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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.
Carlyle most likely is responsible for paying Longview for the claims incurred before Longview has actually paid the medical expenses.

  • A. True
  • B. False

Answer: B


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

  • A. McGwire's retention of net income
  • B. McGwire's payment of cash dividends on the stock it issued
  • C. McGwire's purchase of treasury stock
  • D. All of the above

Answer: D


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

  • A. Report the payment of the health plan's utility bills
  • B. Spread the payment of sales force commissions over the premium paying period of healthcare coverage
  • C. Report the fees paid by the health plan to attorneys and consultants
  • D. Depreciate the cost of a new computer system over the useful life of the system

Answer: D


The Northwest Company offers its employees the option of choosing to receive their
healthcare benefits from an HMO or from a traditional indemnity plan. The premiums for the HMO are lower than for the traditional indemnity plan. In this situation, it is correct to assume that:
* 1.Individual low utilizers are more likely to enroll in the traditional indemnity plan 2.Individual high utilizers are more likely to enroll in the HMO

  • A. Both 1 and 2
  • B. 1 only
  • C. 2 only
  • D. Neither 1 nor 2

Answer: D


The following information was presented on one of the financial statements prepared by the Rouge Health Plan as of December 31, 1998:
AHM-520 dumps exhibit
This type of financial statement is called:

  • A. A balance sheet
  • B. An income statement
  • C. A statement of owners’ equity
  • D. A cash flow statement

Answer: C


The Proform Health Plan uses agents to market its small group business. Proform capitalizes the commission expense relating to this line of business by spreading the commissions over thepremium-paying period of the healthcare coverage. This approach to expense recognition is known as:

  • A. Systematic and rational allocation
  • B. Matching principle
  • C. Immediate recognition
  • D. Associating cause and effect

Answer: D


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


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:

  • A. $6.25
  • B. $16.25
  • C. $18.75
  • D. $21.25

Answer: B


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


The following statements are about the option for health plan funding known as a self- funded plan. Select the answer choice containing the correct response:

  • A. In a self-funded plan, an employer is relieved of all risk associated with paying for the healthcare costs of its employees.
  • B. Self-funded plans are subject to the same state laws and regulations that apply to health insurance policies.
  • C. Employers electing to self-fund a health plan are required to pay claims from a separate trust established for that purpose.
  • D. An employer electing to self-fund a health plan has the option of purchasing stop-loss insurance to transfer part of the financial risk to an insurer.

Answer: D


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

  • A. Both 1 and 2
  • B. 1 only
  • C. 2 only
  • D. Neither 1 nor 2

Answer: C


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.

  • A. True
  • B. False

Answer: A


A health plan most likely would use benchmarking in order to

  • A. Measure its performance and practices against those of other companies to help identify those practices that will lead to superior performance in a variety of financial and non- financial areas
  • B. Calculate the percentage changes in its financial statement items over several consecutive accounting periods
  • C. Determine both the direction and velocity of trends in its financial statements
  • D. Display only percentage relationships in its financial statements

Answer: A


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

  • A. Capital budgeting
  • B. Compounding
  • C. Capital rationing
  • D. Discounting

Answer: B


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

  • A. Medicaid will be M
  • B. Falk’s primary insurer
  • C. Medicare will be M
  • D. Falk’s primary insurer
  • E. Either Medicare or Medicaid will be M
  • F. Falk’s primary insurer depending on her election
  • G. Medicare and Medicaid will each be responsible for one-half of M
  • H. Falk’s covered expense

Answer: B


The Amethyst Health Plan uses a budgeting approach that requires each line of business within Amethyst’s operation to justify its continued operation. Amethyst begins with the premise that no resources will be allocated for the following period unless each dollar to be spent is justified and is shown to be within departmental plans and corporate goals and objectives. The budgeting approach used by Amethyst is known as:

  • A. Bottom-up budgeting
  • B. Top-down budgeting
  • C. Zero-based budgeting
  • D. Master budgeting

Answer: C


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