Question 1

Indigo Health Plan advertised a specific individual health insurance policy through a direct mail advertisement that provided detailed information about the product. In order to comply with the NAIC Model Rules Governing Advertisements of Accident and Sickness Insurance, Indigo must disclose whether the advertised policy contains any exceptions, reductions, or limitations. Thus, Indigo disclosed in the advertisement that one policy provision limits coverage for dental exams to $50 per exam and to one exam per calendar year. This information indicates that, with respect to the definitions in the NAIC Model Rules, Indigo's advertisement is an example of an

Accepted Answer

The advertisement is an invitation to contract because it provides detailed information about the product and invites the recipient to purchase it. The disclosed policy provision is a reduction because it limits coverage for dental exams to a certain amount and frequency, thereby reducing the scope of coverage.

Question 2

The Nonprofit Institutions Act allows the Neighbor Hospital, a not-for-profit hospital, to purchase at a discount drugs for its 'own use'. Consider whether the following sales of drugs were not for Neighbor's own use and therefore were subject to antitrust enforcement: Elijah Jamison, a former patient of Neighbor, renewed a prescription that was originally dispensed when he was discharged from Neighbor. Neighbor filled a prescription for Camille Raynaud, who has no connection to Neighbor other than that her prescribing physician is located in a nearby physician's office building. Neighbor filled a prescription for Nigel Dixon, who is a friend of a Neighbor medical staff member. With respect to the United States Supreme Court's definition of 'own use,' the drug sales that were not for Neighbor's own use were the sales that Neighbor made to

Accepted Answer

The sales to all three individuals - Elijah Jamison, Camille Raynaud, and Nigel Dixon - were not for Neighbor's own use because they did not involve treatment of current Neighbor patients. Therefore, all three sales could potentially be subject to antitrust enforcement.

Question 3

The Wentworth Corporation uses a self-funded plan to provide its employees with healthcare benefits. One consequence of Wentworth's approach to providing healthcare benefits is that selffunding

Accepted Answer

Self-funding eliminates the need for an insurer or health plan to manage and pay the claims. Therefore, Wentworth does not have to pay a risk charge to an insurer or health plan for handling the healthcare benefits. A is incorrect because self-funding may involve the assistance of a third-party administrator. B is incorrect because self-funding may lower state premium taxes. D is unrelated to self-funding.

Question 4

Antitrust laws can affect the formation, merger activities, or acquisition initiatives of a health plan. In the United States, the two federal agencies that have the primary responsibility for enforcing antitrust laws are the

Accepted Answer

The two federal agencies that have the primary responsibility for enforcing antitrust laws in the United States are the Federal Trade Commission (FTC) and the Department of Justice (DOJ). Therefore, option D is the correct answer. The Internal Revenue Service (IRS) and the Department of Labor (DOL) do not have any primary responsibility for enforcing antitrust laws. Option B is incorrect as the Office of Inspector General (OIG) and the Department of Defense (DOD) are not responsible for enforcing antitrust laws.

Question 5

Determine whether the following statement is true or false: Failing to adopt and implement standards for the prompt investigation and settlement of claims is an example of an activity that would be considered an improper claims practice according to the NAIC Model Unfair Claims Settlement Practices Act.

Accepted Answer

The NAIC Model Unfair Claims Settlement Practices Act identifies failing to adopt and implement standards for the prompt investigation and settlement of claims as an example of an improper claims practice.

Question 6

Greenpath Health Services, Inc., an HMO, recently terminated some providers from its network in response to the changing enrollment and geographic needs of the plan. A provision in Greenpath's contracts with its healthcare providers states that Greenpath can terminate the contract at any time, without providing any reason for the termination, by giving the other party a specified period of notice. The state in which Greenpath operates has an HMO statute that is patterned on the NAIC HMO Model Act, which requires Greenpath to notify enrollees of any material change in its provider network. As required by the HMO Model Act, the state insurance department is conducting an examination of Greenpath's operations. The scope of the on-site examination covers all aspects of Greenpath's market conduct operations, including its compliance with regulatory requirements. With respect to the type of change that constitutes a material change under the HMO Model Act's disclosure requirements, the termination of one healthcare provider from Greenpath's provider network

Accepted Answer

The answer of Greenpath Health Services, Inc., an HMO, recently...

Question 7

The Good & Well Pharmacy, a Medicaid provider of outpatient drugs, is subject to the prospective drug utilization review (DUR) mandates of the Omnibus Budget Reconciliation Act of 1990 (OBRA '90). One component of prospective DUR is screening. In this context, when Good & Well is involved in the process of screening, the pharmacy is

Accepted Answer

Screening in the context of prospective DUR refers to the process of reviewing patient profiles to identify potential problems, such as drug interactions or therapeutic duplications. This is an important component of ensuring safe and effective use of medications, especially in Medicaid populations who may be at higher risk for adverse drug events. Updating a formulary (A) and consulting directly with prescribers and patients (C) are other important activities related to medication management, but they are not specifically related to screening in the context of prospective DUR. Denying coverage for off-label use (D) is not necessarily part of prospective DUR, although Medicaid programs may have policies in place to restrict coverage for certain off-label uses.

