Variance analysis is the study of the difference between expected results and actual results. Variances can be positive or negative. A positive variance is typically considered:
The Landau health plan will switch from using top-down budgeting to using bottom-up budgeting. One potential advantage to Landau of making this switch is that, compared to top-down budgeting, bottom-up budgeting is more likely to
Julio Benini is eligible to receive healthcare coverage through a health plan that is under contract to his employer. Mr. Benini is seeking coverage for the following individuals:
Elena Benini, his wife
Maria Benini, his 18-year-old unmarried daughter
Johann Benini, his 80-year-old father who relies on Julio for support and maintenance
The health plan most likely would consider that the definition of a dependent, for purposes of healthcare coverage, applies to:
The Coral Health Plan, a for-profit health plan, has two sources of capital:
Debt and equity. With regard to these sources of capital, it can correctly be stated that
In order to print all of its forms in-house, the Prism health plan is considering the purchase of 10 new printers at a total cost of $30,000. Prism estimates that the proposed printers have a useful life of 5 years. Under its current system, Prism spends $10,000 a year to have forms printed by a local printing company. Assume that Prism selects a 15% discount rate based on its weighted-average costs of capital. The cash inflows for each year, discounted to their present value, are shown in the following chart:
Prism will use both the payback method and the discounted payback method to analyze the worthiness of this potential capital investment. Prism's decision rule is to accept all proposed capital projects that have payback periods of four years or less.
Now assume that Prism decides to use the net present value (NPV) method to evaluate this potential investment's worthiness and that Prism will accept the project if the project's NPV is greater than $4,000. Using the NPV method, Prism would correctly conclude that this project should be
The Rathbone Company has contracted with the Jarvin Insurance Company to provide healthcare benefits to its employees. Under this contract, Rathbone assumes financial responsibility for paying 80% of its estimated annual claims and for depositing the funds necessary to pay these claims into a bank account. Although Rathbone owns the bank account, Jarvin, acting as Rathbone’s agent, makes the actual claims payments from this account. Claims in excess of Rathbone’s contracted percentage are paid by Jarvin. Rathbone pays to Jarvin a premium for administering the entire plan and bearing the costs of claims in excess of Rathbone’s obligation. This premium is substantially lower than would be charged if Jarvin were providing healthcare coverage under a traditional fully insured group plan. Jarvin is required to pay premium taxes only on the premiums it receives from Rathbone. This information indicates that the type of alternative funding method used by Rathbone is known as a:
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:
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
With regard to alternative funding arrangements, the part of a health plan premium that is intended to contribute to the claims reserve that a health plan maintains to pay for unusually high utilization is known as the:
The amount of risk for health plan products is dependent on the degree of influence and the relationships that the health plan maintains with its providers. Consider the following types of managed care structures:
Preferred provider organization (PPO)
Group model HMO
Staff model health maintenance organization (HMO)
Traditional health insurance
Of these health plan products, the one that would most likely expose a health plan to the highest risk is the:
