Health Plan Finance and Risk Management
Last Update Oct 15, 2025
Total Questions : 215
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The methods of alternative funding for health coverage can be divided into the following general categories:
Typically, small employers are able to use some of the alternative funding methods in
This concept, which holds that a company should record the amounts associated with its business transactions in monetary terms, assumes that the value of money is stable over time. This concept provides objectivity and reliability, although its relevance may fluctuate.
From the following answer choices, choose the name of the accounting concept that matches the description.
With regard to capitation arrangements for hospitals, it can correctly be Back to Top stated that
With regard to a health plan's underwriting of groups, it can correctly be stated that, generally, a
This concept, which is an extension of the going-concern concept, holds that the value of an asset that a company reports in its accounting records should be the asset's historical cost, not its current market value. Although this concept offers objectivity and reliability, it may lack relevance, particularly for assets held for a long period of time.
From the following answer choices, choose the name of the accounting concept that matches the description.
Under the alternative funding method used by the Flair Company, Flair assumes financial responsibility for paying claims up to a specified level and deposits the funds necessary to pay these claims into a bank account that belongs to Flair. However, an insurer, which acts as an agent of Flair, makes the actual payment of claims from this account. When claims exceed the specified level, the insurer pays the balance from its own funds. No state premium tax is levied on the amounts that Flair deposits into this bank account.
From the following answer choices, choose the name of the alternative funding method described.
In order to show the efficiency of a health plan's managers in using the health plan's investments to earn a return for stockholders, a financial analyst most likely would use a type of profitability ratio known as
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.
The following statements are about a health plan's evaluation of its responsibility centers. Select the answer choice containing the correct statement.
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 the premium-paying period of the healthcare coverage. This approach to expense recognition is known as:
The Arista Health Plan is evaluating the following four groups that have applied for group healthcare coverage:
With respect to the relative degree of risk to Arista represented by these four companies, the company that would most likely expose Arista to the lowest risk is the:
One way that the Medicare and Medicaid programs differ is that under Medicare, a smaller proportion of provider reimbursement goes to the primary care providers and a greater proportion of the reimbursement goes to hospitals and specialists.
The process of converting the present value of a specified amount of money to its future value is known as
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
Doctors’ Care is an individual practice association (IPA) under contract to the Jasper Health Plan to provide primary and secondary care to Jasper’s members. Jasper’s capitation payments compensate Doctors’ Care for all physician services and associated diagnostic tests and laboratory work. The physicians at Doctors’ Care, as a group, determine how individual physicians in the group will be remunerated. The type of capitation used by Jasper to compensate Doctors’ Care is known as:
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:
Experience rating methods can be either prospective or retrospective. With regard to these types of experience rating methods, it can correctly be stated that
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
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
The accounting department of the Enterprise health plan adheres to the following policies:
Of these Enterprise policies, the ones that are consistent with the accounting principle of conservatism are Policies
The following statements are about a health plan's underwriting of small groups. Select the answer choice containing the correct statement.
One true statement about a type of capitation known as a percent-of-premium arrangement is that this arrangement
The following statements are about federal laws and regulations which affect health plans that offer products and services to the employer group market. Select the answer choice containing the correct statement.
The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
One likely way in which Investment Center X or Y could effectively increase its ROI is by
The traditional financial ratios that analysts use to study a health plan's GAAP-based financial statements include liquidity ratios, activity ratios, leverage ratios, and profitability ratios. Of these categories of ratios, analysts are most likely to use
Companies typically produce three types of budgets: operational budgets, cash budgets, and capital budgets. The following statements are about operational budgets. Select the answer choice containing the correct statement.
The theory of vicarious liability or ostensible agency can expose a health plan to the risk that it could be held liable for the acts of independent contractors. Factors that may give rise to the assumption that an agency relationship exists between a health plan and its independent contractors include:
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
Health plans have access to a variety of funding sources depending on whether they are operated as for-profit or not-for-profit organizations. The Verde Health Plan is a for-profit health plan and the Noir Health Plan is a not-for-profit health plan. From the answer choices below, select the response that correctly identifies whether funds from debt markets and equity markets are available to Verde and Noir:
With regard to the major risk factors associated with group underwriting, it can correctly be stated that, typically,
TESTED 15 Oct 2025
