EMT Practice Test

1. Question Content...

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Question1: One law prohibits Dr. Laura Cole from making a referral to another provider entity for designated health services if Dr. Cole or one of her immediate family members has a financial relationship with the entity.
This law is known as the

Question2: One true statement about the rate ratios used by a health plan is that the

Question3: The following statements are about the financial risks for health plans in Medicare and Medicaid markets.
Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

Question4: The NAIC has developed a risk-based capital (RBC) formula for all health plans that accept risk.
One true statement about the RBC formula for health plans is that it

Question5: 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

Question6: Under the alternative funding method used by the Flair Company, Flair assumes financial responsibility for paying claims up to a specified level and deposits the funds necessary to pay these claims into a bank account that belongs to Flair. However, an insurer, which acts as an agent of Flair, makes the actual payment of claims from this account. When claims exceed the specified level, the insurer pays the balance from its own funds. No state premium tax is levied on the amounts that Flair deposits into this bank account.
From the following answer choices, choose the name of the alternative funding method described.

Question7: The Atoll Health Plan must comply with a number of laws that directly affect the plan's contracts. One of these laws allows Atoll's plan members to receive medical services from certain specialists without first being referred to those specialists by a primary care provider (PCP). This law, which reduces the PCP's ability to manage utilization of these specialists, is known as _________.

Question8: Kevin Olin applied for individual healthcare coverage from the Mercury health plan. Before issuing the policy, Mercury's underwriters attached a rider that excludes from coverage any loss that results from Mr.
Olin's chronic knee problem. This information indicates that Mr. Olin's policy includes

Question9: The Health Maintenance Organization (HMO) Model Act, developed by the National Association of Insurance Commissioners (NAIC), represents one approach to developing solvency standards. One drawback to this type of solvency regulation is that it

Question10: Under the alternative funding method used by the Trilogy Company, the insurer charges Trilogy an initial premium that is based on the assumption that claims will be 93% of the expected claims for the year. If claims exceed 93% of expected claims, then Trilogy must reimburse the insurer for any additional claims paid, up to 112% of expected claims. The insurer bears the responsibility for paying claims in excess of
112% of expected claims.
From the following answer choices, choose the name of the alternative funding method described.

Question11: The accounting department of the Enterprise health plan adheres to the following policies:
Policy A-Report gains only after they actually occur
Policy B-Report losses immediately
Policy C-Record expenses only when they are certain
Policy D-Record revenues only when they are certain
Of these Enterprise policies, the ones that are consistent with the accounting principle of conservatism are Policies

Question12: 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

Question13: The following statements are about the Health Insurance Portability and Accountability Act (HIPAA) as it relates to the small group market. Three of these statements are true and one statement is false. Select the answer choice containing the FALSE statement:

Question14: The following statements are about pure risk and speculative risk-two kinds of risk that both businesses and individuals experience. Select the answer choice containing the correct statement.

Question15: Doctors' Care is an individual practice association (IPA) under contract to the Jasper Health Plan to provide primary and secondary care to Jasper's members. Jasper's capitation payments compensate Doctors' Care for all physician services and associated diagnostic tests and laboratory work. The physicians at Doctors' Care, as a group, determine how individual physicians in the group will be remunerated. The type of capitation used by Jasper to compensate Doctors' Care is known as:

Question16: Users of the Fulcrum Health Plan financial information include:
The independent auditors who review Fulcrum's financial statements
Fulcrum's controller (comptroller)
Fulcrum's plan members
The providers that deliver healthcare services to Fulcrum plan members
Fulcrum's competitors
Of these users, the ones that most likely can correctly be classified as external users with a direct financial interest in Fulcrum are the

Question17: 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.

Question18: 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

Question19: 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:

Question20: 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

Question21: For each of its products, the Wisteria Health Plan monitors the provider reimbursement trend and the residual trend. One true statement about these trends is that

Question22: 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.

Question23: 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.

Question24: The following statements are about the new methodology authorized under the Balanced Budget Act of
1997 (BBA) for payments by the Centers for Medicaid & Medicare Services (CMS) to Medicare-contracting health plans.Select the answer choice containing the correct statement.

Question25: The Violin Company offers its employees a triple option of health plans: an HMO, an HMO with a point of service (POS) option, and an indemnity plan.
Premiums are lowest for the HMO option and highest for the indemnity plan. Violin employees who anticipate that they will be individual low utilizes of healthcare services are most likely to enroll in the

Question26: In the following paragraph, a sentence 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 selected. The Igloo health plan recognizes the receipt of its premium income during the accounting period in which the income is earned, regardless of when cash changes hands.
However, Igloo recognizes its expenses when it earns the revenues related to those expenses, regardless of when it receives cash for the revenues earned. This information indicates that the (realization/ capitalization) principle governs Igloo's revenue recognition, whereas the (matching/initial-recording) principle governs its expense recognition.

