AHIP Health Plan Finance and Risk Management Questions + Answers

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Question 1 ( 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
A. Both Category A and Category B
B. Category A only
C. Category B only
D. Neither Category A nor Category B


Answer : C

Question 2 ( Topic 1 )
The Marble Health Plan sets aside a PMPM amount for each specialty.
When a PCP in Marble's provider network refers a Marble plan member to a specialist and the specialist provides medical services to the member, the specialist begins to receive a share of those funds on a monthly basis. Marble determines the monthly payment for each specialist by dividing the number of active patients for that specialty by the total specialty pool for that month.
This form of payment, which is similar to a case rate, is known as
A. Referral circle capitation
B. Risk pod capitation
C. Contact capitation
D. Retrospective reimbursement capitation


Answer : C

Question 3 ( Topic 1 )
A health plan that capitates a provider group typically provides or offers to provide stop-loss coverage to that provider group.
A. True
B. False


Answer : A

Question 4 ( Topic 1 )
State A, which requires guaranteed issue of at least two mandated healthcare plans, has established a typical health coverage reinsurance program for small employer groups. One true statement about this reinsurance program is that it most likely
A. is administered by a commercial reinsurance company that operates in State A
B. allows a small employer carrier operating in State A to reinsure either an entire small group or specific individuals within the group
C. has, for the coverage on a plan, a base premium, which is multiplied by a factor of 2 in the case of reinsurance on entire groups or a factor of 3 for reinsurance on individuals
D. prohibits a small employer carrier operating in State A from placing individuals enrolled in small groups in a reinsurance pool


Answer : B

Question 5 ( Topic 1 )
One true statement about cash-basis accounting is that
A. Cash receipt, but not cash disbursement, is an important component of cash-basis accounting
B. Most companies use a pure cash-basis accounting system
C. Cash-basis accounting records revenue according to the realization principle and expenses according to the matching principle
D. Health insurance companies and health plans that fall under the jurisdiction of state insurance commissioners must report some items on a cash basis for statutory reporting purposes


Answer : D


Question 6 ( Topic 1 )
Mandated benefit laws are state or federal laws that require health plans to arrange for the financing and delivery of particular benefits. Within a market, the implementation of mandated benefit laws is likely to cause __________.
A. A reduction in the number of self-funded healthcare plans
B. An increase in the cost to the health plans
C. A reduction in the size of the provider panels of health plans
D. A reduction in the uniformity among the healthcare plans of competing health plans


Answer : B

Question 7 ( 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 -
A. a moral hazard rider
B. an essential plan rider
C. an impairment rider
D. an insurable interest rider


Answer : C

Question 8 ( Topic 1 )
The physicians who work for the Sunrise Health Plan, a staff model HMO, are paid a salary that is not augmented with another type of incentive plan. Compared to the use of a traditional reimbursement method, Sunrise's use of a salary reimbursement method is more likely to
A. Encourage Sunrise's physicians to perform services that are not medically necessary
B. Completely eliminate service risk for Sunrise's physicians
C. Decrease Sunrise's liability for any negligent acts of the physicians in the plan's network of providers
D. Help stabilize expenses for Sunrise


Answer : D

Question 9 ( Topic 1 )
The following statement(s) can correctly be made about a health plan's underwriting of small groups:
A. Typically, a health plan medically underwrites both the employees of a small group and their dependents, even though small group reform laws prohibit health plans from singling out individuals for rejection or substandard rate-ups.
B. In the absence of laws mandating otherwise, a health plan's underwriting standards grow stricter as group size gets smaller.
C. Both A and B
D. A only
E. B only
F. Neither A nor B


Answer : A

Question 10 ( Topic 1 )
The Eagle health plan wants to limit the possibility that it will be held vicariously liable for the negligent acts of providers. Dr. Michael Chan is a member of an independent practice association (IPA) that has contracted with Eagle. One step that Eagle could take in order to limit its exposure under the theory of vicarious liability is to
A. Supply Dr. Chan with office space
B. Employ nurses, laboratory technicians, and therapists to support Dr.Chan
C. Be responsible for keeping Dr. Chan's medical records updated
D. Ensure that documents provided to Dr. Chan's patients describe him as an independent practitioner


