Question 6 of 212
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.
    Correct Answer: C

Question 7 of 212
The Atoll Health Plan must comply with a number of laws that directly affect the plan's contracts. One of these laws allows Atoll's plan members to receive medical services from certain specialists without first being referred to those specialists by a primary care provider (PCP). This law, which reduces the PCP's ability to manage utilization of these specialists, is known as _________.
    Correct Answer: C

Question 8 of 212
The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
One difference between the RI method and the ROI method is that:
    Correct Answer: A

Question 9 of 212
The following transactions occurred at the Lane Health Plan:
Transaction 1 — Lane recorded a $25,000 premium prior to receiving the payment
Transaction 2 — Lane purchased $500 in office expenses on account, but did not record the expense until it received the bill a month later
Transaction 3 — Fire destroyed one of Lane’s facilities; Lane waited until the facility was rebuilt before assessing and recording the amount of loss
Transaction 4 — Lane sold an investment on which it realized a $14,000 gain; Lane recorded the gain only after the sale was completed.
Of these transactions, the one that is consistent with the accounting principle of conservatism is:
    Correct Answer: D

Question 10 of 212
The Jade Health Plan used a profitability index (PI) to rank the following capital proposals:

Proposal PI -

A0.45 -

B1.05 -
This information indicates that, of these two projects, Jade would most likely select:
    Correct Answer: C