Question 1

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.

Options :

A : Dover = modified community rating

Rolling Hills = factored rating

B : Dover = modified community rating

Rolling Hills = adjusted community rating (ACR)

C : Dover = community rating by class (CRC)

Rolling Hills = factored rating

D : Dover = community rating by class (CRC)

Rolling Hills = adjusted community rating (ACR)

Answer: D

Question 2

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:

Options :

A : Is highly effective in preventing excessive services that take the form of churning, unbundling, and upcoding

B : Provides physicians who attempt to control costs with a higher rate of compensation than is provided to physicians who make the effort to control costs

C : Is relatively easy to initiate, especially in markets where managed care penetration is low

D : Guards against the practice of defensive medicine

Answer: B

Question 3

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.

Options :

A : A health plan that participates in the small group market is required to issue a contract to any employer that requests healthcare benefits, as long as the employer meets the statutory definition of a small group.

B : A small group must consist of more than 10 employees in order to be underwritten on a group, rather than an individual, basis.

C : A health plan is prohibited from canceling a small group’s healthcare coverage because of poor claims experience.

D : A health plan that participates in the small group market is limited in placing restrictions such as waiting periods and pre-existing conditions exclusions to individuals in high risk categories.

Answer: B

Question 4

In order to determine a health plan's quick liquidity ratio, a financial analyst would divide the health plan's:

Options :

A : Total assets not invested in affiliates by its total liabilities

B : Liquid assets by its total liabilities

C : Liquid assets by its contractual reserves

D : Total assets by its contractual reserves

Answer: C

Question 5

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:

Options :

A : Is a contributory plan

B : Is subject to collective bargaining

C : Is unable to secure discounts from the physicians who provide medical services to the plan members

D : Has a relatively high frequency of low severity claims

Answer: D

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