Test Question AHM 520

AHM 520 Health Plan Finance and Risk Management

>>>>> TEST SERIES <<<<<<

Chapter 1 A:

Test 1: Health Plan Financial Information

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

independent auditors, the plan members, the providers, and the competitors only

independent auditors, the controller, and the providers only controller and the competitors only plan members and the providers only

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2. 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

has only one potential source of funding: borrowing money does not pay federal, state, or local taxes on its earnings must distribute its earnings to its owners-investors for their personal

gain is a privately held corporation

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3. 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 known as

an integrated delivery system (IDS) a medical foundation a provider-sponsored organization (PSO) a physician practice management (PPM) company

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4. 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

third party administrator (TPA) utilization review organization (URO) preferred provider organization (PPO) pharmacy benefit management (PBM) plan

-------------------------------** Correct Answers **-------------------------------------------------

1. 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

A. independent auditors, the plan members, the providers, and the competitors only B. independent auditors, the controller, and the providers only C. controller and the competitors onlyD. plan members and the providers only Your correct answer: D

Correct! Health plan members, providers, outside agents and brokers, creditors, stockholders, and potential investors are examples of external users with a direct financial interest in the financial performance of a health plan. --------------------------------------------------------------------------------2. 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 EclipseA. has only one potential source of funding: borrowing money B. does not pay federal, state, or local taxes on its earnings C. must distribute its earnings to its owners-investors for their personal gainD. is a privately held corporation Your correct answer: B

Correct! Tax-exempt organizations do not pay federal, state, or local taxes on earnings. --------------------------------------------------------------------------------

3. 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 known asA. an integrated delivery system (IDS) B. a medical foundation C. a provider-sponsored organization (PSO)D. a physician practice management (PPM) company

Your correct answer: D Correct! A PPM purchases the assets of of physician practices, provides practice management and administrative support services to participating providers. -------------------------------------------------------------------------------- 4. 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 aA. third party administrator (TPA) B. utilization review organization (URO) C. preferred provider organization (PPO)D. pharmacy benefit management (PBM) plan

Your correct answer: C

Correct! HMOs, PPOs, and PSOs, assume the financial risks of delivering healthcare benefits to plan members.

>---------- End of the Test ----------<

Chapter 2 A

Test 2: Types of Risk

1. 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.

Healthcare coverage is designed to help plan members avoid pure risk, not speculative risk. Only pure risk involves the possibility of gain. An example of speculative risk is the possibility that an individual will contract a serious illness. Only speculative risk contains an element of uncertainty.

--------------------------------------------------------------------------------2. 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.

asset risk (C-1) pricing risk (C-2) interest-rate risk (C-3) general management risk (C-4)

--------------------------------------------------------------------------------3. 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

uses estimates of future expenditures and premium income to estimate future risk fails to adjust the solvency requirement to account for the size of an HMO's premiums and expenditures assumes that the amount of premiums an HMO charges always directly corresponds to the level of the risk that the HMO faces fails to mandate a minimum level of capital and surplus that an HMO must maintain

--------------------------------------------------------------------------------4. 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

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 fails to take into account a health plan's underwriting risk, which is the risk that the premiums the health plan receives will be insufficient to pay for the healthcare services it provides to its plan members applies to all health plans in the United States fails to assess the specific level of risk faced by each health plan

--------------------------------------------------------------------------------5. 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

an increase the health plan's underwriting risk a decrease the health plan's credit risk a decrease the health plan's net worth requirement all of the above

--------------------------------------------------------------------------------6. 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.

Generally, the smaller the likely benefits of accepting a risk, and the lower the costs of avoiding that risk, the greater the likelihood that a health plan will elect to avoid the risk. A health plan is seldom able to transfer any of the risk that utilization rates will be higher than expected and that its cost of providing healthcare will exceed the revenues it receives. If a risk is a pure risk from the point of view of a health plan, then the health plan most likely will attempt to avoid the risk. A health plan would most likely transfer some or all of its utilization risk if it pays a provider a rate that is based on the number of plan enrollees that choose the provider as their primary care provider (PCP).

-----------------------------** Correct Answers **---------------------------------------------------

1. 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.A. Healthcare coverage is designed to help plan members avoid pure risk, not speculative risk. B. Only pure risk involves the possibility of gain. C. An example of speculative risk is the possibility that an individual will contract a serious illness.D. Only speculative risk contains an element of uncertainty. Your correct answer: A

Correct! The possibility of economic loss without the possibility of gain—pure risk—is the only kind of risk that healthcare coverage is designed to help plan members avoid.

-------------------------------------------------------------------------------- 2. 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.

A. asset risk (C-1) B. pricing risk (C-2) C. interest-rate risk (C-3)D. general management risk (C-4)

Your correct answer: B

Correct! For most health plans, pricing risk is the most important risk the organization faces. -------------------------------------------------------------------------------- 3. 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 itA. uses estimates of future expenditures and premium income to estimate future risk B. fails to adjust the solvency requirement to account for the size of an HMO's premiums and expenditures C. assumes that the amount of premiums an HMO charges always directly corresponds to the level of the risk that the HMO facesD. fails to mandate a minimum level of capital and surplus that an HMO must maintain Your correct answer: C

Correct! The size of an HMO’s premiums and expenditures is assumed to reflect accurately the level of risk the HMO faces. ------------------------------------------------------------------------------- 4. 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

A. 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

B. fails to take into account a health plan's underwriting risk, which is the risk that the premiums the health plan receives will be insufficient to pay for the healthcare services it provides to its plan members C. applies to all health plans in the United StatesD. fails to assess the specific level of risk faced by each health plan Your correct answer: A Correct!

