- (Topic 2)
The Fairway health plan is a for-profit health plan that issues stock. The following data was taken from Fairway's financial statements:
Current assets.....$5,000,000
Total assets.....6,000,000
Current liabilities.....2,500,000
Total liabilities.....3,600,000
Stockholders' equity.....2,400,000
Fairway's total revenues for the previous financial period were $7,200,000, and its net income for that period was $180,000.
From this data, Fairway can determine both its current ratio and its net working capital. Fairway would correctly determine that its

1. A. Current ratio is 1.39
2. B. Current ratio is 2.00
3. C. Net working capital equals $1,000,000
4. D. Net working capital equals $3,000,000

Correct Answer: B

- (Topic 1)
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

1. A. Third party administrator (TPA)
2. B. Utilization review organization (URO)
3. C. Preferred provider organization (PPO)
4. D. Pharmacy benefit management (PBM) plan

Correct Answer: C

- (Topic 2)
One true statement about variance analysis is that

1. A. A price variance is the difference between the budgeted quantities to be sold and theactual quantities sold, multiplied by the budgeted amount
2. B. Variance analysis suggests solutions to a particular problem
3. C. Positive variances generally are favorable, from a health plan's point of view, for the plan's expenses but unfavorable for the plan's revenues
4. D. An effective variance system typically focuses on matters that require management's attention

Correct Answer: D

- (Topic 2)
In order to achieve its goal of improved customer service, the Evergreen Health Plan will add three new customer service representatives to its existing staff, install a new switching station, and install additional phone lines. In this situation, the cost that would be classified as a sunk cost, rather than a differential cost, is the expense associated with:

1. A. Adding new customer service representatives
2. B. Maintaining the existing staff
3. C. Installing a new switching station
4. D. Installing additional phone lines

Correct Answer: B

- (Topic 2)
In a comparison of small employer-employee groups to large employer-employee groups, it is correct to say that small employer-employee groups tend to:

1. A. More closely follow actuarial predictions with respect to morbidity rates
2. B. Generate more administrative expenses as a percentage of the total premium amount the group pays
3. C. Have less frequent and smaller claims fluctuations
4. D. Expose an health plan to a lower risk of anti selection

Correct Answer: B