Question27: If Grace Wilson is eligible for benefits under both the Medicare and Medicaid programs, then

Question28: The following paragraph contains an incomplete statement. Select the answer choice containing the term that correctly completes the statement. Health plans face four contingency risks (C-risks):
asset risk (C-1), pricing risk (C-2), interest-rate risk (C-3), and general management risk (C-4). Of these risks, ________________ is typically the most important risk that health plans face. This is true because a sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay for future medical costs, and the exact amount of these costs is not known when the healthcare coverage is priced.

Question29: The Challenger Group is a type of management services organization (MSO) that purchases the assets of physician practices, provides practice management and administrative support services to participating providers, and offers physicians a long-term contract and an equity position in Challenger. This information indicates that Challenger is a type of health plan

Question30: One way that a health plan can protect itself against case stripping is by requiring:

Question31: One true statement about capital and surplus ratios for health plans is that

Question32: 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

Question33: Health plans seeking to provide comprehensive healthcare plans must contract with a variety of providers for ancillary services. One characteristic of ancillary services is that

Question34: With regard to capitation arrangements for hospitals, it can correctly be Back to Top stated that

Question35: In order to calculate a simple monthly capitation payment, the Argyle Health Plan used the following information:
The average number of office visits each member makes in a year is two
The FFS rate per office visit is $55
The member copayment is $5 per office visit
The reimbursement period is one month
Given this information, Argyle would correctly calculate that the per member per month (PMPM) capitation rate should be

Question36: With regard to a health plan's underwriting of groups, it can correctly be stated that, generally, a

Question37: The medical loss ratio (MLR) for the Peacock health plan is 80%. Peacock's expense ratio is 16%.
One characteristic of Peacock's MLR is that it

Question38: 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.

Question39: The following statements are about a health plan's underwriting of small groups. Select the answer choice containing the correct statement.

Question40: The Marble Health Plan sets aside a PMPM amount for each specialty.
When a PCP in Marble's provider network refers a Marble plan member to a specialist and the specialist provides medical services to the member, the specialist begins to receive a share of those funds on a monthly basis. Marble determines the monthly payment for each specialist by dividing the number of active patients for that specialty by the total specialty pool for that month. This form of payment, which is similar to a case rate, is known as

Question41: 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

Question42: 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. The basic formula for Caribou's income statement is

Question43: Under the doctrine of corporate negligence, a health plan and its physician administrators may be held directly liable to patients or providers for failing to investigate adequately the competence of healthcare providers whom it employs or with whom it contracts, particularly where the health plan actually provides healthcare services or restricts the patient's/enrollee's choice of physician.

Question44: 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

Question45: 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

Question46: The following statements are about carve-out programs. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

Question47: One true statement about variance analysis is that

Question48: The Eclipse Health Plan is a not-for-profit health plan that qualifies under the Internal Revenue Code for tax-exempt status. This information indicates that Eclipse

Question49: 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.

Question50: An actuary for the Noble Health Plan observed that the plan's actual morbidity was lower than its assumed morbidity and that the plan's actual administrative expenses were higher than its assumed administrative expenses. In this situation, Noble's actual underwriting margin was

Question51: 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.
The main purpose of Caribou's balance sheet is to

Question52: 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

Question53: With regard to the Medicaid program in the United States, it can correctly be stated that

Question54: One true statement about a type of capitation known as a percent-of-premium arrangement is that this arrangement

Question55: The Danner Bank loaned money to the CareWell Health Plan to fund an expansion of a healthcare facility.
With respect to the type of financial information user Danner represents to CareWell, it is correct to say that Danner is an:

Question56: The reimbursement arrangement that Dr. Caroline Monroe has with the Exmoor Health Plan includes a typical withhold arrangement. One true statement about this withhold arrangement is that, for a given financial period,

Question57: The following statements are about federal laws and regulations which affect health plans that offer products and services to the employer group market. Select the answer choice containing the correct statement.