Your incorrect answer: C Incorrect. The financial standards contained in the HMO Model Act and various states’ HMO and insurance statutes may not apply to some provider organizations or certain other risk-bearing entities. Please review pages 31 and 33 of this lesson.

Your incorrect answer: D Incorrect. The RBC formula assesses the specific level of risk faced by each health plan. Please review pages 32 and 33 of this lesson. -------------------------------------------------------------------------------- 5. 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 inA. an increase the health plan's underwriting risk B. a decrease the health plan's credit risk C. a decrease the health plan's net worth requirementD. all of the above


Correct! Because the underwriting risk is by far the largest risk in the RBC formula for health plans, the net effect of using provider reimbursement contracts to transfer risk is that the health plan’s net worth requirement will decrease. -------------------------------------------------------------------------------- 6. 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.

A. Generally, the smaller the likely benefits of accepting a risk, and the lower the costs of avoiding that risk, the greater the likelihood that a health plan will elect to avoid the risk.

B. A health plan is seldom able to transfer any of the risk that utilization rates will be higher than expected and that its cost of providing healthcare will exceed the revenues it receives.

C. If a risk is a pure risk from the point of view of a health plan, then the health plan most likely will attempt to avoid the risk.

D. A health plan would most likely transfer some or all of its utilization risk if it pays a provider a rate that is based on the number of plan enrollees that choose the provider as their primary care provider (PCP). Your incorrect answer: A Incorrect. Please review page 40 of this lesson.

Your incorrect answer: C Incorrect. Please review page 41 of this lesson. Your correct answer: B Statement B is FALSE, Plan can transfer some Risk to Providers using “Reimbursement Methods”, answer Choice is - Correct!

>---------- End of the Test ----------<

Chapter 2 BTest 3: Risk Management in Health Plans

1. 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.

True False

-------------------------------------------------------------------------------- 2. 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

supply Dr. Chan with office space employ nurses, laboratory technicians, and therapists to support Dr. Chan be responsible for keeping Dr. Chan's medical records updated ensure that documents provided to Dr. Chan's patients describe him as an independent practitioner

--------------------------------------------------------------------------------3. 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

1, 2, and 3 1 and 2 only 1 and 3 only 2 and 3 only

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

Risk management is especially important to health plans because the Employee Retirement Income Security Act of 1974 (ERISA) allows plan members to recover punitive damages from healthcare plans. With regard to the relative risk for health plan structures based upon the degree of influence and relationships that health plans maintain with their providers, preferred provider organizations (PPOs) typically have a higher risk than do group HMOs and staff HMOs. Although there are clear risks associated with the provision of healthcare services and coverage decisions surrounding that care, the bulk of risk in health plans is associated with a health plan's benefit administration and contracting activities. A health plan generally structures its risk management process around loss reduction techniques and loss transfer techniques.

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Correct answers :>1. 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.A. True B. False

Your correct answer: A Correct!

-------------------------------------------------------------------------------- 2. 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 toA. supply Dr. Chan with office space B. employ nurses, laboratory technicians, and therapists to support Dr. Chan C. be responsible for keeping Dr. Chan's medical records updatedD. ensure that documents provided to Dr. Chan's patients describe him as an independent practitioner

Your correct answer: D Correct! The risk manager may wish to review documents provided to patients to ensure that the physician is described as an independent practitioner and that there is a clear distinction between those services provided by the health plan and those provided by the physician.

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3. 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 decisionOf these possible actions, the ones that are likely to reduce physicians' exposures related to utilization review include actionsA. 1, 2, and 3 B. 1 and 2 only C. 1 and 3 onlyD. 2 and 3 only Your correct answer: D Correct! Physicians must exercise independent medical judgment that meets with the standard of care. Utilization management decisions should not influence the physician’s clinical decisions in any way that the physician would consider truly harmful to the patient. --------------------------------------------------------------------------------

4. The following statements are about risk management in health plans. Select the answer choice containing the correct response.A. Risk management is especially important to health plans because the Employee Retirement Income Security Act of 1974 (ERISA) allows plan members to recover punitive damages from healthcare plans. B. With regard to the relative risk for health plan structures based upon the degree of influence and relationships that health plans maintain with their providers, preferred provider organizations (PPOs) typically have a higher risk than do group HMOs and staff HMOs. C. Although there are clear risks associated with the provision of healthcare services and coverage decisions surrounding that care, the bulk of risk in health plans is associated with a health plan's benefit administration and contracting activities.D. A health plan generally structures its risk management process around loss reduction techniques and loss transfer techniques. Your correct answer: D

Correct! The risk management process is generally structured around loss reduction techniques (which include the identification of risk, the elimination of risk whenever possible, and the control or management of risk when it cannot be entirely eliminated) and loss transfer (techniques which include determining the economic risk associated with various types of loss and selection of the best methods either to finance risk internally or to transfer those risks to a third party, generally through the purchase of insurance).