Answer : D


Question 11 ( 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
A. $4.17
B. $8.33
C. $9.17
D. $10.00


Answer : B

Question 12 ( Topic 1 )
Three general strategies that health plans use for controlling types of risk are risk avoidance, risk transfer, and risk acceptance. The following statements are about these strategies. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.
A. Generally, the smaller the likely benefits of accepting a risk, and the lower the costs of avoiding that risk, the greater the likelihood that a health plan will elect to avoid the risk.
B. A health plan is seldom able to transfer any of the risk that utilization rates will be higher than expected and that its cost of providing healthcare will exceed the revenues it receives.
C. If a risk is a pure risk from the point of view of a health plan, then the health plan most likely will attempt to avoid the risk.
D. A health plan would most likely transfer some or all of its utilization risk if it pays a provider a rate that is based on the number of plan enrollees that choose the provider as their primary care provider (PCP).


Answer : B

Question 13 ( Topic 1 )
Over time, health plans and their underwriters have gathered increasingly reliable information about the morbidity experience of small groups.
Generally, in comparison to large groups, small groups tend to
A. Have more frequent and larger claims fluctuations
B. Generate lower administrative expenses as a percentage of the total premium amount the group pays
C. More closely follow actuarial predictions regarding morbidity rates
D. All of the above


Answer : A

Question 14 ( Topic 1 )
One true statement about mandated benefit laws is that they
A. Apply equally to self-funded and fully funded groups
B. Require a health plan to cover certain conditions or treatments or to pay a specified level of benefits for certain conditions or treatments
C. Have no impact on a health plan's underwriting and rating decisions
D. Typically decrease a health plan's risk because the health plan may need to delay premium rate decreases or may be prevented from increasing premium rates


Answer : B

Question 15 ( Topic 1 )
The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs.
The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is
A. $10,000
B. $14,000
C. $30,000
D. $34,000


Answer : C


Question 16 ( Topic 1 )
Federal law addresses the relationship between Medicare- or Medicaidcontracting health plans and providers who are at "substantial financial risk."
Under federal law, Medicare- or Medicaid-contracting health plans
A. Place a provider at "substantial risk" whenever incentive arrangements put the provider at risk for amounts in excess of 10% of his or her total potential reimbursement for providing services to Medicare and Medicaid enrollees
B. Must provide stop-loss coverage to a provider who is placed at "substantial financial risk" for services that the provider does not directly provide to Medicare or Medicaid enrollees
C. Both A and B
D. A only
E. B only
F. Neither A nor B


Answer : C

Question 17 ( Topic 1 )
Rasheed Azari, the risk manager for the Tower health plan, is attempting to work with providers in the organization in order to reduce the providers' exposure related to utilization review. Mr. Azari is considering advising the providers to take the following actions:
-> 1-Allow Tower's utilization management decisions to override a physician's independent medical judgment
-> 2-Support the development of a system that can quickly render a second opinion in case of disagreement surrounding clinical judgment
-> 3-Inform a patient of any issues that are being disputed relative to a physician's recommended treatment plan and Tower's coverage decision
Of these possible actions, the ones that are likely to reduce physicians' exposures related to utilization review include actions
A. 1, 2, and 3
B. 1 and 2 only
C. 1 and 3 only
D. 2 and 3 only


Answer : D

Question 18 ( Topic 1 )
Experience rating and manual rating are two rating methods that the Cheshire health plan uses to determine its premium rates. One difference between these two methods is that, under experience rating, Cheshire
A. Uses a purchaser's actual experience to estimate the group's expected experience, whereas, under manual rating, Cheshire uses its own average experienceand sometimes the experience of other plansto estimate the group's expected experience
B. can establish rates for groups that have no previous plan experience, whereas, under manual rating, Cheshire cannot establish rates for groups with no previous plan experience
C. charges each group in the same class the same premium whereas, under manual rating, Cheshire charges lower premiums to groups that have experienced lower utilization rates
D. can use group demographics to help determine the rate for a block of business, whereas, under manual rating, Cheshire cannot use group demographics when determining the rate for a block of business


