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PAHM practice questions

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Question 1Healthcare Systems and Delivery Models

Which type of health insurance plan typically requires members to choose a primary care physician who coordinates referrals to specialists?

  1. Point-of-service (POS) plan
  2. Indemnity (fee-for-service) plan
  3. Preferred provider organization (PPO)
  4. Health maintenance organization (HMO) Correct answer.

Explanation

HMOs use a gatekeeping model in which a primary care physician manages care and authorizes specialist referrals. PPOs and indemnity plans generally allow members to see specialists without a referral, and POS plans make the gatekeeper optional.

Question 2Healthcare Systems and Delivery Models

A patient enrolled in Original Medicare receives inpatient hospital coverage under which part of the program?

  1. Part D
  2. Part A Correct answer.
  3. Part C
  4. Part B

Explanation

Part A covers inpatient hospital, skilled nursing facility, hospice, and some home health care. Part B covers outpatient and physician services, Part C is Medicare Advantage, and Part D covers prescription drugs.

Question 3Healthcare Systems and Delivery Models

Which government program provides health coverage jointly funded by the federal government and the states for low-income individuals?

  1. Medicare
  2. TRICARE
  3. The Federal Employees Health Benefits program
  4. Medicaid Correct answer.

Explanation

Medicaid is a joint federal-state program that provides coverage to eligible low-income people, with the federal government matching state spending. Medicare is federally funded and age- or disability-based, while TRICARE and FEHB serve specific populations.

Question 4Healthcare Systems and Delivery Models

In a capitated payment arrangement, a provider is paid:

  1. A bonus tied to patient satisfaction scores
  2. A negotiated fee for each service delivered
  3. A fixed amount per member per month regardless of services used Correct answer.
  4. A percentage of the plan's annual premium revenue

Explanation

Capitation pays a fixed per-member per-period amount, shifting financial risk for utilization to the provider. Fee-for-service pays per unit of service, while shared-savings or bonus arrangements are separate incentive mechanisms.

Question 5Healthcare Systems and Delivery Models

Which entity is responsible for administering the credentialing process that verifies a physician's licensure, training, and malpractice history before network participation?

  1. The Centers for Medicare & Medicaid Services directly
  2. The physician's malpractice carrier
  3. The state insurance department
  4. The health plan's credentialing committee Correct answer.

Explanation

Health plans verify practitioner qualifications through a formal credentialing process, often reviewed by a credentialing or peer committee. State insurance departments regulate insurers but do not credential individual physicians, and malpractice carriers only provide history data.

Question 6Healthcare Systems and Delivery Models

A health plan that contracts with a select group of providers who agree to discounted fees in exchange for expedited claims processing and patient volume is best described as a:

  1. Exclusive provider organization
  2. Staff model HMO
  3. Indemnity plan
  4. Preferred provider organization Correct answer.

Explanation

PPOs build discounted-fee networks and reward members for using in-network providers while still permitting out-of-network care. Staff model HMOs employ physicians directly, and EPOs generally provide no out-of-network coverage.

Question 7Healthcare Systems and Delivery Models

The primary purpose of a utilization management program is to:

  1. Set premium rates based on member risk scores
  2. Evaluate the medical necessity and appropriateness of care Correct answer.
  3. Administer member grievance and appeal processes
  4. Recruit and credential new network providers

Explanation

Utilization management reviews services prospectively, concurrently, or retrospectively to confirm medical necessity and appropriate setting of care. Premium setting, network recruitment, and appeals are separate functions.

Question 8Healthcare Systems and Delivery Models

Which model of care delivery assigns a fixed group of patients to an interdisciplinary team that provides continuous, coordinated primary care?

  1. Patient-centered medical home Correct answer.
  2. Telehealth-only practice
  3. Retail clinic model
  4. Concierge medicine

Explanation

The patient-centered medical home emphasizes a personal physician, team-based care, coordination, and whole-person orientation for an enrolled panel. Retail clinics, telehealth-only practices, and concierge models do not provide continuous panel-based coordination.

Question 9Healthcare Systems and Delivery Models

An accountable care organization (ACO) participating in a shared-savings program is financially rewarded primarily when it:

  1. Meets quality targets and holds total cost of care below a benchmark Correct answer.
  2. Increases the volume of specialist referrals
  3. Raises member cost-sharing amounts
  4. Reduces its network of contracted providers

Explanation

ACOs accept responsibility for the quality and total cost of care for an assigned population and share in savings when spending falls below a benchmark while quality standards are met. Volume expansion and network reduction are not the basis for shared savings.

