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Health Plan Finance and Risk Management Certification Exam

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NEW QUESTION 1

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:

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

Answer: C

NEW QUESTION 2

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

  • A. is administered by a commercial reinsurance company that operates in State A
  • B. allows a small employer carrier operating in State A to reinsure either an entire small group or specific individuals within the group
  • C. has, for the coverage on a plan, a base premium, which is multiplied by a factor of 2 in the case of reinsurance on entire groups or a factor of 3 for reinsurance on individuals
  • D. prohibits a small employer carrier operating in State A from placing individuals enrolled in small groups in a reinsurance pool

Answer: B

NEW QUESTION 3

For a given healthcare product, the Magnolia Health Plan has a premium of $80 PMPM and a unit variable cost of $30 PMPM. Fixed costs for this product are $30,000 per month. Magnolia can correctly calculate the break-even point for this product to be:

  • A. 274 members
  • B. 375 members
  • C. 600 members
  • D. 1,000 members

Answer: C

NEW QUESTION 4

The Longview Hospital contracted with the Carlyle Health Plan to provide inpatient services to Carlyle’s enrolled members. Carlyle provides Longview with a type of stop-loss coverage that protects, on a claims incurred and paid basis, against losses arising from significantly higher than anticipated utilization rates among Carlyle’s covered population. The stop-loss coverage specifies an attachment point of 130% of Longview’s projected $2,000,000 costs of treating Carlyle plan members and requires Longview to pay 15% of any costs above the attachment point. In a given plan year, Longview incurred covered costs totaling $3,000,000.
With regard to the type of stop-loss coverage provided to Longview by Carlyle and to whether this coverage is classified as insurance or reinsurance, the risk transfer approach used in this situation can be described as:

  • A. aggregate stop-loss reinsurance
  • B. aggregate stop-loss insurance
  • C. specific stop-loss reinsurance
  • D. specific stop-loss insurance

Answer: C

NEW QUESTION 5

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. Thisplan is not a part of a collective bargaining process. A potential disadvantage to Jasmine of using a 501(c)(9) trust is that

  • 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

Answer: A

NEW QUESTION 6

The Challenger Group is a type of management services organization (MSO) that purchases the assets of physician practices, provides practice management andadministrative support servicesto 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

  • A. Known as
  • B. An integrated delivery system (IDS)
  • C. Amedical foundation
  • D. Aprovider-sponsored organization (PSO)
  • E. Aphysician practice management (PPM) company

Answer: D

NEW QUESTION 7

A primary reason that a financial analyst would measure the Tapestry health plan's return on assets (ROA) is to determine the

  • A. Amount of net income per share of Tapestry's common stock
  • B. Rate of return on the book value of the stockholders' investment in Tapestry
  • C. Proportion of earnings paid out to Tapestry stockholders in the form of cash dividends
  • D. Efficiency of Tapestry's management

Answer: D

NEW QUESTION 8

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 9

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 10

The Longview Hospital contracted with the Carlyle Health Plan to provide inpatient services to Carlyle’s enrolled members. Carlyle provides Longview with a type of stop-loss coverage that protects, on a claims incurred and paid basis, against losses arising from significantly higher than anticipated utilization rates among Carlyle’s covered population. The stop-loss coverage specifies an attachment point of 130% of Longview’s projected $2,000,000 costs of treating Carlyle plan members and requires Longview to pay 15% of any costs above the attachment point. In a given plan year, Longview incurred covered costs totaling $3,000,000.
For the year in which Longview’s incurred covered costs were $3,000,000, the amount for which Longview will be responsible is:

  • A. $2,000,000
  • B. $2,600,000
  • C. $2,660,000
  • D. $3,900,000

Answer: C

NEW QUESTION 11

The Jade Health Plan used a profitability index (PI) to rank the following capital proposals:
ProposalPI
A0.45
B1.05
This information indicates that, of these two projects, Jade would most likely select:

  • A. Proposal A, and the PI indicates that the net present value (NPV) for this project is less than zero
  • B. Proposal A, and the PI indicates that the net present value (NPV) for this project is greater than zero
  • C. Proposal B, and the PI indicates that the net present value (NPV) for this project is less than zero
  • D. Proposal B, and the PI indicates that the net present value (NPV) for this project is greater than zero

Answer: C

NEW QUESTION 12

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:

  • A. Federal law: Consolidated Omnibus Budget Reconciliation Act (COBRA) Entity: Lindberg
  • B. Federal law: Consolidated Omnibus Budget Reconciliation Act (COBRA) Entity: Benson
  • C. Federal law: Employee Retirement Income Security Act (ERISA) Entity: Lindberg
  • D. Federal law: Employee Retirement Income Security Act (ERISA) Entity: Benson

Answer: A

NEW QUESTION 13

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

  • A. $152
  • B. $188
  • C. $192
  • D. $228

Answer: B

NEW QUESTION 14

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

  • A. End result of a typical family rate ratio is that the health plan's family rate is subsidized by its single premium rate
  • B. health plan cannot arbitrarily increase or decrease its rate ratio for a rate category
  • C. rate ratios used by the health plan most likely have been established by government regulations
  • D. health plan should determine its rate ratios by considering family size alone rather than competitive factors such as the ratios that competitors are using

Answer: A

NEW QUESTION 15

A financial analyst wants to learn the following information about the Forest health plan for a given financial period:

  • A. Forest's beginning-of-period cash balance
  • B. Forest's minimum cash balance
  • C. The cash needs of Forest during the period
  • D. Forest's end-of-period cash balanceFrom Forest's cash budget, the analyst most likely can obtain information about
  • E. A, B, C, and D
  • F. A, B, and C only
  • G. A and D only
  • H. B and C only

Answer: A

NEW QUESTION 16

The Column health plan is in the process of developing a strategic plan.
The following statements are about this strategic plan. Three of the statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

  • A. Human resources most likely will be a critical component of Column's strategic plan because, in health plan markets, the size and the quality of a health plan's provider network is often more important to customers than are the details of a product's benefit design.
  • B. Column's strategic plan should only address how the health plan will differentiate its products, rather than where and how it will sell these products.
  • C. Column most likely will need to develop contingency plans to address the need to make adjustments to its original strategic plan.
  • D. Column's information technology (IT) strategy most likely will be a critical element in successfully implementing the health plan's strategic plan.

Answer: B

NEW QUESTION 17
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