Answer : A

Question 19 ( Topic 1 )
The provider contract that Dr. Timothy Meyer, a pediatrician, has with the Cardigan health plan states that Cardigan will compensate him under a capitation arrangement. However, the contract also includes a typical low enrollment guarantee provision. Statements that can correctly be made about this arrangement include that the low enrollment guarantee provision most likely:
A. Causes Dr. Meyer's capitation contract with Cardigan to transfer more risk to him than the contract otherwise would transfer
B. Specifies that Cardigan will pay Dr. Meyer under an arrangement other than capitation until a specified number of children covered by the plan use him as their PCP
C. Both A and B
D. A only
E. B only
F. Neither A nor B


Answer : C

Question 20 ( Topic 1 )
The following paragraph contains an incomplete statement. Select the answer choice containing the term that correctly completes the statement. Health plans face four contingency risks (C-risks): asset risk (C-1), pricing risk (C-2), interest-rate risk (C-3), and general management risk (C-4). Of these risks, ________________ is typically the most important risk that health plans face. This is true because a sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay for future medical costs, and the exact amount of these costs is not known when the healthcare coverage is priced.
A. Asset risk (C-1)
B. Pricing risk (C-2)
C. Interest-rate risk (C-3)
D. General management risk (C-4)


Answer : B


Question 21 ( Topic 1 )
The following statements are about pure risk and speculative risktwo kinds of risk that both businesses and individuals experience. Select the answer choice containing the correct statement.
A. Healthcare coverage is designed to help plan members avoid pure risk, not speculative risk.
B. Only pure risk involves the possibility of gain.
C. An example of speculative risk is the possibility that an individual will contract a serious illness.
D. Only speculative risk contains an element of uncertainty.


Answer : A

Question 22 ( Topic 1 )
Two sets of financial accounting standards are generally accepted accounting principles
(GAAP) and statutory accounting practices (SAP). One true statement about these financial accounting standards is that
A. State laws and regulations in the United States govern the implementation of GAAP, but not the implementation of SAP
B. Health plans must prepare their financial statements for their external users according to applicable laws, regulations, and accounting principles, particularly GAAP
C. GAAP specifically focuses on the requirements of insurance regulators and policyholder interests
D. The Financial Accounting Standards Board (FASB) is a private organization whose purpose is to establish and promote SAP in the United States


Answer : B

Question 23 ( Topic 1 )
With regard to a health plan's underwriting of groups, it can correctly be stated that, generally, a
A. Health plan will require that contributory healthcare plans have a participation level of between 50% and 70%
B. Health plan will decline to cover a group that has been formed for the sole purpose of obtaining healthcare coverage
C. Health plan's underwriters will not examine the age spread of the entire group being underwritten
D. Health plan would expect a group with a large proportion of young females to have lower healthcare costs than does a similar group with a large proportion of young males


Answer : B

Question 24 ( Topic 1 )
The McGwire Health Plan is a for-profit health plan that issues stock. Events that will cause the owners' equity account of McGwire to change include
A. McGwire's retention of net income
B. McGwire's payment of cash dividends on the stock it issued
C. McGwire's purchase of treasury stock
D. All of the above


Answer : D

Question 25 ( Topic 1 )
The following statements are about risk management in health plans. Select the answer choice containing the correct response.
A. Risk management is especially important to health plans because the Employee Retirement Income Security Act of 1974 (ERISA) allows plan members to recover punitive damages from healthcare plans.
B. With regard to the relative risk for health plan structures based upon the degree of influence and relationships that health plans maintain with their providers, preferred provider organizations (PPOs) typically have a higher risk than do group HMOs and staff HMOs.
C. Although there are clear risks associated with the provision of healthcare services and coverage decisions surrounding that care, the bulk of risk in health plans is associated with a health plan's benefit administration and contracting activities.
D. A health plan generally structures its risk management process around loss reduction techniques and loss transfer techniques.