>---------- End of the Test ----------<

Chapter 3 A

Test 4 : Provider Reimbursement and Plan Risk

1. 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 _________.

issuing regulations pertaining to the Health Insurance Portability and Accountability Act (HIPAA) of 1996 administering the Medicare and Medicaid programs administering ERISA, which imposes various documentation, appeals, reporting, and disclosure requirements on employer group health plans administering the Federal Employees Health Benefits Program (FEHBP), which provides voluntary health insurance coverage to federal employees, retirees, and dependents

--------------------------------------------------------------------------------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 _________.

a due process law an any willing provider law a direct access law a fair procedure law

--------------------------------------------------------------------------------3. 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 __________.

a reduction in the number of self-funded healthcare plans an increase in the cost to the health plans a reduction in the size of the provider panels of health plans a reduction in the uniformity among the healthcare plans of competing health plans

-----------------------------------** Correct Answers ** ---------------------------------------------

1. 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 _________.

A. issuing regulations pertaining to the Health Insurance Portability and Accountability Act (HIPAA) of 1996 B. administering the Medicare and Medicaid programs C. administering ERISA, which imposes various documentation, appeals, reporting, and disclosure requirements on employer group health plansD. administering the Federal Employees Health Benefits Program (FEHBP), which provides voluntary health insurance coverage to federal employees, retirees, and dependents


Correct! The DOL is the federal agency with primary responsibility for administering the Employee Retirement Income Security Act (ERISA) of 1974, including recent amendments made by HIPAA. --------------------------------------------------------------------------------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 _________.A. a due process law B. an any willing provider law C. a direct access law D. a fair procedure law

Your correct answer: C Correct! Direct access laws are laws that allow health plan members to see certain specialists without first being referred to those specialists by a primary care provider.

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3. 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 __________.A. a reduction in the number of self-funded healthcare plans B. an increase in the cost to the health plans C. a reduction in the size of the provider panels of health plansD. a reduction in the uniformity among the healthcare plans of competing health plans

Your correct answer: B Correct! Mandated benefits increase the cost of a health plan’s health 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. >---------- End of the Test ----------<

Chapter 3 B

Test 5 : Provider Reimbursement Methods

1. 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

A. encourage Sunrise's physicians to perform services that are not medically necessary B. completely eliminate service risk for Sunrise's physicians C. decrease Sunrise's liability for any negligent acts of the physicians in the plan's network of providersD. help stabilize expenses for Sunrise

Your correct answer: D Correct! Because provider reimbursement is a sizable portion of a health plan’s total costs, salaries help to stabilize expenses for the health plan or other entity employing the providers, and at the same time stabilizes the income of the providers.-------------------------------------------------------------------------------- 2. 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

A. an advantage of using RBRVS is that it can assist Acorn in developing reimbursement schedules for various types of providers in a comprehensive healthcare plan B. an advantage of using RBRVS is that it puts providers who render more medical services than necessary at financial risk for this overutilization C. a disadvantage of using RBRVS is that it will be difficult for Acorn to track treatment rates for the health plan's quality and cost management functionsD. a disadvantage of using RBRVS is that it rewards procedural healthcare services more than cognitive healthcare services

Your correct answer: A

Correct! RBRVS can be useful to a health plan that is developing reimbursement schedules for various types of providers in a comprehensive health plan. -------------------------------------------------------------------------------- 3. 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 feesA. eliminate any motivation the provider may have to engage in churning B. transfer some of the risk of overutilization of care from the health plan to the providers C. eliminate the practice of upcoding within specific treatmentsD. reward providers who deliver cost-effective care

Your correct answer: A Correct! Global fee systems do not completely eliminate all motivation a provider may have to engage in churning. -------------------------------------------------------------------------------- 4. The reimbursement arrangement that Dr. Caroline Monroe has with the Exmoor Health Plan includes a typical withhold arrangement. One true statement about this withhold arrangement is that, for a given financial period,

A. Dr. Monroe and Exmoor are equally responsible for making up the difference if cost overruns exceed the amount of money withheld B. Exmoor most likely distributes to Dr. Monroe the entire amount withheld from her if her costs are below the amount budgeted for the period C. Exmoor pays Dr. Monroe at the end of the period an amount over and above her usual reimbursement, and this amount is based on the performance of the plan as a wholeD. Exmoor most likely withholds between 3% and 5% of Dr. Monroe's total reimbursement

Your correct answer: B Correct! If providers hold costs below the amount budgeted for that period, then the entire amount of money in the withhold is usually distributed to them. -------------------------------------------------------------------------------5. The following statements are about various reimbursement arrangements that health plans have with hospitals. Select the answer choice containing the correct statement.

A. A sliding scale per-diem charges arrangement differs from a sliding scale discount on charges arrangement in that only a sliding scale per-diem charges arrangement is based on total volume of admissions and outpatient procedures. B. Under a typical reimbursement arrangement that is based on diagnosis-related groups (DRGs), if the payment amount is fixed on the basis of

diagnosis, then any reduction in costs resulting from a reduction in days will go to the health plan rather than to the hospital. C. A negotiated straight per-diem charge requires payment of a single charge for a day in the hospital, regardless of any actual charges or costs incurred during the hospital stay.D. A straight discount on charges arrangement is the most common reimbursement method in markets with high levels of health plans. Your correct answer: C Correct! A negotiated straight per-diem charge is a single charge for a day in the hospital, regardless of any actual charges or costs incurred. --------------------------------------------------------------------------------6. Health plans seeking to provide comprehensive healthcare plans must contract with a variety of providers for ancillary services. One characteristic of ancillary services is that