Question 8

Nightingale Health Systems, a health plan, operates in a state that requires health plans to allow enrollees to visit obstetricians and gynecologists without a referral from a primary care provider. This information indicates that Nightingale must comply with a type of mandate known as a:

Accepted Answer

The information provided indicates that Nightingale is required to allow enrollees to directly access obstetricians and gynecologists without a referral from a primary care provider. This type of requirement is known as a direct access law.

Question 9

The Surrey Medical Supply Company was formed as a limited partnership. In this partnership, Victoria Lewin is one of the limited partners and Oscar Gould is a general partner. This information indicates that, with respect to the typical characteristics of limited partnerships,

Accepted Answer

Limited partners like Ms. Lewin typically have more freedom to leave the partnership without affecting its continuity, whereas general partners like Mr. Gould are more integral to the partnership's operations and continuity.

Question 10

The Tidewater Life and Health Insurance Company is owned by its policy owners, who are entitled to certain rights as owners of the company, and it issues both participating and nonparticipating insurance policies. Tidewater is considering converting to the type of company that is owned by individuals who purchase shares of the company's stock. Tidewater is incorporated under the laws of Illinois, but it conducts business in the Canadian provinces of Ontario and Manitoba. Tidewater established the Diversified Corporation, which then acquired various subsidiary firms that produce unrelated products and services. Tidewater remains an independent corporation and continues to own Diversified and the subsidiaries. In order to create and maintain a common vision and goals among the subsidiaries, the management of Diversified makes decisions about strategic planning and budgeting for each of the businesses. Tidewater's participating policy owners have the right to

Accepted Answer

Participating policy owners in a mutual insurance company like Tidewater have the right to elect the board of directors, typically on the basis of one vote per policy owner.

Question 11

The Tidewater Life and Health Insurance Company is owned by its policy owners, who are entitled to certain rights as owners of the company, and it issues both participating and nonparticipating insurance policies. Tidewater is considering converting to the type of company that is owned by individuals who purchase shares of the company's stock. Tidewater is incorporated under the laws of Illinois, but it conducts business in the Canadian provinces of Ontario and Manitoba. Tidewater established the Diversified Corporation, which then acquired various subsidiary firms that produce unrelated products and services. Tidewater remains an independent corporation and continues to own Diversified and the subsidiaries. In order to create and maintain a common vision and goals among the subsidiaries, the management of Diversified makes decisions about strategic planning and budgeting for each of the businesses. In creating Diversified, Tidewater formed the type of company known as

Accepted Answer

A downstream holding company is a company that owns other companies (subsidiaries) and manages them, which is what Diversified Corporation does for Tidewater's subsidiaries.

Question 12

The Tidewater Life and Health Insurance Company is owned by its policy owners, who are entitled to certain rights as owners of the company, and it issues both participating and nonparticipating insurance policies. Tidewater is considering converting to the type of company that is owned by individuals who purchase shares of the company's stock. Tidewater is incorporated under the laws of Illinois, but it conducts business in the Canadian provinces of Ontario and Manitoba. Tidewater established the Diversified Corporation, which then acquired various subsidiary firms that produce unrelated products and services. Tidewater remains an independent corporation and continues to own Diversified and the subsidiaries. In order to create and maintain a common vision and goals among the subsidiaries, the management of Diversified makes decisions about strategic planning and budgeting for each of the businesses. In order to become the type of company that is owned by people who purchase shares of the company's stock, Tidewater must undergo a process known as

Accepted Answer

Demutualization is the process by which a company owned by its policyholders, such as Tidewater, converts to a company owned by shareholders who purchase shares of the company's stock. This would mean that Tidewater's policyholders would receive shares in the newly formed company in exchange for their ownership rights in the old company. This process typically occurs when a company wants to access new sources of capital and increase its ability to compete with other companies in the industry. While Tidewater is incorporated in Illinois, its business operations in Canada may also be subject to specific regulatory requirements for demutualization in those provinces. The fact that Tidewater owns Diversified and its subsidiaries is not directly relevant to the process of demutualization.

Question 13

Certificate of need (CON) laws apply to health plans in a variety of ways, depending upon the state. By definition, CON laws are laws that are designed to

Accepted Answer

Certificate of need (CON) laws are designed to regulate the construction, renovation, and acquisition of healthcare facilities as well as the purchase of major medical equipment in a geographical area. Therefore, option A is the best choice for this question. Option B is incorrect as it refers to antitrust laws, which are different from CON laws. Option C refers to coordination of benefits, which pertains to multiple health plans covering the same person. Finally, option D refers specifically to regulating HMOs, which may be one part of CON laws, but it does not encompass the entirety of these laws.