Question58: 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

Question59: The following examples describe situations that expose an individual or a health plan to either pure risk or speculative risk:
Example 1 - A health plan invested in 1,000 shares of stock issued by a technology company.
Example 2 - An individual could contract a terminal illness.
Example 3 - A health plan purchased a new information system.
Example 4 - A health plan could be held liable for the negligent acts of an employee.
The examples that describe pure risk are

Question60: State A, which requires guaranteed issue of at least two mandated healthcare plans, has established a typical health coverage reinsurance program for small employer groups. One true statement about this reinsurance program is that it most likely

Question61: The purest form of a self-funded benefit plan is one in which the employer pays benefits from current revenue, administers all aspects of the plan, and bears the risk that actual benefit payments will exceed the expected amount of payments. A decision to use this kind of self-funding is generally considered most desirable when certain conditions are present. These conditions most likely include that the benefit plan

Question62: One difference between the internal and external analysis of a health plan's financial information is that

Question63: For this question, select the answer choice containing the terms that correctly complete blanks A and B in the paragraph below. The FASB mandates that accounting information must exhibit certain qualitative characteristics. One of these characteristics is ________A________, which means that a company's financial statements use the same accounting policies and procedures from one accounting period to the next, unless there is a sound reason for changing a policy or procedure. Another characteristic is
_________B________, which requires a company to disclose in its financial statements all significant financial information about the company.

Question64: Over time, health plans and their underwriters have gathered increasingly reliable information about the morbidity experience of small groups.
Generally, in comparison to large groups, small groups tend to

Question65: The following statements are about various reimbursement arrangements that health plans have with hospitals. Select the answer choice containing the correct statement.

Question66: The physicians who work for the Sunrise Health Plan, a staff model HMO, are paid a salary that is not augmented with another type of incentive plan. Compared to the use of a traditional reimbursement method, Sunrise's use of a salary reimbursement method is more likely to

Question67: 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

Question68: 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.

Question69: Companies typically produce three types of budgets: operational budgets, cash budgets, and capital budgets. The following statements are about operational budgets. Select the answer choice containing the correct statement.

Question70: The Coral Health Plan, a for-profit health plan, has two sources of capital:
Debt and equity. With regard to these sources of capital, it can correctly be stated that

Question71: With regard to the financial statements prepared by health plans, it can correctly be stated that

Question72: One true statement about a health plan's underwriting margin is that

Question73: A health plan's costs can be classified as committed costs or discretionary costs. An example of a discretionary cost for a health plan is the cost of its

Question74: 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 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

Question75: 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

Question76: 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

Question77: The following statements are about risk management in health plans. Select the answer choice containing the correct response.

Question78: This concept, which is an extension of the going-concern concept, holds that the value of an asset that a company reports in its accounting records should be the asset's historical cost, not its current market value. Although this concept offers objectivity and reliability, it may lack relevance, particularly for assets held for a long period of time.
From the following answer choices, choose the name of the accounting concept that matches the description.

Question79: 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.

Question80: The Montvale Health Plan purchased a piece of real estate 20 years ago for $40,000. It recently sold the real estate for $80,000 and reported a capital gain of $40,000 on this sale. Even though the purchasing power of the dollar declined by half during this period and Montvale realized noactual gain in purchasing power, Montvale recorded in its accounting records the $40,000 gain from this sale. This situation best illustrates the accounting concept known as the:

Question81: A health plan that capitates a provider group typically provides or offers to provide stop-loss coverage to that provider group.

Question82: One true statement about cash-basis accounting is that

Question83: Under GAAP, three approaches to expense recognition are generally allowed: associating cause and effect, systematic and rational allocation, and immediate recognition. A health plan most likely would use the approach of systematic and rational allocation in order to

Question84: 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

Question85: Health plans sometimes use global fees to reimburse providers. Health plans would use this method of provider reimbursement for all of the following reasons EXCEPT that global fees

Question86: Because a health plan cannot decline coverage for individuals who are eligible for conversion of group health coverage to individual health coverage, the bulk of the health plan's underwriting for conversion policies is accomplished through health plan design.

Question87: Rasheed Azari, the risk manager for the Tower health plan, is attempting to work with providers in the organization in order to reduce the providers' exposure related to utilization review. Mr. Azari is considering advising the providers to take the following actions:
1-Allow Tower's utilization management decisions to override a physician's independent medical judgment
2-Support the development of a system that can quickly render a second opinion in case of disagreement surrounding clinical judgment
3-Inform a patient of any issues that are being disputed relative to a physician's recommended treatment plan and Tower's coverage decision Of these possible actions, the ones that are likely to reduce physicians' exposures related to utilization review include actions

Question88: The risk-based capital formula for health plans defines a number of risks that can impact a health plan's solvency. These categories reflect the fact that the level of risk faced by health plans is significantly impacted by provider reimbursement methods that shift utilization risk to providers. The following statements are about the effect of a health plan transferring utilization risk to providers. Select the answer choice containing the correct statement:

Question89: Mandated benefit laws are state or federal laws that require health plans to arrange for the financing and delivery of particular benefits. Within a market, the implementation of mandated benefit laws is likely to cause __________.