A. physician behavior typically does not impact the utilization rates for these services B. package pricing is the preferred reimbursement method for ancillary service providers C. these services include physical therapy, behavior therapy, and home healthcare, but not diagnostic services such as laboratory testsD. few plan members seek these services without first being referred to the ancillary provider by a physician Your correct answer: D Correct! One characteristic of most ancillary services that has important contractual and financial implications for a health plan is that few plan members seek these services without first being referred to the ancillary provider by a physician. ------------------------------------00-00----------------------------------------------------

Chapter 4 ATest 6 : Capitation in Provider Reimbursement

1. In order to calculate a simple monthly capitation payment, the Argyle Health Plan used the following information:The average number of office visits each member makes in a year is two The FFS rate per office visit is $55 The member copayment is $5 per office visit The reimbursement period is one monthGiven this information, Argyle would correctly calculate that the per member per month (PMPM) capitation rate should be

$4.17 $8.33 $9.17 $10.00

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2. The provider contract that Dr. Timothy Meyer, a pediatrician, has with the Cardigan health plan states that Cardigan will compensate him under a capitation arrangement. However, the contract also includes a typical low enrollment guarantee provision. Statements that can correctly be made about this arrangement include that the low enrollment guarantee provision most likely Causes Dr. Meyer's capitation contract with Cardigan to transfer more risk to him than the contract otherwise would transfer Specifies that Cardigan will pay Dr. Meyer under an arrangement other than capitation until a specified number of children covered by the plan use him as their PCP

Both A and B A only B only Neither A nor B

-------------------------------------------------------------------------------- 3. One true statement about a type of capitation known as a percent-of-premium arrangement is that this arrangement

is the most common type of capitation is less attractive to providers when the arrangement sets provisions to limit risk sets provider reimbursement at a specific dollar amount per plan member transfers some of the risk associated with underwriting and rating from a health plan to a provider

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4. The provider contract that Dr. Zachery Cogan, an internist, has with the Neptune Health Plan calls for Neptune to reimburse him under a typical PCP capitation arrangement. Dr. Cogan serves as the PCP for Evelyn Pfeiffer, a Neptune plan member. After hospitalizing Ms. Pfeiffer and ordering several expensive diagnostic tests to determine her condition, Dr. Cogan referred her to a specialist for further treatment. In this situation, the compensation that Dr. Cogan receives under the PCP capitation arrangement most likely includes Neptune's payment for

all of the diagnostic tests that he ordered on Ms. Pfeiffer his visits to Ms. Pfeiffer while she was hospitalized the cost of the services that the specialist performed for Ms. Pfeiffer all of the above

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5. The following statements illustrate common forms of capitation: The Antler Health Plan pays the Epsilon Group, an integrated delivery system (IDS), a capitated amount to provide substantially all of the inpatient and outpatient services that Antler offers. Under this arrangement, Epsilon accepts much of the risk that utilization rates will be higher than expected. Antler retains responsibility for the plan's marketing, enrollment, premium billing, actuarial, underwriting, and member services functions. The Bengal Health Plan pays an independent physician association (IPA) a capitated amount to provide both primary and specialty care to Bengal's plan members. The payments cover all physician services and associated diagnostic tests and laboratory work. The physicians in the IPA determine as a group how the individual physicians will be paid for their services.From the following answer choices, select the response that best indicates the form of capitation used by Antler and Bengal.

Antler = subcapitationBengal = full-risk capitation Antler = subcapitationBengal = full professional capitation Antler = global capitationBengal = subcapitation Antler = global capitationBengal = full professional capitation

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6. The following statements are about carve-out programs. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

In the type of carve-out in which entire categories of care are administered by independent organizations, a health plan typically reimburses these organizations under an FFS contract. Typically, a health plan will offer carved-out services to its enrollees, but will manage these services separately.

Carve-outs are services that are excluded from a capitation payment, a risk pool, or a health benefit plan. The most rapidly growing area relaed to carve-outs is disease management (DM).

--------------------------------------------------------------------------------7. The Marble Health Plan sets aside a PMPM amount for each specialty. When a PCP in Marble's provider network refers a Marble plan member to a specialist and the specialist provides medical services to the member, the specialist begins to receive a share of those funds on a monthly basis. Marble determines the monthly payment for each specialist by dividing the number of active patients for that specialty by the total specialty pool for that month. This form of payment, which is similar to a case rate, is known as

referral circle capitation risk pod capitation contact capitation retrospective reimbursement capitation

--------------------------------------------------------------------------------8. A reconciliation is the process by which a health plan assesses providers' performance relative to contractual terms and reimbursement. With regard to this process, it can correctly be stated that

a reconciliation typically includes payment to the providers of any withholds or bonuses due to them a health plan typically should conduct a reconciliation immediately after the evaluation period has ended most agreements between health plans and providers require reconciliations to be performed quarterly a health plan typically should not conduct reconciliation for a provider until the plan has received all claims or other documentation of services that the physician provided during the evaluation period

--------------------------------------------------------------------------------9. With regard to capitation arrangements for hospitals, it can correctly be stated that

the most common reimbursement method for hospitals is professional services capitation most jurisdictions prohibit hospitals and physicians from joining together to receive global capitations that cover institutional services provided by the hospitals a health plan typically can capitate a hospital for outpatient laboratory and X-ray services only if the health plan also capitates the hospital for inpatient care many hospitals have formed physician hospital organizations (PHOs), hospital systems, or integrated delivery systems (IDSs) that can accept global capitation payments from health plans