Question 14

The Sawgrass Health Center is an institution that trains healthcare professionals and performs various clinical and other types of healthcare-related research. Because Sawgrass receives government funding, it is required to provide medical care for the poor. Of the following types of health plans, Sawgrass can best be described as:

Accepted Answer

An academic medical center (AMC) is an institution that trains healthcare professionals and conducts research, often receiving government funding and providing care for underserved populations, fitting the description of Sawgrass Health Center.

Question 15

Regulatory and legislative bodies are among the important environmental forces in the health plan industry. The following statements are about such regulation and legislation. Select the answer choice that contains the correct statement.

Accepted Answer

Federal and state governments have significant influence over the formation and operations of health plans as stakeholders in the industry. This influence is exerted through regulation and legislation. Additionally, federal guidelines do exist to direct health plans on compliance issues when encountering conflicting state laws. Administrative rules and regulations do carry the force of law, so option B is incorrect. Finally, there is no information provided to support option D, so it is also incorrect.

Question 16

The Tidewater Life and Health Insurance Company is owned by its policy owners, who are entitled to certain rights as owners of the company, and it issues both participating and nonparticipating insurance policies. Tidewater is considering converting to the type of company that is owned by individuals who purchase shares of the company's stock. Tidewater is incorporated under the laws of Illinois, but it conducts business in the Canadian provinces of Ontario and Manitoba. With regard to the state in which Tidewater is domiciled, it is correct to say that, from the perspective of both Ontario and Manitoba, Tidewater is considered to be the type of corporation known as:

Accepted Answer

Tidewater is incorporated in Illinois, which is outside of Canada. Therefore, from the perspective of Ontario and Manitoba, it is considered an alien corporation.

Question 17

The Tidewater Life and Health Insurance Company is owned by its policy owners, who are entitled to certain rights as owners of the company, and it issues both participating and nonparticipating insurance policies. Tidewater is considering converting to the type of company that is owned by individuals who purchase shares of the company's stock. Tidewater is incorporated under the laws of Illinois, but it conducts business in the Canadian provinces of Ontario and Manitoba. Tidewater established the Diversified Corporation, which then acquired various subsidiary firms that produce unrelated products and services. Tidewater remains an independent corporation and continues to own Diversified and the subsidiaries. In order to create and maintain a common vision and goals among the subsidiaries, the management of Diversified makes decisions about strategic planning and budgeting for each of the businesses. By combining under Diversified a group of businesses that produce unrelated products and by consolidating the management of the businesses, Tidewater has achieved the type(s) of integration known as

Accepted Answer

Tidewater has achieved conglomerate integration by acquiring unrelated businesses and operational integration by consolidating their management under Diversified.

Question 18

In the course of doing business, health plans conduct basic corporate transactions. For example, when a health plan engages in the corporate transaction known as aggressive sourcing, the health plan

Accepted Answer

Aggressive sourcing involves seeking the best deals from vendors for various business needs, such as equipment and services, to reduce costs and improve efficiency.

Question 19

Some health plans qualify as tax-exempt organizations under Sections 501(c)(3) and 501(c)(4) of the Internal Revenue Code. One true statement regarding a health plan that qualifies as a 501(c)(4) social welfare organization, in comparison to a health plan that qualifies as a 501(c)(3) charitable organization, is that a

Accepted Answer

A 501(c)(4) exemption is generally easier to obtain than a 501(c)(3) exemption because 501(c)(4) organizations can engage in more political and lobbying activities and are not required to benefit the public at large, allowing them to serve a smaller group of individuals.

Question 20

Greenpath Health Services, Inc., an HMO, recently terminated some providers from its network in response to the changing enrollment and geographic needs of the plan. A provision in Greenpath's contracts with its healthcare providers states that Greenpath can terminate the contract at any time, without providing any reason for the termination, by giving the other party a specified period of notice. The state in which Greenpath operates has an HMO statute that is patterned on the NAIC HMO Model Act, which requires Greenpath to notify enrollees of any material change in its provider network. As required by the HMO Model Act, the state insurance department is conducting an examination of Greenpath's operations. The scope of the on-site examination covers all aspects of Greenpath's market conduct operations, including its compliance with regulatory requirements. From the following answer choices, select the response that identifies the type of market conduct examination that is being performed on Greenpath and the frequency with which the HMO Model Act requires state insurance departments to conduct an examination of an HMO's operations.

Accepted Answer

The type of examination being performed on Greenpath is a comprehensive market conduct examination, as it covers all aspects of Greenpath's market conduct operations. The HMO Model Act requires state insurance departments to conduct a comprehensive market conduct examination of an HMO's operations at least every three years. Therefore, B is the correct answer.

Exam 2: Governance and Regulation