

The HMO Model Act sets certain requirements that an entity that wishes to operate as an HMO must meet. These requirements include:

Three general strategies that health plans use for controlling types of risk are risk avoidance, risk transfer, and risk acceptance. The following statements are about these strategies. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

One true statement about a health plan's underwriting margin is that

The following statements indicate the pricing policies of two health plans that operate in a particular market:

• The Accent Health Plan consistently underprices its product
• The Bolton Health Plan uses extremely strict underwriting practices for the small groups to which it markets its plan

From the following answer choices, select the response that correctly indicates the most likely market effects of the pricing policies used by Accent and Bolton.

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.

The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is

The provider contract that Dr. Zachery Cogan, an internist, has with the Neptune Health Plan calls for Neptune to reimburse him under a typical PCP capitation arrangement. Dr. Cogan serves as the PCP for Evelyn Pfeiffer, a Neptune plan member. After hospitalizing Ms. Pfeiffer and ordering several expensive diagnostic tests to determine her condition, Dr. Cogan referred her to a specialist for further treatment. In this situation, the compensation that Dr. Cogan receives under the PCP capitation arrangement most likely includes Neptune's payment for

The following statements are about a health plan's pricing of a preferred provider organization (PPO) plan. Three of the statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

Reconciliation is the process by which a health plan assesses providers' performance relative to contractual terms and reimbursement.

With regard to this process, it can correctly be stated that

The following statements are about various reimbursement arrangements that health plans have with hospitals. Select the answer choice containing the correct statement.

The Fiesta Health Plan prices its products in such a way that the rates for its products are reasonable, adequate, equitable, and competitive. Fiesta is using blended rating to calculate a premium rate for the Murdock Company, a large employer. Fiesta has assigned a credibility factor of 0.6 to Murdock. Fiesta has also determined that Murdock's manual rate is $200 PMPM and that Murdock's experience rate is $180 PMPM. Fiesta would correctly calculate that its blended rate PMPM for Murdock should be Fiesta's retention charge plus

In evaluating the claims experience during a given rating period of the Lucky Company, the Calaway Health Plan determined that the claims incurred by Lucky were lower than Calaway anticipated when it established Lucky’s premium rate for the rating period. Calaway, therefore, refunded a portion of Lucky’s premium to reflect the better-than-anticipated claims experience. This rating method is known as:

The core of a health plan's strategic financial plan is the development of its pro forma financial statements. The following statements are about these pro forma financial statements. Select the answer choice containing the correct statement.

Julio Benini is eligible to receive healthcare coverage through a health plan that is under contract to his employer. Mr. Benini is seeking coverage for the following individuals:

• Elena Benini, his wife
• Maria Benini, his 18-year-old unmarried daughter
• Johann Benini, his 80-year-old father who relies on Julio for support and maintenance

The health plan most likely would consider that the definition of a dependent, for purposes of healthcare coverage, applies to:

The Lindberg Company has decided to terminate its group healthcare coverage with the Benson Health Plan. Lindberg has several former employees who previously experienced qualifying events that caused them to lose their group coverage. One federal law allows these former employees to continue their group healthcare coverage. From the answer choices below, select the response that correctly identifies the federal law that grants these individuals with the right to continue group healthcare coverage, as well as the entity which is responsible for continuing this coverage:

The following statements are about a health plan's evaluation of its responsibility centers. Select the answer choice containing the correct statement.

In order to show the efficiency of a health plan's managers in using the health plan's investments to earn a return for stockholders, a financial analyst most likely would use a type of profitability ratio known as