>>> Partially Correct Answers <<<<<<<<

1. In order to calculate a simple monthly capitation payment, the Argyle Health Plan used the following information:The average number of office visits each member makes in a year is two The FFS rate per office visit is $55

The member copayment is $5 per office visit The reimbursement period is one monthGiven this information, Argyle would correctly calculate that the per member per month (PMPM) capitation rate should beA. $4.17 B. $8.33 C. $9.17D. $10.00 Your incorrect answer: C Incorrect. Calculate a simple monthly capitation payment (or PMPM amount) by multiplying the average number of services used by a member in one year by the average fee-for-service equivalent payment per service (subtracting the copayment), and then dividing by the number of reimbursement periods per specified time period. In this example, 2 X 50 (subtracting the $5 copay) divided by 100. Please review page 6 of this lesson.

*** Your correct answer: B ***

Correct! Calculate a simple monthly capitation payment (or PMPM amount) by multiplying the average number of services used by a member in one year by the average fee-for-service equivalent payment per service, and then dividing by the number of reimbursement periods per specified time period--------------------------------------------------------------------------------2. The provider contract that Dr. Timothy Meyer, a pediatrician, has with the Cardigan health plan states that Cardigan will compensate him under a capitation arrangement. However, the contract also includes a typical low enrollment guarantee provision. Statements that can correctly be made about this arrangement include that the low enrollment guarantee provision most likely Causes Dr. Meyer's capitation contract with Cardigan to transfer more risk to him than the contract otherwise would transfer Specifies that Cardigan will pay Dr. Meyer under an arrangement other than capitation until a specified number of children covered by the plan use him as their PCPA. Both A and B B. A only C. B only D. Neither A nor B Your correct answer: C

Correct! Health plans may reimburse providers on a discounted FFS basis until a threshold number of plan members designate that provider as their caregiver. Contractual provisions that allow capitated providers to be paid on a discounted FFS basis until the provider’s enrollment meets or exceeds a threshold number are called low-enrollment guarantees. --------------------------------------------------------------------------------

3. One true statement about a type of capitation known as a percent-of-premium arrangement is that this arrangementA. is the most common type of capitation B. is less attractive to providers when the arrangement sets provisions to limit risk C. sets provider reimbursement at a specific dollar amount per plan memberD. transfers some of the risk associated with underwriting and rating from a health plan to a provider Your correct answer: D Correct! Percent-of-premium arrangements transfer some of the risk associated with underwriting and rating from the health plan to the provider. Please review pages 11 and 12 of this lesson. --------------------------------------------------------------------------------4. The provider contract that Dr. Zachery Cogan, an internist, has with the Neptune Health Plan calls for Neptune to reimburse him under a typical PCP capitation arrangement. Dr. Cogan serves as the PCP for Evelyn Pfeiffer, a Neptune plan member. After hospitalizing Ms. Pfeiffer and ordering several expensive diagnostic tests to determine her condition, Dr. Cogan referred her to a specialist for further treatment. In this situation, the compensation that Dr. Cogan receives under the PCP capitation arrangement most likely includes Neptune's payment for

A. all of the diagnostic tests that he ordered on Ms. Pfeiffer B. his visits to Ms. Pfeiffer while she was hospitalized C. the cost of the services that the specialist performed for Ms. PfeifferD. all of the above Your incorrect answer: C Incorrect; PCP capitation, also called partial capitation, is a capitation payment that reimburses the provider for primary care services only. Please review pages 14 and 15 of this lesson.

Your incorrect answer: D Incorrect; Please review page 15 of this lesson.

***** Your correct answer: B ****Correct! Primary care services usually include a range of office-based services as well as physician visits to hospitalized plan members. --------------------------------------------------------------------------------5. The following statements illustrate common forms of capitation: The Antler Health Plan pays the Epsilon Group, an integrated delivery system (IDS), a capitated amount to provide substantially all of the inpatient and outpatient services that Antler offers. Under this arrangement, Epsilon accepts much of the risk that utilization rates will be higher than expected. Antler retains responsibility for the plan's marketing, enrollment, premium billing, actuarial, underwriting, and member services functions. The Bengal Health Plan pays an independent physician association (IPA) a capitated amount to provide both primary and specialty care to Bengal's plan members. The payments cover all physician services and associated

diagnostic tests and laboratory work. The physicians in the IPA determine as a group how the individual physicians will be paid for their services.

From the following answer choices, select the response that best indicates the form of capitation used by Antler and Bengal.

A. Antler = subcapitationBengal = full-risk capitation B. Antler = subcapitationBengal = full professional capitation C. Antler = global capitationBengal = subcapitation D. Antler = global capitationBengal = full professional capitation Your correct answer: D

Correct! Global capitation, also called full-risk capitation, is a capitation system that pays a provider organization to provide substantially all of the inpatient and outpatient services—including clinical, primary, specialty, and ancillary services —that the health plan offers. --------------------------------------------------------------------------------6. The following statements are about carve-out programs. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

A. In the type of carve-out in which entire categories of care are administered by independent organizations, a health plan typically reimburses these organizations under an FFS contract. B. Typically, a health plan will offer carved-out services to its enrollees, but will manage these services separately. C. Carve-outs are services that are excluded from a capitation payment, a risk pool, or a health benefit plan. D. The most rapidly growing area relaed to carve-outs is disease management (DM). Your correct answer: A