Answer : D


Question 26 ( Topic 1 )
A product is often described as having a thin margin or a wide margin. With regard to the factors that help determine the size of the margin of a health plan's product, it can correctly be stated that the
A. greater the risk a health plan assumes in a health plan, the thinner the product margin should be
B. more that competition acts to force prices down, the wider the product margins tend to become
C. greater the demand for the product, the thinner the margin for this product tends to become
D. longer the premium rates are guaranteed to a group, the wider the health plan's margin should be


Answer : D

Question 27 ( Topic 1 )
The Brookhaven Company is the parent company of two subsidiaries: an HMO and an insurance company. The headings on Brookhaven's financial statements read
"Consolidated Financial Statements of Brookhaven Company." From the following answer choices, select the response that correctly indicates, under the entity concept, whether the
HMO and the insurance company are accounted for as separate entities and whether the subsidiaries' financial results would be included in Brookhaven's consolidated financial statements.
A. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = yes
B. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = no
C. Accounted for as Separate Entities? = no Results Included in Brookhaven's Statements? = yes
D. Accounted for as Separate Entities? = no Results Included in Brookhaven's Statements? = no


Answer : A

Question 28 ( Topic 1 )
Because a health plan cannot decline coverage for individuals who are eligible for conversion of group health coverage to individual health coverage, the bulk of the health plan's underwriting for conversion policies is accomplished through health plan design.
A. True
B. False


Answer : A

Question 29 ( Topic 1 )
The following statements are about the new methodology authorized under the Balanced
Budget Act of 1997 (BBA) for payments by the Centers for Medicaid & Medicare Services
(CMS) to Medicare-contracting health plans.
Select the answer choice containing the correct statement.
A. Under this new methodology, Medicare-contracting health plans are paid the lower of (a) a floor payment amount per enrollee covered or (b) the health plan's payment rate increased by 2% from the previous year.
B. The new methodology has decreased the rate of growth in payments from CMS to Medicare-contracting health plans.
C. Under this new methodology, Medicare-contracting health plans are paid 90% of the adjusted average per capita cost (AAPCC) of providing a service to a beneficiary.
D. Under the principal inpatient diagnostic cost group (PIP-DCG), a new risk adjustment methodology, Medicare-contracting health plans will no longer be required to calculate and submit to CMS a Medicare adjusted community rate (ACR).


Answer : B

Question 30 ( Topic 1 )
This concept, which is an extension of the going-concern concept, holds that the value of an asset that a company reports in its accounting records should be the asset's historical cost, not its current market value. Although this concept offers objectivity and reliability, it may lack relevance, particularly for assets held for a long period of time.
From the following answer choices, choose the name of the accounting concept that matches the description.
A. Measuring-unit concept
B. Full-disclosure concept
C. Cost concept
D. Time-period concept


Answer : C


Question 31 ( Topic 1 )
In the following paragraph, a sentence contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have selected.
The Igloo health plan recognizes the receipt of its premium income during the accounting period in which the income is earned, regardless of when cash changes hands. However,
Igloo recognizes its expenses when it earns the revenues related to those expenses, regardless of when it receives cash for the revenues earned. This information indicates that the (realization/capitalization) principle governs Igloo's revenue recognition, whereas the
(matching/initial-recording) principle governs its expense recognition.
A. realization / matching
B. realization / initial-recording
C. capitalization / matching
D. capitalization / initial-recording


Answer : A

Question 32 ( Topic 1 )
The Fiesta Health Plan prices its products in such a way that the rates for its products are reasonable, adequate, equitable, and competitive. Fiesta is using blended rating to calculate a premium rate for the Murdock Company, a large employer. Fiesta has assigned a credibility factor of 0.6 to Murdock. Fiesta has also determined that Murdock's manual rate is $200 PMPM and that Murdock's experience rate is $180 PMPM. Fiesta would correctly calculate that its blended rate PMPM for Murdock should be Fiesta's retention charge plus
A. $152
B. $188
C. $192
D. $228


