- (Topic 1)
With regard to the financial statements prepared by health plans, it can correctly be stated that

1. A. both for-profit, publicly owned health plans and not-for-profit health plans are required by law to provide all interested parties with an annual report
2. B. a health plan's annual report typically includes an independent auditor's report and notes to the financial statements
3. C. any health plan that owns more than 20% of the stock of a subsidiary company must compile the financial statements for the health plan's annual report on a consolidated basis
4. D. a health plan typically must prepare the financial statements included in its annual report according to SAP

Correct Answer: B

- (Topic 2)
In order to show the efficiency of a health plan's managers in using the health plan's investments to earn a return for stockholders, a financial analyst most likely would use a type of profitability ratio known as

1. A. A net gain-to-total income ratio
2. B. An insurance leverage ratio
3. C. A statutory return on assets (ROA) ratio
4. D. A gross profit ratio

Correct Answer: C

- (Topic 1)
For this question, select the answer choice containing the terms that correctly complete blanks A and B in the paragraph below. The FASB mandates that accounting information must exhibit certain qualitative characteristics. One of these characteristics is ______ A _______, which means that a company's financial statements use the same accounting policies and procedures from one accounting period to the next, unless there is a sound reason for changing a policy or procedure. Another characteristic is ______ B _______, which requires a company to disclose in its financial statements all significant financial information about the company.

1. A. A = reliability B = comparability
2. B. A = reliability B = materiality
3. C. A = consistency B = comparability
4. D. A = consistency B = materiality

Correct Answer: D

- (Topic 1)
Kevin Olin applied for individual healthcare coverage from the Mercury health plan. Before issuing the policy, Mercury's underwriters attached a rider that excludes from coverage any loss that results from Mr. Olin's chronic knee problem. This information indicates that Mr. Olin's policy includes

1. A. a moral hazard rider
2. B. an essential plan rider
3. C. an impairment rider
4. D. an insurable interest rider

Correct Answer: C

- (Topic 2)
In evaluating the claims experience during a given rating period of the Lucky Company, the Calaway Health Plan determined that the claims incurred by Lucky were lower than Calaway anticipated when it established Lucky’s premium rate for the rating period. Calaway, therefore,refunded a portion of Lucky’s premium to reflect the better-than- anticipated claims experience. This rating method is known as:

1. A. durational rating
2. B. retrospective experience rating
3. C. blended rating
4. D. prospective experience rating

Correct Answer: B