Question 1

The purest form of a self-funded benefit plan is one in which the employer pays benefits from current revenue, administers all aspects of the plan, and bears the risk that actual benefit payments will exceed the expected amount of payments. A decision to use this kind of self-funding is generally considered most desirable when certain conditions are present.

These conditions most likely include that the benefit plan:

Options :

A : Is a contributory plan

B : Is subject to collective bargaining

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

D : Has a relatively high frequency of low severity claims

Answer: D

Question 2

The Jasmine Company, which self-funds the health plan for its 200 employees, has established a 501(c)(9) trust as a means of addressing possible claims fluctuations under the health plan. This plan is not a part of a collective bargaining process.A potential disadvantage to Jasmine of using a 501(c)(9) trust is that:

Options :

A : The cost of maintaining the trust may be prohibitive to Jasmine

B : The trust must always maintain enough assets to pay the health plan-s claims that have been incurred but not yet paid

C : Jasmine is prohibited from earning any return on the trust assets

D : The contributions to this trust are not deductible for federal income tax purposes

Answer: A

Question 3

A health plan's costs can be classified as committed costs or discretionary costs. An example of a discretionary cost for a health plan is the cost of its:

Options :

A : Facilities

B : Executive salaries

C : Employee training

D : Equipment

Answer: A

Question 4

Federal law addresses the relationship between Medicare- or Medicaid contracting health plans and providers who are at "substantial financial risk."Under federal law, Medicare- or Medicaid-contracting health plans:

Options :

A : Place a provider at "substantial risk" whenever incentive arrangements put the provider at risk for amounts in excess of 10% of his or her total potential reimbursement for providing services to Medicare and Medicaid enrollees

B : Must provide stop-loss coverage to a provider who is placed at "substantial financial risk" for services that the provider does not directly provide to Medicare or Medicaid enrollees

C : Both A and B

D : A only

E : B only

F : Neither A nor B

Answer: C

Question 5

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

Options :

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

B : Liquid assets by its total liabilities

C : Liquid assets by its contractual reserves

D : Total assets by its contractual reserves

Answer: C

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