Question 10Healthcare Systems and Delivery Models

Under Medicare Advantage, the federal government pays a private plan using a rate that is primarily based on:

  1. The number of providers in the plan's network
  2. The plan's administrative expense ratio
  3. A risk-adjusted benchmark reflecting the enrolled population Correct answer.
  4. The plan's actual claims experience in the prior year

Explanation

Medicare Advantage payments are based on a benchmark rate adjusted by risk scores reflecting the health status of enrollees. Prior-year claims and network size do not set the federal payment rate.

Question 11Healthcare Systems and Delivery Models

Which statement best describes the difference between a closed panel and an open panel provider network?

  1. A closed panel permits out-of-network care, while an open panel prohibits it
  2. A closed panel uses capitation, while an open panel uses fee-for-service
  3. A closed panel limits participation to a defined group of providers, while an open panel allows any qualified provider to join Correct answer.
  4. A closed panel applies only to specialists, while an open panel applies only to primary care

Explanation

Panel structure concerns which providers may participate in the network, not benefit design or payment method. Closed panels restrict participation to a defined set, while open panels admit any provider meeting credentialing criteria.

Question 12Healthcare Systems and Delivery Models

A member enrolled in a high-deductible health plan paired with a health savings account typically:

  1. Must use a gatekeeper for all specialist visits
  2. Receives first-dollar coverage for all services
  3. Is restricted to a single designated clinic
  4. Pays lower premiums in exchange for higher upfront cost-sharing Correct answer.

Explanation

HDHPs trade lower premiums for a higher deductible, and the paired HSA lets members pay qualified expenses with pre-tax funds. They do not inherently require gatekeeping, first-dollar coverage, or single-clinic assignment.

Question 13Healthcare Systems and Delivery Models

The term 'medical loss ratio' refers to the proportion of premium revenue that an insurer:

  1. Retains as profit
  2. Collects in member cost-sharing
  3. Pays out for clinical services and quality improvement Correct answer.
  4. Spends on administrative salaries

Explanation

The medical loss ratio measures the share of premium dollars spent on medical care and activities that improve quality, with minimum thresholds required in many markets. Administrative costs and profit are the complement of the loss ratio.

Question 14Healthcare Systems and Delivery Models

Which delivery setting is designed to provide short-term skilled nursing and rehabilitation after an acute hospitalization?

  1. Adult day care center
  2. Skilled nursing facility Correct answer.
  3. Assisted living facility
  4. Independent living community

Explanation

Skilled nursing facilities provide post-acute rehabilitation and skilled nursing care following hospitalization. Assisted living, independent living, and adult day care serve longer-term residential or daytime support needs.

Question 15Healthcare Systems and Delivery Models

A payer that shifts financial risk to a provider group through a global budget with shared savings and losses is using which approach?

  1. Retrospective cost-based reimbursement
  2. Fee-for-service reimbursement
  3. Discounted charge payment
  4. Two-sided risk contracting Correct answer.

Explanation

Two-sided risk arrangements make providers eligible for shared savings but also liable for shared losses, creating stronger incentives for cost control. Fee-for-service, cost-based, and discount-off-charges models place little or no risk on providers.

Question 16Healthcare Systems and Delivery Models

Which organization accredits and certifies managed care organizations against national standards for quality and care coordination?

  1. NCQA Correct answer.
  2. OSHA
  3. FTC
  4. FCC

Explanation

NCQA is a private nonprofit that accredits health plans and recognizes providers against standards for quality and coordination. FTC, FCC, and OSHA are federal agencies with unrelated regulatory missions.

Question 17Healthcare Systems and Delivery Models

In a point-of-service plan, a member who receives care from a non-network provider typically:

  1. Pays a higher level of cost-sharing Correct answer.
  2. Must obtain prior authorization from the federal government
  3. Forfeits all coverage for the service
  4. Receives the same benefits as in-network care

Explanation

POS plans blend HMO and PPO features, allowing out-of-network care at a higher member cost share. Coverage is generally still provided, and authorization comes from the plan rather than a federal agency.

