Chapter 8 Full Test Bank The Market for Health Insurance

Dewar ASQZ

Chapter 8

True/False

1. Charged insurance premiums generally exceed the fair value of the risk that the insurance company has assumed, where the fair value is the expected payout or actuarially fair premium.

<Answer: True>

<Complexity: Easy>

<A-head: The Insurance Market>

<Subject: Chapter 8, Page 58>

Fill-in-the-Blank

2. Due to ___________________, insurance suppliers will be more willing to enter market situations where they can make a reasonable estimate of their payouts or where they can assess the degree of risk they are assuming.

<Answer: risk aversion>

<Complexity: Moderate>

<A-head: The Insurance Market>

<Subject: Chapter 8, Page 58>

Matching

3. Match the following terms to the appropriate definition.

[1] Applies when each member of an insurance pool pays the same premium per person or per family for the same coverage.

<Answer: Community rating>

[2] Occurs when insurance companies base premiums on past levels of payouts, which is often done in the case of car or homeowner’s insurance.

<Answer: Experience rating>

[3] Refers to the phenomenon of a person’s behavior being affected by his or her insurance coverage.

<Answer: Moral hazard>

[4] Exists when people with different health-related characteristics than the average person increase the amount of health insurance purchased.

<Answer: Adverse selection>

<Complexity: Difficult>

<A-head: The Insurance Market>

<Subject: Chapter 8, Page 58>

Matching

4. Match the following terms to the appropriate definition.

[1] A level of expenditure that must be incurred before any benefits are paid out.

<Answer: Deductibles>

[2] Helps to reduce the moral hazard factor for the insured who has spent more than his or her deductible because health care is not free to the consumer.

<Answer: Coinsurance>

[3] Rationed using such mechanisms as gatekeepers who are primary care physicians who make all referrals to specialists, thus limiting coverage to service providers with whom the insurance company has a contractual agreement and requiring pre-certification or approval from the insurance company before services are rendered.

<Answer: Managed care>

[4] Annual limits on out-of-pocket expenditures that must be borne by the insured.

<Answer: Stop-loss provisions>

<Complexity: Difficult>

<A-head: The Insurance Market>

<Subject: Chapter 8, Page 59>

Multiple Choice

5. Which of the following is defined when the insurance companies structure coverage to both avoid adverse selection and to attract lower-than-average risk subscribers?

[1] Positive selection

[2] Negative selection

[3] Comprehensive selection

[4] Beneficial selection

<Answer: 1>

<Complexity: Moderate>

<A-head: The Insurance Market>

<Subject: Chapter 8, Page 59>

Multiple Choice

6. Which piece of legislation allows Americans to cut back on work hours or end unsatisfying jobs because health insurance is now portable?

[1] Health Insurance Portability and Accountability Act

[2] Affordable Care Act

[3] Consolidated Omnibus Budget Reconciliation Act

[4] Emergency Medical Treatment and Active Labor Act

<Answer: 2>

<Complexity: Moderate>

<A-head: Employer-Based Insurance>

<Subject: Chapter 8, Page 60>

Multiple Choice

7. Which of the following means that hospitals receive payment in full for all healthcare expenditures incurred in some pre-specified period of time?

[1] Retrospective payment

[2] Fee-for-service payment

[3] Prospective payment

[4] Optimal payment

<Answer: 1>

<Complexity: Moderate>

<A-head: Reimbursement>

<Subject: Chapter 8, Page 60>

True/False

8. One problem in modeling the optimal insurance contract is that the degree of moral hazard may vary by type of illness or type of healthcare service.

<Answer: True>

<Complexity: Easy>

<A-head: Optimal Insurance Contracts>

<Subject: Chapter 8, Page 61>

True/False

9. Because hospital income depends on actual costs incurred or on the volume of services provided, there are many incentives to minimize costs.

<Answer: False>

<Complexity: Easy>

<A-head: Reimbursement>

<Subject: Chapter 8, Page 61>

Multiple Choice

10. Diagnosis-related groups are an example of what type of reimbursement method?

[1] Retrospective payment

[2] Fee-for-service payment

[3] Prospective payment

[4] Optimal payment

<Answer: 3>

<Complexity: Moderate>

<A-head: Reimbursement>

<Subject: Chapter 8, Page 62>