Correct!--------------------------------------------------------------------------------7. The Marble Health Plan sets aside a PMPM amount for each specialty. When a PCP in Marble's provider network refers a Marble plan member to a specialist and the specialist provides medical services to the member, the specialist begins to receive a share of those funds on a monthly basis. Marble determines the monthly payment for each specialist by dividing the number of active patients for that specialty by the total specialty pool for that month. This form of payment, which is similar to a case rate, is known asA. referral circle capitation

B. risk pod capitation C. contact capitationD. retrospective reimbursement capitation Your correct answer: C

Correct! Contact capitation is a form of payment in which specialists receive a flat, predetermined fee once a referred patient begins to receive treatment from them for a given condition. This is similar to a case rate—a flat fee paid to the provider in order to care for a patient with a given condition. --------------------------------------------------------------------------------8. A reconciliation is the process by which a health plan assesses providers' performance relative to contractual terms and reimbursement. With regard to this process, it can correctly be stated that

A. a reconciliation typically includes payment to the providers of any withholds or bonuses due to them B. a health plan typically should conduct a reconciliation immediately after the evaluation period has ended C. most agreements between health plans and providers require reconciliations to be performed quarterly D. a health plan typically should not conduct reconciliation for a provider until the plan has received all claims or other documentation of services that the physician provided during the evaluation period """ Correct Answer : A """

Your incorrect answer: B Incorrect; utilization calculations generally require that at least three months and possibly as much as six months have passed from the closing of the evaluation period. Please review pages 50 and 51 of this lesson.

Your incorrect answer: C Incorrect; Most agreements call for reconciliations, or settlements, to be performed at year-end. Please review page 50 of this lesson

Your incorrect answer: D Incorrect; utilization calculations generally require that at least three months and possibly as much as six months have passed from the closing of the evaluation period. Please review pages 50 and 51 of this lesson. --------------------------------------------------------------------------------9. With regard to capitation arrangements for hospitals, it can correctly be stated that

A. the most common reimbursement method for hospitals is professional services capitation B. most jurisdictions prohibit hospitals and physicians from joining together to receive global capitations that cover institutional services provided by the hospitals

C. a health plan typically can capitate a hospital for outpatient laboratory and X-ray services only if the health plan also capitates the hospital for inpatient careD. many hospitals have formed physician hospital organizations (PHOs), hospital systems, or integrated delivery systems (IDSs) that can accept global capitation payments from health plans Your correct answer: D

Correct! In the interest of maintaining their autonomy, many hospitals form PHOs, hospital systems and integrated delivery systems that can accept global capitation payments.

>>>>> Correct Answers <<<<<<<<<<<<<

1. In order to calculate a simple monthly capitation payment, the Argyle Health Plan used the following information:The average number of office visits each member makes in a year is two The FFS rate per office visit is $55 The member copayment is $5 per office visit The reimbursement period is one monthGiven this information, Argyle would correctly calculate that the per member per month (PMPM) capitation rate should beA. $4.17 B. $8.33 C. $9.17D. $10.00 Your correct answer: B

Correct! Calculate a simple monthly capitation payment (or PMPM amount) by multiplying the average number of services used by a member in one year by the average fee-for-service equivalent payment per service, and then dividing by the number of reimbursement periods per specified time period.

-------------------------------------------------------------------------------- 2. The provider contract that Dr. Timothy Meyer, a pediatrician, has with the Cardigan health plan states that Cardigan will compensate him under a capitation arrangement. However, the contract also includes a typical low enrollment guarantee provision. Statements that can correctly be made about this arrangement include that the low enrollment guarantee provision most likely Causes Dr. Meyer's capitation contract with Cardigan to transfer more risk to him than the contract otherwise would transfer Specifies that Cardigan will pay Dr. Meyer under an arrangement other than capitation until a specified number of children covered by the plan use him as their PCPA. Both A and B B. A only C. B onlyD. Neither A nor B


Correct! Health plans may reimburse providers on a discounted FFS basis until a threshold number of plan members designate that provider as their caregiver. Contractual provisions that allow capitated providers to be paid on a discounted FFS basis until the provider’s enrollment meets or exceeds a threshold number are called low-enrollment guarantees. --------------------------------------------------------------------------------

3. One true statement about a type of capitation known as a percent-of-premium arrangement is that this arrangementA. is the most common type of capitation B. is less attractive to providers when the arrangement sets provisions to limit risk C. sets provider reimbursement at a specific dollar amount per plan memberD. transfers some of the risk associated with underwriting and rating from a health plan to a provider Your correct answer: D

Correct! Percent-of-premium arrangements transfer some of the risk associated with underwriting and rating from the health plan to the provider. Please review pages 11 and 12 of this lesson.

-------------------------------------------------------------------------------- 4. The provider contract that Dr. Zachery Cogan, an internist, has with the Neptune Health Plan calls for Neptune to reimburse him under a typical PCP capitation arrangement. Dr. Cogan serves as the PCP for Evelyn Pfeiffer, a Neptune plan member. After hospitalizing Ms. Pfeiffer and ordering several expensive diagnostic tests to determine her condition, Dr. Cogan referred her to a specialist for further treatment. In this situation, the compensation that Dr. Cogan receives under the PCP capitation arrangement most likely includes Neptune's payment forA. all of the diagnostic tests that he ordered on Ms. Pfeiffer B. his visits to Ms. Pfeiffer while she was hospitalized C. the cost of the services that the specialist performed for Ms. Pfeiffer D. all of the above Your correct answer: B

Correct! Primary care services usually include a range of office-based services as well as physician visits to hospitalized plan members.