Question 18Healthcare Systems and Delivery Models

Which factor most directly distinguishes a hospital's inpatient prospective payment system from its outpatient payment?

  1. Outpatient services are paid a fixed amount per discharge
  2. Inpatient stays are paid a fixed amount per discharge based on diagnosis-related groups Correct answer.
  3. Inpatient stays are paid per diem based on actual length of stay
  4. Outpatient services are paid only through capitation

Explanation

Under the inpatient prospective payment system, hospitals are paid a predetermined amount per discharge classified by diagnosis-related group. Per-diem payment and capitation are different methods, and outpatient services are paid through separate outpatient payment systems.

Question 19Healthcare Systems and Delivery Models

Which of the following best describes a health system's 'continuum of care'?

  1. The schedule of member premium payment dates
  2. The set of benefits excluded from a policy
  3. A list of contracted specialists within a network
  4. An integrated range of services spanning prevention through end-of-life care Correct answer.

Explanation

The continuum of care describes the full range of coordinated services across settings and time, from prevention and primary care to acute, post-acute, and end-of-life care. It is broader than a provider list or a benefits schedule.

Question 20Healthcare Systems and Delivery Models

A physician group that accepts capitation but then pays its individual physicians on a fee-for-service basis has created which arrangement?

  1. A pure staff model HMO
  2. A single-payer system
  3. A risk-sharing arrangement with internal fee-for-service incentives Correct answer.
  4. An indemnity insurance product

Explanation

The group bears population risk through capitation while passing volume-based incentives to its physicians internally. This mix is a risk-sharing structure, not a staff model, indemnity product, or single-payer system.

Question 21Healthcare Systems and Delivery Models

Which entity typically issues the certificate of authority that allows an insurer to operate in a given state?

  1. The U.S. Department of Health and Human Services
  2. The plan's own board of directors
  3. The Joint Commission
  4. The state department of insurance Correct answer.

Explanation

Insurers must be licensed by the state insurance department, which grants a certificate of authority to transact business. Federal agencies, accreditors, and internal boards do not grant state operating authority.

Question 22Healthcare Systems and Delivery Models

Which statement correctly describes the relationship between Medicare Parts A and B and Medicare Advantage?

  1. Medicare Advantage eliminates the need for any premium
  2. Medicare Advantage covers only prescription drugs
  3. Medicare Advantage replaces Parts A and B with a private plan that must cover at least the same benefits Correct answer.
  4. Medicare Advantage is available only to people under 65

Explanation

Medicare Advantage plans are private alternatives to Original Medicare that must provide at least the benefits of Parts A and B, often with additional coverage. They do not replace drug coverage entirely or eliminate premiums, and eligibility generally mirrors Medicare eligibility.

Question 23Healthcare Systems and Delivery Models

The main purpose of a peer review organization in a managed care plan is to:

  1. Negotiate hospital discount rates
  2. Process member enrollment applications
  3. Set the plan's premium rates
  4. Evaluate the quality and appropriateness of care provided by network clinicians Correct answer.

Explanation

Peer review uses practicing clinicians to assess quality and appropriateness of care and to support credentialing and utilization decisions. Rate setting, contracting, and enrollment are separate functions.

Question 24Healthcare Systems and Delivery Models

Which of the following is a defining feature of an exclusive provider organization (EPO)?

  1. Members must obtain a referral for every visit
  2. Members pay no cost-sharing for preventive care
  3. Members generally receive benefits only when using network providers Correct answer.
  4. Members may use any provider with no cost difference

Explanation

EPOs typically provide coverage only for in-network care, except in emergencies, distinguishing them from PPOs that allow out-of-network use. Referral requirements and preventive cost-sharing rules are separate benefit features.

Question 25Healthcare Systems and Delivery Models

Which of the following best describes the role of a pharmacy benefit manager in the health care system?

  1. It sets state Medicaid eligibility thresholds
  2. It accredits hospitals for Medicare participation
  3. It provides direct patient primary care
  4. It administers prescription drug benefits, including formularies and network pharmacy contracting Correct answer.

Explanation

Pharmacy benefit managers administer drug benefits for payers, managing formularies, pharmacy networks, and manufacturer rebates. They do not deliver primary care, accredit hospitals, or set eligibility rules.