Question90: The Cardinal health plan complies with all of the provisions of HIPAA.
Cardinal has received requests for healthcare coverage from the following companies that meet the statutory definition of a small group:
The Xavier Company has excellent claims experience The Youngblood Company has not previously offered group healthcare coverage to its employees The Zebulon Company has poor claims experience According to HIPAA's provisions, Cardinal must issue a healthcare contract to

Question91: Mandated benefit laws are state or federal laws that require health plans to arrange for the financing and delivery of particular benefits. Ways that mandated benefits have the potential to influence health plans include:
1. Causing a lower degree of uniformity among health plans of competing health plans in a given market
2. Increasing the cost of the benefit plan to the extent that the plan must cover mandated benefits that would not have been included in the plan in the absence of the law or regulation that mandates the benefits

Question92: Dr. Martin Cassini is an obstetrician who is under contract with the Bellerby Health Plan. Bellerby compensates Dr. Cassini for each obstetrical patient he sees in the form of a single amount that covers the costs of prenatal visits, the delivery itself, and post-delivery care . This information indicates that Dr.
Cassini is compensated under the provider reimbursement method known as a:

Question93: 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

Question94: The Chamber Health Plan reimburses primary care physicians on a monthly basis by using a simple capitation method. Chamber assumes an annual utilization rate of three visits per year. The FFS rate per office visit is $75, and all plan members are required to make a $10 copayment for each office visit. This information indicates that the capitation rate that Chamber calculates per member per month (PMPM) is equal to:

Question95: 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.

Question96: The following statements are about a health plan's capital budgeting process. Select the answer choice containing the correct statement.

Question97: 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.
According to regulations, Fiesta's premium rates are reasonable if they

Question98: 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.

Question99: 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

Question100: 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

Question101: 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

Question102: The Eagle health plan wants to limit the possibility that it will be held vicariously liable for the negligent acts of providers. Dr. Michael Chan is a member of an independent practice association (IPA) that has contracted with Eagle. One step that Eagle could take in order to limit its exposure under the theory of vicarious liability is to

Question103: 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.

Question104: 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:

Question105: With regard to the major risk factors associated with group underwriting, it can correctly be stated that, typically,

Question106: Providing services under Medicare or Medicaid can impose on health plans financial risks and costs that are greater than those related to providing services to the commercial population.
Reasons that an health plan's financial risks and costs for providing services to Medicare and Medicaid enrollees tend to be higher include

Question107: The process of converting the present value of a specified amount of money to its future value is known as

Question108: 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

Question109: 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

Question110: The following statements are about the capital budgeting technique known as the payback method. Select the answer choice containing the correct statement:

Question111: 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.
Caribou is engaged in an operating activity when it

Question112: Several federal agencies establish rules and requirements that affect health plans. One of these agencies is the Department of Labor (DOL), which is primarily responsible for

Question113: 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

Question114: Variance analysis is the study of the difference between expected results and actual results. Variances can be positive or negative. A positive variance is typically considered:

Question115: If the Ascot health plan's accountants follow the going-concern concept under GAAP, then these accountants most likely

Question116: The Acorn Health Plan uses a resource-based relative value scale (RBRVS) to help determine the reimbursement amounts that Acorn should make to providers who are compensated under an FFS system. With regard to the advantages and disadvantages to Acorn of using RBRVS, it can correctly be stated that

Question117: One true statement about mandated benefit laws is that they

Question118: The Lighthouse health plan operates in a state that allows the health plan to use an underwriting method of determining a group's premium in which underwriters treat several small groups as one large group for risk assessment purposes. This method, which helps Lighthouse more accurately estimate a small group's probable claims costs, is known as

Question119: In a fee-for-service (FFS) reimbursement method, providers are paid per treatment or per service that they provide. One typical benefit of FFS reimbursement is that it:

Question120: The following statements illustrate common forms of capitation:
1. The Antler Health Plan pays the Epsilon Group, an integrated delivery system (IDS), a capitated amount to provide substantially all of the inpatient and outpatient services that Antler offers. Under this arrangement, Epsilon accepts much of the risk that utilization rates will be higher than expected. Antler retains responsibility for the plan's marketing, enrollment, premium billing, actuarial, underwriting, and member services functions.
2. The Bengal Health Plan pays an independent physician association (IPA) a capitated amount to provide both primary and specialty care to Bengal's plan members. The payments cover all physician services and associated diagnostic tests and laboratory work. The physicians in the IPA determine as a group how the individual physicians will be paid for their services.
From the following answer choices, select the response that best indicates the form of capitation used by Antler and Bengal.

Question121: 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

Question122: 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

Question123: 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

Question124: Experience rating methods can be either prospective or retrospective. With regard to these types of experience rating methods, it can correctly be stated that