-------------------------------------------------------------------------------- 5. The following statements illustrate common forms of capitation: The Antler Health Plan pays the Epsilon Group, an integrated delivery system (IDS), a capitated amount to provide substantially all of the inpatient and outpatient services that Antler offers. Under this arrangement, Epsilon accepts much of the risk that utilization rates will be higher than expected. Antler retains responsibility for the plan's marketing, enrollment, premium billing, actuarial, underwriting, and member services functions. The Bengal Health Plan pays an independent physician association (IPA) a capitated amount to provide both primary and specialty care to Bengal's plan members. The payments cover all physician services and associated diagnostic tests and laboratory work. The physicians in the IPA determine as a group how the individual physicians will be paid for their services.

From the following answer choices, select the response that best indicates the form of capitation used by Antler and Bengal.A. Antler = subcapitationBengal = full-risk capitation B. Antler = subcapitationBengal = full professional capitation C. Antler = global capitationBengal = subcapitation D. Antler = global capitationBengal = full professional capitation Your correct answer: D

Correct! Global capitation, also called full-risk capitation, is a capitation system that pays a provider organization to provide substantially all of the inpatient and outpatient services—including clinical, primary, specialty, and ancillary services —that the health plan offers.

-------------------------------------------------------------------------------- 6. The following statements are about carve-out programs. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.A. In the type of carve-out in which entire categories of care are administered by independent organizations, a health plan typically reimburses these organizations under an FFS contract. B. Typically, a health plan will offer carved-out services to its enrollees, but will manage these services separately. C. Carve-outs are services that are excluded from a capitation payment, a risk pool, or a health benefit plan.D. The most rapidly growing area relaed to carve-outs is disease management (DM).


Correct!-------------------------------------------------------------------------------- 7. The Marble Health Plan sets aside a PMPM amount for each specialty. When a PCP in Marble's provider network refers a Marble plan member to a specialist and the specialist provides medical services to the member, the specialist begins to receive a share of those funds on a monthly basis. Marble determines the monthly payment for each specialist by dividing the number of active patients for that specialty by the total specialty pool for that month. This form of payment, which is similar to a case rate, is known asA. referral circle capitation B. risk pod capitation C. contact capitationD. retrospective reimbursement capitation


Correct! Contact capitation is a form of payment in which specialists receive a flat, predetermined fee once a referred patient begins to receive treatment from them for a given condition. This is similar to a case rate—a flat fee paid to the provider in order to care for a patient with a given condition.

-------------------------------------------------------------------------------- 8. A reconciliation is the process by which a health plan assesses providers' performance relative to contractual terms and reimbursement. With regard to this process, it can correctly be stated thatA. a reconciliation typically includes payment to the providers of any withholds or bonuses due to them B. a health plan typically should conduct a reconciliation immediately after the evaluation period has ended C. most agreements between health plans and providers require reconciliations to be performed quarterlyD. a health plan typically should not conduct reconciliation for a provider until the plan has received all claims or other documentation of services that the physician provided during the evaluation period


Correct! Typically, reconciliation includes a reconciliation of any surpluses or losses against monies withheld.

-------------------------------------------------------------------------------- 9. With regard to capitation arrangements for hospitals, it can correctly be stated thatA. the most common reimbursement method for hospitals is professional services capitation B. most jurisdictions prohibit hospitals and physicians from joining together to receive global capitations that cover institutional services provided by the hospitals C. a health plan typically can capitate a hospital for outpatient laboratory and X-ray services only if the health plan also capitates the hospital for inpatient careD. many hospitals have formed physician hospital organizations (PHOs), hospital systems, or integrated delivery systems (IDSs) that can accept global capitation payments from health plans Your correct answer: D

Correct! In the interest of maintaining their autonomy, many hospitals form PHOs, hospital systems and integrated delivery systems that can accept global capitation payments.

Chapter 4 BTest 7 : Risk Transfer in Health Plans

1. The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs. One true statement about this specific stop-loss coverage is that

A. the carrier is Newfeld B. the attachment point is $20,000 C. the shared-risk corridor is between $0 and $70,000 D. this coverage can also be activated when the total covered medical expenses generated by the hospitalizations of Azalea plan members reach a specified level Your correct answer: B

Correct! The attachment point is the loss amount that must occur before the stop-loss coverage begins to cover any expenses. -------------------------------------------------------------------------------- 2. The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs. The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is

A. $10,000 B. $14,000 C. $30,000D. $34,000


Correct! ; $20,000, plus 20% of $50,000= $30,000

-------------------------------------------------------------------------------- 3. The Sanford Group, a provider group, entered into a risk contract with a health plan. Sanford has purchased aggregate stop-loss coverage with an

attachment point of 115% of the group's predicted healthcare costs of $2,000,000 for the year. Sanford has a copayment of 10% for any costs above the attachment point. If Sanford's actual costs for the year are $2,800,000, then, according to the terms of the aggregate stop-loss agreement, the amount that Sanford is responsible for is

A. $2,080,000 B. $2,300,000 C. $2,350,000D. $2,380,000 Your incorrect answer: B Incorrect; 2,300,000 plus 10% of $50,000 (10% over the attachment point of 2,300,000.) Please review pages 7-8 of this lesson.