Answer : B

Question 33 ( Topic 1 )
The Acorn Health Plan uses a resource-based relative value scale (RBRVS) to help determine the reimbursement amounts that Acorn should make to providers who are compensated under an FFS system. With regard to the advantages and disadvantages to
Acorn of using RBRVS, it can correctly be stated that
A. An advantage of using RBRVS is that it can assist Acorn in developing reimbursement schedules for various types of providers in a comprehensive healthcare plan
B. An advantage of using RBRVS is that it puts providers who render more medical services than necessary at financial risk for this overutilization
C. A disadvantage of using RBRVS is that it will be difficult for Acorn to track treatment rates for the health plan's quality and cost management functions
D. A disadvantage of using RBRVS is that it rewards procedural healthcare services more than cognitive healthcare services


Answer : A

Question 34 ( Topic 1 )
Several federal agencies establish rules and requirements that affect health plans. One of these agencies is the Department of Labor (DOL), which is primarily responsible for
_________.
A. Issuing regulations pertaining to the Health Insurance Portability and Accountability Act (HIPAA) of 1996
B. Administering the Medicare and Medicaid programs
C. Administering ERISA, which imposes various documentation, appeals, reporting, and disclosure requirements on employer group health plans
D. Administering the Federal Employees Health BenefitsProgram (FEHBP), which providesvoluntary health insurance coverage to federal employees, retirees, and dependents


Answer : C

Question 35 ( Topic 1 )
The Poplar Company and a Blue Cross/Blue Shield organization have contracted to provide a typical fully funded health plan for Poplar's employees. One true statement about this health plan for Poplar's employees is that
A. Poplar bears the entire financial risk if, during a given period, the dollar amount of services rendered to Poplar plan members exceeds the dollar amount of premiums collected for this health plan
B. Poplar and the Blue Cross/Blue Shield organization share the financial risk of paying for claims under Poplar's health plan
C. The Blue Cross/Blue Shield organization, upon acceptance of a premium, becomes the group plan sponsor for Poplar's health plan
D. The Blue Cross/Blue Shield organization, upon acceptance of a premium, bears the entire financial risk of paying for the administrative expenses associated with health plan operations


Answer : D


Question 36 ( Topic 1 )
Health plans seeking to provide comprehensive healthcare plans must contract with a variety of providers for ancillary services. One characteristic of ancillary services is that
A. Physician behavior typically does not impact the utilization rates for these services
B. Package pricing is the preferred reimbursement method for ancillary service providers
C. These services include physical therapy, behavior therapy, and home healthcare, but not diagnostic services such as laboratory tests
D. Few plan members seek these services without first being referred to the ancillary provider by a physician


Answer : D

Question 37 ( Topic 1 )
The Cardinal health plan complies with all of the provisions of HIPAA.
Cardinal has received requests for healthcare coverage from the following companies that meet the statutory definition of a small group:
-> The Xavier Company has excellent claims experience
-> The Youngblood Company has not previously offered group healthcare coverage to its employees
-> The Zebulon Company has poor claims experience
According to HIPAA's provisions, Cardinal must issue a healthcare contract to
A. Xavier, Youngblood, and Zebulon
B. Xavier and Youngblood only
C. Xavier only
D. None of these companies


Answer : A

Question 38 ( 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.
A. Panda most likely built the crediting interest rate of 4% into the investment margin of its product.
B. Panda's investment margin is the difference between its actual benefit costs and the benefit costs that it assumes in its pricing.
C. The interest margin for this product is 2%.
D. All of these statements are correct.


