- (Topic 2)
The medical loss ratio (MLR) for the Peacock health plan is 80%. Peacock's expense ratio is 16%.
Peacock's MLR and its expense ratio indicate that Peacock

1. A. Has a 4% potential profit margin
2. B. Has a combined ratio of 64%
3. C. Must increase its premium income in order to remain in business
4. D. Must rely on investment income in order to avoid financial losses

Correct Answer: A

- (Topic 1)
The methods of alternative funding for health coverage can be divided into the following general categories:
✑ Category A—Those methods that primarily modify traditional fully insured group insurance contracts
✑ Category B—Those methods that have either partial or total self funding
Typically, small employers are able to use some of the alternative funding methods in

1. A. Both Category A and Category B
2. B. Category A only
3. C. Category B only
4. D. Neither Category A nor Category B

Correct Answer: C

- (Topic 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 month
Given this information, Argyle would correctly calculate that the per member per month (PMPM) capitation rate should be

1. A. $4.17
2. B. $8.33
3. C. $9.17
4. D. $10.00

Correct Answer: B

- (Topic 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.

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

Correct Answer: A

- (Topic 2)
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:

1. A. Requiring the providers to supply their own office space
2. B. Employing nurses and other healthcare professionals to support the physician providers
3. C. Requiring providers to maintain their own medical records
4. D. All of the above

Correct Answer: B