Correct Answer C115% of 2,000,000 = 2,300,000Difference 2,800,000 – 2,300,000 = 50,00010% of 50,000 = 5,000

Total =2,350,000-------------------------------------------------------------------------------- 4. A stop-loss contract may provide that claims are settled using a paid claims method or an incurred claims method. The Concord Company provides health coverage to its employees through a self-funded health plan. On March 17, a Concord employee who is enrolled in this plan underwent surgery, and the surgery was sufficiently expensive to trigger Concord's specific stop-loss coverage. On April 10, Concord paid the medical expenses associated with the surgery. The term of the stop-loss contract ended on April-01

This information indicates that the stop-loss carrier is responsible for paying a portion of the cost of the surgery under

A. both the paid claims method and the incurred claims method B. the paid claims method but not the incurred claims method C. the incurred claims method but not the paid claims methodD. neither the paid claims method nor the incurred claims method Your incorrect answer: A Incorrect; Until the policyholder pays the claim, the stop-loss carrier is not liable to the policyholder for that claim. Please review page 13 of this lesson.

:Correct Answer C :Paid Claim > Date when Claim was PaidIncurred Claim > Date when Claim was incurred = Service Date.--------------------------------------------------------------------------------

5. A health plan that capitates a provider group typically provides or offers to provide stop-loss coverage to that provider group.A. True B. False

Your correct answer: A Correct!

-------------------------------------------------------------------------------- 6. The sentence below contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have chosen.

Purchasing stop-loss coverage most likely (increases / reduces) a health plan's underwriting risk and (increases / reduces) the health plan’s affiliate risk.

A. increases / increases B. increases / reduces C. reduces / increases D. reduces / reduces Your incorrect answer: D Incorrect; Although purchasing stop-loss coverage reduces a health plan’s underwriting risk, the same stop-loss coverage will increase the health plan’s affiliate risk. Please review page 27 of this lesson.

Correct Answer C:

Although purchasing stop-loss coverage reduces a health plan’s underwriting risk, the same stop-loss coverage will increase the health plan’s affiliate risk. Recall that affiliate risk is the risk that the financial condition of an affiliated entity (in this case, the stop-loss carrier) will cause an adverse change in capital (in this case, the health plan1’s capital). Although the decrease in underwriting risk is always greater than the increase in affiliate risk, the increasing affiliate risk is part of the cost of securing stop-loss coverage. The greater the financial strength of the stop-loss carrier, the lower the health plan’s affiliate risk.

>> Correct Answers <<Chapter 4 BTest 7 : Risk Transfer in Health Plans

1. The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs. One true statement about this specific stop-loss coverage is that

A. the carrier is Newfeld B. the attachment point is $20,000 C. the shared-risk corridor is between $0 and $70,000D. this coverage can also be activated when the total covered medical expenses generated by the hospitalizations of Azalea plan members reach a specified level Your correct answer: B

Correct! The attachment point is the loss amount that must occur before the stop-loss coverage begins to cover any expenses.

-------------------------------------------------------------------------------- 2. The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs. The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is

A. $10,000 B. $14,000 C. $30,000D. $34,000 Your correct answer: C

Correct! ; $20,000, plus 20% of $50,000= $30,000

--------------------------------------------------------------------------------

3. The Sanford Group, a provider group, entered into a risk contract with a health plan. Sanford has purchased aggregate stop-loss coverage with an attachment point of 115% of the group's predicted healthcare costs of $2,000,000 for the year. Sanford has a copayment of 10% for any costs above the attachment point. If Sanford's actual costs for the year are $2,800,000, then, according to the terms of the aggregate stop-loss agreement, the amount that Sanford is responsible for isA. $2,080,000 B. $2,300,000 C. $2,350,000D. $2,380,000


Correct! 2,300,000 plus 10% of $50,000 (10% over the attachment point of 2,300,000.)

-------------------------------------------------------------------------------- 4. A stop-loss contract may provide that claims are settled using a paid claims method or an incurred claims method. The Concord Company provides health coverage to its employees through a self-funded health plan. On March 17, a Concord employee who is enrolled in this plan underwent surgery, and the surgery was sufficiently expensive to trigger Concord's specific stop-loss coverage. On April 10, Concord paid the medical expenses associated with the surgery. The term of the stop-loss contract ended on April 1. This information indicates that the stop-loss carrier is responsible for paying a portion of the cost of the surgery underA. both the paid claims method and the incurred claims method B. the paid claims method but not the incurred claims method C. the incurred claims method but not the paid claims methodD. neither the paid claims method nor the incurred claims method


Correct! Under the incurred claims method, the stop-loss carrier is obligated to make payments on the applicable claims as of the date the medical expense was incurred.

-------------------------------------------------------------------------------- 5. A health plan that capitates a provider group typically provides or offers to provide stop-loss coverage to that provider group.A. True B. False

Your correct answer: A Correct!--------------------------------------------------------------------------------

6. The sentence below contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have chosen. Purchasing stop-loss coverage most likely (increases / reduces) a health plan's underwriting risk and (increases / reduces) the health plan’s affiliate risk.

A. increases / increases B. increases / reduces C. reduces / increasesD. reduces / reduces Your correct answer: C

Correct! Although purchasing stop-loss coverage reduces a health plan’s underwriting risk, the same stop-loss coverage will increase the health plan’s affiliate risk.

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Test Question AHM 520