Answer : C

Question 39 ( Topic 1 )
The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series of adjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.
The main purpose of Caribou's balance sheet is to
A. Reveal how Caribou obtained particular assets or liabilities
B. Show how much money Caribou has realized from its operations during an accounting period
C. Measure the owners' wealth
D. Reconcile the cash that Caribou has on hand at the beginning and at the end of an accounting period


Answer : C

Question 40 ( Topic 1 )
With regard to capitation arrangements for hospitals, it can correctly be Back to Top stated that
A. The most common reimbursement method for hospitals is professional services capitation
B. Most jurisdictions prohibit hospitals and physicians from joining together to receive global capitations that cover institutional services provided by the hospitals
C. Ahealth plan typically can capitate a hospital for outpatient laboratory and X-ray services only if the health plan also capitates the hospital for inpatient care
D. Many hospitals have formed physician hospital organizations (PHOs), hospital systems, or integrated delivery systems (IDSs) that can accept global capitation payments from health plans


Answer : D


Question 41 ( Topic 1 )
The Lighthouse health plan operates in a state that allows the health plan to use an underwriting method of determining a group's premium in which underwriters treat several small groups as one large group for risk assessment purposes. This method, which helps
Lighthouse more accurately estimate a small group's probable claims costs, is known as
A. Case stripping
B. The low-option rating method
C. The rate spread method
D. Pooling


Answer : D

Question 42 ( Topic 1 )
Experience rating methods can be either prospective or retrospective. With regard to these types of experience rating methods, it can correctly be stated that
A. A health plan typically can expect much higher profit levels from using retrospective experience rating rather than prospective experience rating a health plan using prospective experience rating is more likely than a
B. Health plan using retrospective experience rating to have to pay an experience rating dividend if a group's experience has been better than expected during the rating period
C. The premium determined under retrospective experience rating is usually higher than the premium under prospective experience rating
D. Most states require HMOs to use retrospective experience rating rather than prospective experience rating


Answer : C

Question 43 ( Topic 1 )
The following statements are about various reimbursement arrangements that health plans have with hospitals. Select the answer choice containing the correct statement.
A. A sliding scale per-diem charges arrangement differs from a sliding scale discount on charges arrangement in that only a sliding scale per-diem charges arrangement is based on total volume of admissions and outpatient procedures.
B. Under a typical reimbursement arrangement that is based on diagnosisrelated groups (DRGs), if the payment amount is fixed on the basis of diagnosis, then any reduction in costs resulting from a reduction in days will go to the health plan rather than to the hospital.
C. A negotiated straight per-diem charge requires payment of a single charge for a day in the hospital, regardless of any actual charges or costs incurred during the hospital stay.
D. A straight discount on charges arrangement is the most common reimbursement method in markets with high levels of health plans.


Answer : C

Question 44 ( Topic 1 )
Under GAAP, three approaches to expense recognition are generally allowed: associating cause and effect, systematic and rational allocation, and immediate recognition. A health plan most likely would use the approach of systematic and rational allocation in order to
A. Report the payment of the health plan's utility bills
B. Spread the payment of sales force commissions over the premium paying period of healthcare coverage
C. Report the fees paid by the health plan to attorneys and consultants
D. Depreciate the cost of a new computer system over the useful life of the system


Answer : D

Question 45 ( Topic 1 )
The Fiesta Health Plan prices its products in such a way that the rates for its products are reasonable, adequate, equitable, and competitive. Fiesta is using blended rating to calculate a premium rate for the Murdock Company, a large employer. Fiesta has assigned a credibility factor of 0.6 to Murdock. Fiesta has also determined that Murdock's manual rate is $200 PMPM and that Murdock's experience rate is $180 PMPM.
According to regulations, Fiesta's premium rates are reasonable if they
A. vary only on the factors that affect Fiesta's costs
B. are at a level that balances Fiesta's need to generate a profit against its need to obtain or retain a specified share of the market in which it conducts business
C. are high enough to ensure that Fiesta has enough money on hand to pay operating expenses as they come due
D. do not exceed what Fiesta needs to cover its costs and provide the plan with a fair profit


Answer : D