Question 26Healthcare Systems and Delivery Models

Which type of health insurance arrangement typically allows members to self-refer to specialists without a primary care gatekeeper but still requires use of a defined provider network?

  1. A closed-panel group practice
  2. A preferred provider organization Correct answer.
  3. A staff-model health maintenance organization
  4. A traditional indemnity plan

Explanation

A preferred provider organization offers members a defined network with negotiated rates while permitting self-referral to specialists, with reduced benefits for out-of-network care. Gatekeeping and closed panels are features of many HMO structures, and indemnity plans generally impose no network at all.

Question 27Healthcare Systems and Delivery Models

A patient is admitted to a hospital for an elective knee replacement and later is discharged to a freestanding rehabilitation facility. Which term best describes this rehabilitation setting?

  1. Post-acute care Correct answer.
  2. Emergency care
  3. Primary care
  4. Ambulatory surgery

Explanation

Post-acute care covers services delivered after an acute inpatient stay, such as inpatient rehabilitation, skilled nursing, and home health. Primary care is the first point of contact, ambulatory surgery is an outpatient procedure setting, and emergency care addresses urgent conditions.

Question 28Healthcare Systems and Delivery Models

A state Medicaid program wants to move most beneficiaries into managed care while keeping spending predictable per enrollee. Which payment approach best fits this goal?

  1. Prospective per-member-per-month capitation to contracted plans Correct answer.
  2. Per-diem payment for each inpatient day used
  3. Cost-based reimbursement of each hospital's reported expenses
  4. Retrospective fee-for-service reimbursement for each encounter

Explanation

Capitation pays a fixed amount per member per month regardless of the volume of services used, which shifts utilization risk to the plan and makes spending predictable. Fee-for-service, cost-based, and per-diem methods all vary with the amount of care delivered.

Question 29Healthcare Systems and Delivery Models

An insurer is designing a network and wants to control costs by requiring members to obtain a referral from a primary care physician before seeing a specialist. Which network design element is the insurer using?

  1. A retrospective claims audit
  2. A tiered pharmacy formulary
  3. A gatekeeping requirement Correct answer.
  4. An out-of-pocket maximum

Explanation

Gatekeeping uses a primary care physician as the entry point and coordinator who authorizes specialist referrals, a common cost-control feature of many HMO products. Formularies govern drug coverage, claims audits review submitted bills, and out-of-pocket maximums limit member cost sharing.

Question 30Healthcare Systems and Delivery Models

A large employer is comparing a fully insured arrangement with self-funding. Which statement best captures the financial consequence of self-funding?

  1. The employer transfers all claims risk to the insurer and pays a fixed premium each month
  2. The employer's costs are limited by law to a fixed percentage of payroll
  3. The employer bears the claims risk and pays claims from its own funds, often using a stop-loss policy to limit catastrophic exposure Correct answer.
  4. The employer must enroll employees in a state-run insurance exchange

Explanation

Under self-funding the employer retains the claims risk and pays incurred claims directly, typically purchasing stop-loss coverage to protect against unusually large claims. Fully insured arrangements transfer that risk to the carrier in exchange for a fixed premium.

Question 31Health Insurance and Managed Care Fundamentals

Which term describes a fixed dollar amount a member pays to the provider at the time of each service, before the plan pays its share?

  1. Deductible
  2. Coinsurance
  3. Copayment Correct answer.
  4. Premium

Explanation

A copayment is a flat, predetermined dollar charge collected at the point of service. Coinsurance is a percentage share, a deductible is an amount paid before benefits begin, and a premium is the periodic cost of enrollment.

Question 32Health Insurance and Managed Care Fundamentals

In a typical preferred provider organization (PPO), what happens to a member's cost sharing when they receive care from an out-of-network provider?

  1. It is identical to in-network cost sharing
  2. It is waived if the member calls the plan first
  3. It is usually higher than for in-network care Correct answer.
  4. It is capped at the in-network deductible

Explanation

PPOs contract with a network of preferred providers and give members a financial incentive to stay in network by applying higher cost sharing, and sometimes balance billing, outside the network. In-network and out-of-network cost sharing are therefore not the same.

Question 33Health Insurance and Managed Care Fundamentals

Which managed care model requires members to select a primary care physician who coordinates care and issues referrals to specialists?

