(Health Plan Finance and Risk Management) Flashcards
7 cards from real AHIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 (Health Plan Finance and Risk Management) flashcards as text
A health plan's medical loss ratio (MLR) is calculated by dividing which of the following by earned premiums?
Answer: Incurred claims plus quality improvement expenses
MLR equals incurred claims plus quality improvement expenses divided by earned premiums, and must meet minimum thresholds under the ACA.
Which of the following best describes 'reinsurance' as used by health plans?
Answer: A method for spreading risk by ceding a portion of liabilities to another insurer
Reinsurance allows a health plan to transfer a portion of its risk to another insurer (reinsurer) in exchange for a premium, protecting against catastrophic losses.
Under the ACA's risk adjustment program, which plans receive payments and which plans make payments?
Answer: Plans with sicker-than-average enrollees receive payments; plans with healthier enrollees make payments
ACA risk adjustment transfers funds from plans with lower-risk enrollees to plans with higher-risk enrollees to discourage cherry-picking.
What is the primary purpose of an IBNR (Incurred But Not Reported) reserve?
Answer: To account for claims that have occurred but have not yet been submitted to the plan
IBNR reserves represent an estimate of claims that members have already incurred but providers have not yet billed to the health plan.
A health plan's 'days in claims payable' (DCP) metric is used primarily to measure:
Answer: The number of days' worth of claims represented by the plan's claims payable balance
DCP measures how many days of claims expense the outstanding claims payable liability represents, serving as an indicator of reserve adequacy.
Which financial metric measures the proportion of each premium dollar that a health plan retains after paying medical claims?
Answer: Gross margin
Gross margin (or gross profit margin) represents the portion of premium revenue remaining after deducting medical costs, available to cover administrative expenses and profit.
A health plan is considering entering a new market with a capitation arrangement with a provider group. The primary financial risk the plan assumes in this arrangement is:
Answer: Premium revenue will be insufficient to cover capitation payments
Under capitation, the plan pays providers a fixed per-member per-month amount, so the plan's key risk is that premium revenue is insufficient to cover the fixed capitation payments plus administrative costs.