Question 1

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

Accepted Answer

The fact that Eclipse Health Plan is recognized as tax-exempt under the Internal Revenue Code means it is not required to pay federal, state, or local taxes on its earnings. This is a key characteristic of nonprofit organizations, as they reinvest any earnings back into the organization rather than distributing them to owners or shareholders. Therefore, option B is the best choice.

Question 2

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 _________.

Accepted Answer

The law described in the question that allows plan members to receive medical services from certain specialists without a referral from a PCP is known as a direct access law. A due process law provides individuals with fair treatment through the judicial system, an any willing provider law allows plan members to choose a provider of their choice within the network, and a fair procedure law requires parties to follow a proper process before making a decision.

Question 3

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

Accepted Answer

The RBC formula is a set of calculations based on information in a health plan's annual financial report that yields a target capital requirement for the organization. It takes into account various sources of risk, including underwriting risk. However, it is not necessarily applicable to all health plans in the United States, and it does not assess the specific level of risk faced by each individual health plan.

Question 4

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

Accepted Answer

The Department of Labor (DOL) is primarily responsible for administering the Employee Retirement Income Security Act (ERISA), which imposes various documentation, appeals, reporting, and disclosure requirements on employer group health plans. While the DOL does play a role in enforcing HIPAA and also oversees aspects of the Affordable Care Act and COBRA, ERISA is its primary focus when it comes to health plan regulation.

Question 5

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

Accepted Answer

The drawback of the HMO Model Act is that it assumes a direct correlation between premiums charged and the level of risk, which may not always be accurate, potentially leading to inadequate solvency standards.

Question 6

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 __________.

Accepted Answer

Mandated benefit laws require health plans to cover specific benefits, which can increase the cost of providing healthcare. As a result, health plans may need to raise premiums, which can make coverage more expensive for consumers. Additionally, health plans may need to reduce benefits or provider networks to manage costs, which could lead to reduced uniformity and provider options among competing plans. However, mandated benefit laws are unlikely to directly impact the number of self-funded healthcare plans, which are typically regulated by federal law rather than state law.

Question 7

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.

Accepted Answer

This statement accurately describes the doctrine of corporate negligence as it relates to health plans and physician administrators.

Question 8

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.

Accepted Answer

Pricing risk (C-2) is typically the most important risk that health plans face 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.

Question 9

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

Accepted Answer

Allowing a system for a second opinion (2) and informing patients of disputes (3) can help reduce liability by ensuring transparency and additional validation of medical decisions.

Question 10

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

Accepted Answer

A preferred provider organization (PPO) is a type of health plan that assumes financial risk for the delivery and financing of healthcare benefits. PPOs typically contract with a network of healthcare providers who agree to provide services to plan members at a discounted rate. The PPO assumes the financial risk for paying healthcare claims for its members, and may also negotiate rates with providers and manage care to control costs. In contrast, third party administrators (TPAs), utilization review organizations (UROs), and pharmacy benefit management (PBM) plans do not typically assume financial risk for delivering and financing healthcare benefits.

Question 11

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

Accepted Answer

Health plans generally manage risk through loss reduction techniques (such as implementing safety protocols and quality improvement programs) and loss transfer techniques (such as purchasing insurance or entering into contracts with providers to share the financial risk). Option A is incorrect because ERISA does not allow for punitive damages. Option B is incorrect because group HMOs and staff HMOs may have more control over provider networks and therefore may be more comfortable assuming risk than PPOs. Option C is incorrect because benefit administration and contracting activities are part of the provision of healthcare services and coverage decisions, which are inherently risky.

Question 12

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

Accepted Answer

When a health plan transfers utilization risk to providers, it reduces its own risk exposure, which can lead to a decrease in the net worth requirement as the plan's financial stability is perceived to be stronger.

Question 13

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.

Accepted Answer

Health plans often transfer the risk of higher-than-expected utilization rates through mechanisms like capitation or risk-sharing agreements with providers.

Question 14

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

Accepted Answer

The answer of The Challenger Group is a type of...

Question 15

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.

Accepted Answer

Healthcare coverage is designed to help plan members avoid or mitigate the financial consequences of pure risk events, such as accidents or illnesses that can lead to medical expenses. Speculative risk involves the possibility of gain, such as investing in the stock market or starting a new business venture. Healthcare coverage is not designed to protect against speculative risks.

Therefore, option A is the correct answer. The other options contain incorrect or incomplete statements about pure risk and speculative risk.

Question 16

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

Accepted Answer

The answer of Users of the Fulcrum Health Plan financial...

Question 17

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

Accepted Answer

The answer of The Acorn Health Plan uses a resource-based...

Question 18

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

Accepted Answer

The use of a salary reimbursement method helps to stabilize expenses for Sunrise, as physicians are not incentivized to provide more services in order to receive more reimbursement. This can help control costs and ensure predictable expenses for the HMO.

Question 19

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

Accepted Answer

By ensuring that documents provided to Dr. Chan's patients describe him as an independent practitioner, Eagle is making it clear to patients that Dr. Chan is not an employee or agent of Eagle. This can help limit the possibility of vicarious liability for his actions. Providing office space, employing support staff, or being responsible for record-keeping may actually increase Eagle's exposure to vicarious liability.

Question 20

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

Accepted Answer

The answer of Health plans sometimes use global fees to...

Exam 3: Health Plan Finance and Risk Management