- (Topic 2)
The Savanna health plan used a risk analysis technique which defines the key assumptions of Savanna's strategic financial plan in terms of mathematical formulas that can be correlated to each other or analyzed independently. This technique allowed Savanna to simulate probable future events on a computer and produce a distribution of possible outcomes. This risk analysis technique, which can be used to predict Savanna's distribution of expected claims, is known as

1. A. A hurdle rate simulation
2. B. Optimistic, most likely, pessimistic scenario modeling
3. C. A Monte Carlo simulation
4. D. Debt covenant modeling

Correct Answer: C

- (Topic 1)
With regard to the major risk factors associated with group underwriting, it can correctly be stated that, typically,

1. A. The age and gender of group plan members are not predictors of utilization of health services by group members
2. B. A health plan's product design or delivery system has an impact on member selection of the health plan, unless the members are in an environment in which employees have at least two benefit options or health plans from which to choose
3. C. A health plan should track demographic factors of groups only if the plan specifically adjusts for demographic factors on a group basis
4. D. A large group is more likely to exhibit a consistent claims pattern, level of healthcare cost, or utilization of services than is a small group

Correct Answer: D

- (Topic 1)
When pricing its product, the Panda Health Plan assumes a 4% interest rate on its investments. Panda also assumes a crediting interest rate of 4%.
The actual interest rate earned by Panda on the assets supporting its product is 6%. The following statements can correctly be made about the investment margin and interest margin for Panda's products.

1. A. Panda most likely built the crediting interest rate of 4% into the investment margin of its product.
2. B. Panda's investment margin is the difference between its actual benefit costs and the benefit costs that it assumes in its pricing.
3. C. The interest margin for this product is 2%.
4. D. All of these statements are correct.

Correct Answer: C

- (Topic 2)
One way that a health plan can protect itself against case stripping is by requiring:

1. A. Employees covered by a small group plan to contribute 100% of the cost of the healthcare coverage
2. B. The small group to have no more than 10 members
3. C. A minimum level of participation in order for a small group to be eligible for healthcare coverage
4. D. Its underwriters to consider the characteristics of the employer, but not of the group members, when underwriting the group

Correct Answer: C

- (Topic 2)
The Jade Health Plan used a profitability index (PI) to rank the following capital proposals:
ProposalPI
A0.45
B1.05
This information indicates that, of these two projects, Jade would most likely select:

1. A. Proposal A, and the PI indicates that the net present value (NPV) for this project is less than zero
2. B. Proposal A, and the PI indicates that the net present value (NPV) for this project is greater than zero
3. C. Proposal B, and the PI indicates that the net present value (NPV) for this project is less than zero
4. D. Proposal B, and the PI indicates that the net present value (NPV) for this project is greater than zero

Correct Answer: C