  1. Point-of-service plan without a PCP
  2. Indemnity plan
  3. Health maintenance organization (HMO) Correct answer.
  4. Exclusive provider organization

Explanation

The gatekeeper model, in which a primary care physician manages referrals, is a defining feature of the traditional HMO. Indemnity plans generally impose no network or referral requirements.

Question 34Health Insurance and Managed Care Fundamentals

What does a health plan's out-of-pocket maximum limit for a member in a plan year?

  1. The monthly premium the member owes
  2. The total dollar amount the plan will pay to all providers
  3. The member's total cost sharing for covered in-network essential benefits Correct answer.
  4. The number of covered visits allowed per year

Explanation

The out-of-pocket maximum caps the member's cumulative cost sharing, such as deductibles, copayments, and coinsurance, for covered essential health benefits in a benefit period. Premiums generally do not count toward this limit.

Question 35Health Insurance and Managed Care Fundamentals

Which entity typically bears the financial risk for the cost of care in a fully insured group health plan?

  1. The employer group
  2. The covered employee
  3. The insurance carrier Correct answer.
  4. The provider network

Explanation

In a fully insured arrangement the carrier assumes the risk of claims experience and charges the group a premium. The employer's cost is limited to the premium rather than to actual claims.

Question 36Health Insurance and Managed Care Fundamentals

What is the primary purpose of utilization management in a managed care organization?

  1. To set the premium rates charged to employer groups
  2. To process member enrollment applications
  3. To recruit new network physicians
  4. To evaluate the medical necessity and appropriateness of care Correct answer.

Explanation

Utilization management uses techniques such as prior authorization and concurrent review to assess whether requested services are medically necessary and appropriate. Its focus is on care decisions rather than pricing, contracting, or enrollment.

Question 37Health Insurance and Managed Care Fundamentals

Which federal law established standards for the portability of group health coverage when employees change or lose jobs?

  1. HIPAA Correct answer.
  2. COBRA
  3. ERISA
  4. ACA

Explanation

The Health Insurance Portability and Accountability Act set rules limiting preexisting condition exclusions and guaranteeing availability and renewability of group coverage when people change employment. COBRA addresses continuation of coverage after certain qualifying events.

Question 38Health Insurance and Managed Care Fundamentals

What is a health maintenance organization's closed panel of providers called?

  1. The claims reserve
  2. The reinsurance pool
  3. The network of contracted providers Correct answer.
  4. The risk corridor

Explanation

A closed panel is the defined set of contracted providers through which an HMO delivers covered services. Members generally receive benefits only through these providers except in emergencies or with authorization.

Question 39Health Insurance and Managed Care Fundamentals

A member has a $2,000 deductible, 20% coinsurance, and a $6,000 out-of-pocket maximum. After meeting the deductible, the member incurs $10,000 in allowed in-network charges. Ignoring copayments, what is the member's total out-of-pocket cost for these charges?

  1. $6,000
  2. $3,600
  3. $4,000 Correct answer.
  4. $2,000

Explanation

The member first pays the $2,000 deductible, leaving $8,000 of allowed charges. Coinsurance at 20% of $8,000 is $1,600, so total cost sharing is $3,600, which is below the $6,000 maximum. The out-of-pocket maximum therefore does not cap the amount in this scenario.

Question 40Health Insurance and Managed Care Fundamentals

Which statement best describes the relationship between an independent practice association (IPA) and an HMO?

  1. The IPA sets the HMO's premium rates
  2. The HMO employs all IPA physicians directly
  3. The IPA functions as the state insurance regulator
  4. The IPA contracts with the HMO on behalf of its physician members Correct answer.

Explanation

An IPA is an organization of independent physicians that negotiates and contracts with HMOs and other payers on behalf of its members. The physicians remain independent rather than becoming employees of the HMO.

Question 41Health Insurance and Managed Care Fundamentals

What distinguishes a point-of-service (POS) plan from a traditional HMO?

  1. Members may use out-of-network providers at a higher cost Correct answer.
  2. Members must obtain all care from a closed panel
  3. Members are reimbursed for full billed charges
  4. Members pay no cost sharing for any service

Explanation

A POS plan blends HMO and PPO features by allowing members to go outside the network, usually with a referral, at reduced benefits and higher cost sharing. A traditional HMO generally restricts non-emergency care to its network.

Question 42Health Insurance and Managed Care Fundamentals

A self-funded employer plan pays claims from its own funds and purchases stop-loss coverage. What risk does the stop-loss policy primarily address?

  1. Member premium collection
  2. Provider credentialing
  3. Routine claims below the deductible
  4. Catastrophic claims above a specified threshold Correct answer.

Explanation

Stop-loss insurance protects a self-funded plan against unexpectedly large individual claims or aggregate claims exceeding a set level. It does not cover routine claims within the retention level.

Question 43Health Insurance and Managed Care Fundamentals

Which of the following is an example of a prospective payment method used by managed care plans?

  1. Fee-for-service payment after each visit
  2. Retrospective claims audit
  3. Balance billing of members
  4. Capitation paid per member per month Correct answer.

Explanation

Capitation pays a fixed amount per member per month in advance, shifting some financial risk to the provider and creating an incentive to manage utilization. Fee-for-service payment occurs after services are delivered.

Question 44Health Insurance and Managed Care Fundamentals

What is the function of a credentialing process in a managed care network?

  1. Calculating the plan's medical loss ratio
  2. Verifying that providers meet licensure and quality standards Correct answer.
  3. Determining member premium tiers
  4. Setting the plan's investment strategy

Explanation

Credentialing verifies a provider's education, licensure, board certification, and history before admitting the provider to the network. It supports quality and network adequacy rather than financial or pricing functions.

Question 45Health Insurance and Managed Care Fundamentals

Which statement accurately describes the medical loss ratio (MLR)?

  1. It is the rate at which claims are denied
  2. It is the percentage of members who renew coverage
  3. It is the ratio of providers to members in a network
  4. It is the share of premium revenue spent on clinical care and quality improvement Correct answer.

Explanation

The medical loss ratio compares incurred claims and quality improvement spending to premium revenue. Regulators use it to assess whether plans spend a sufficient share of premium dollars on care.

Question 46Health Insurance and Managed Care Fundamentals

Which plan type generally offers the broadest choice of providers because it does not require members to use a network?

  1. Indemnity plan Correct answer.
  2. Exclusive provider organization
  3. Health maintenance organization
  4. Staff model HMO

Explanation

Traditional indemnity coverage reimburses covered services regardless of whether the provider is in a network, giving members the widest choice. Managed care models restrict benefits to contracted providers.

Question 47Health Insurance and Managed Care Fundamentals

A member enrolled in an HMO needs care from a specialist. What is typically required for the plan to cover the service?

  1. A referral or authorization from the primary care physician Correct answer.
  2. Selection of a provider outside the network
  3. Payment of the full specialist fee by the member
  4. Approval by the member's employer

Explanation

In the gatekeeper model the primary care physician coordinates care and authorizes specialist referrals. Without the required referral, the plan may deny or reduce benefits.

Question 48Health Insurance and Managed Care Fundamentals

Which statement best explains why managed care organizations emphasize preventive services?

  1. Preventive services eliminate the need for cost sharing
  2. Early detection can reduce costly later treatment Correct answer.
  3. Preventive care transfers all risk to members
  4. Preventive visits generate the highest fee revenue

Explanation

Because plans bear financial risk for their members' care, preventing or detecting disease early can avoid expensive acute and chronic treatment later. Prevention is therefore aligned with the plan's cost and quality goals.

Question 49Health Insurance and Managed Care Fundamentals

What is the primary role of a pharmacy benefit manager (PBM) in a managed care plan?

  1. Auditing provider tax filings
  2. Underwriting the plan's medical risk
  3. Administering the prescription drug benefit and managing the formulary Correct answer.
  4. Credentialing hospital-based physicians

Explanation

A PBM administers pharmacy benefits, including formulary management, network pharmacy contracting, and claims processing. It does not underwrite medical risk or perform provider credentialing.

Question 50Health Insurance and Managed Care Fundamentals

Which of the following best describes an exclusive provider organization (EPO)?

  1. Members receive care only at plan-owned clinics
  2. Members may see any provider at the same cost
  3. Members must obtain referrals from a primary care physician
  4. Members must use network providers except in emergencies Correct answer.

Explanation

An EPO contracts with a network and generally provides no benefits for non-emergency out-of-network care, but it usually does not require gatekeeper referrals. This distinguishes it from both HMOs and PPOs.