1
MHA 705 Module 7 Exam — Questions &
Answers Western Governors University |
2026/2027 Academic Year
DOMAIN 1: THE ACA, HEALTH INSURANCE MARKETS & ACCESS TO CARE (12 Questions)
Question 1 (Multiple-Choice)
The Affordable Care Act (ACA) established three premium stabilization programs known as the
"Three R's" to protect insurers against adverse selection in the individual and small-group health
insurance marketplaces. Which of the following correctly identifies the three programs and
their primary functions?
A. Risk Adjustment (redistributes funds from low-risk to high-risk enrollees), Reinsurance (covers
high-cost claims above a threshold), and Risk Corridors (limits insurer profit/loss margins)
B. Risk Adjustment (sets premium caps), Reinsurance (covers all catastrophic claims), and Risk
Corridors (guarantees zero losses to insurers)
C. Risk Adjustment (subsidizes low-income enrollees), Reinsurance (reinsures all marketplace
plans), and Risk Corridors (provides tax credits)
D. Risk Adjustment (eliminates premium differences), Reinsurance (covers administrative costs),
and Risk Corridors (sets actuarial value minimums)
[CORRECT: A]
Rationale: Under ACA §1341–1343 (42 U.S.C. §18061–18063), the Three R's function as follows:
Risk Adjustment permanently redistributes premium revenue among insurers based on the
actuarial risk of their enrolled populations—funds flow from plans with healthier enrollees to
plans with sicker enrollees. Reinsurance (2014–2016, with state-based extensions) provided
payments to insurers for enrollees with high-cost claims exceeding an attachment point (e.g.,
$45,000 in 2014), funded by a per-capita fee on all commercial health plans. Risk Corridors
(2014–2016) limited insurer gains and losses by requiring profitable insurers to contribute a
percentage of profits into a pool that was distributed to insurers with losses, effectively capping
profit/loss margins. The Risk Corridors program was underfunded after 2014 due to
congressional appropriations riders (P.L. 113–235), leading to significant insurer losses.
,2
Question 2 (Multiple-Choice)
Under the ACA Risk Adjustment program, which of the following demographic and clinical
factors is used by CMS's HHS-HCC (Hierarchical Condition Category) model to calculate risk
scores for the individual and small-group markets?
A. Only age and gender
B. Age, gender, and geographic location only
C. Age, gender, diagnoses from inpatient, outpatient, and professional claims, and Medicaid
status
D. Age, gender, and prior-year total medical expenditures
[CORRECT: C]
Rationale: The HHS-HCC risk adjustment model, codified in 45 CFR §153.320, uses a
comprehensive set of variables to predict healthcare spending: demographic factors (age,
gender), clinical conditions (diagnoses from inpatient hospital, outpatient hospital, and
professional claims mapped to HCCs), and enrollment status (Medicaid eligibility as a proxy for
socioeconomic risk). The model does NOT use prior-year expenditures (unlike some Medicare
Advantage models) because that would create perverse incentives to increase spending.
Geographic location is NOT a direct risk adjustment factor in the HHS-HCC model, though it
affects premium setting through the geographic rating area. The model includes approximately
127 HCCs grouped from thousands of ICD-10-CM diagnosis codes.
Question 3 (Select-All-That-Apply)
Which of the following statements about the ACA's Risk Corridor program are TRUE? (Select all
that apply.)
☐ A. The Risk Corridor program was designed to operate from 2014 through 2016.
☐ B. The program required insurers with medical loss ratios below 85% to contribute funds into
a risk corridor pool.
☐ C. The program guaranteed that no insurer would lose more than 3% of their target amount.
,3
☐ D. Congress passed appropriations riders in 2014 and 2015 that prohibited HHS from using
other funding sources to make Risk Corridor payments, resulting in prorated payments of
approximately 12.6% of claims in 2014.
☐ E. The Risk Corridor program was permanently extended through 2027 under the Inflation
Reduction Act.
[CORRECT: A, B, D]
Rationale: Per ACA §1342 (42 U.S.C. §18062) and subsequent CMS guidance: (A) is correct—the
Risk Corridor program was explicitly a temporary three-year program (2014–2016) to stabilize
the marketplace during initial implementation. (B) is correct—insurers with medical loss ratios
(MLRs) below the target range (85% for individual/small group, 80% for large group) were
required to contribute a percentage of their profits into the risk corridor pool; the exact
contribution rate varied by profit margin. (C) is INCORRECT—the Risk Corridor did not guarantee
losses would be capped at 3%; rather, it used a tiered sharing formula where insurers retained
50% of gains/losses between 3% and 8%, and 80% of gains/losses above 8% of the target
amount. (D) is correct—the Consolidated and Further Continuing Appropriations Act, 2015 (P.L.
113–235) included Section 227, which prohibited HHS from transferring funds from other
accounts to pay Risk Corridor obligations. This resulted in prorated payments of approximately
12.6% of valid claims in 2014, causing several nonprofit consumer-oriented and operated plans
(CO-OPs) to fail. (E) is INCORRECT—the Risk Corridor program expired as scheduled in 2016 and
was NOT extended by the Inflation Reduction Act (P.L. 117–169, 2022).
Question 4 (Calculation-Based)
A Silver-tier health plan on the ACA Health Insurance Marketplace has the following cost-sharing
structure for an in-network hospitalization:
• Deductible: $3,000
• Coinsurance: 20% (patient pays 20% after deductible is met)
• Out-of-Pocket Maximum: $7,150
A 45-year-old enrollee is hospitalized and incurs $45,000 in covered medical expenses. Calculate
the enrollee's total out-of-pocket cost for this hospitalization.
A. $3,000
B. $7,150
, 4
C. $11,400
D. $9,000
[CORRECT: B]
Rationale: Under ACA §1302(d) (42 U.S.C. §18022(d)), the out-of-pocket maximum (OOPM) is
the absolute ceiling on enrollee cost-sharing for essential health benefits in a given plan year.
The calculation proceeds as follows:
Step 1: The enrollee first pays the deductible: $3,000
Step 2: After the deductible, the enrollee pays 20% coinsurance on the remaining balance:
Remaining after deductible = $45,000 − $3,000 = $42,000
Coinsurance = $42,000 × 0.20 = $8,400
Step 3: Total without OOPM cap = $3,000 + $8,400 = $11,400
Step 4: However, the ACA-mandated out-of-pocket maximum for an individual in 2024 is $9,450
(this question uses the 2023 value of $7,150 for the Silver plan). Since $11,400 exceeds the
OOPM of $7,150, the enrollee's cost is capped at $7,150.
Final Answer: $7,150 (Option B)
The ACA OOPM limits are indexed annually by the percentage increase in average per capita
premium health insurance costs. For 2026, the individual OOPM limit is projected at
approximately $9,700–$9,900.
Question 5 (Multiple-Choice)
Which ACA metal tier has an actuarial value (AV) of approximately 70%, meaning the health
plan is designed to pay 70% of the total cost of covered benefits for a standard population?
A. Bronze
B. Silver
C. Gold
D. Platinum
[CORRECT: B]
Rationale: Under ACA §1302(d)(1) (42 U.S.C. §18022(d)(1)), the actuarial value (AV) standards
for each metal tier are:
MHA 705 Module 7 Exam — Questions &
Answers Western Governors University |
2026/2027 Academic Year
DOMAIN 1: THE ACA, HEALTH INSURANCE MARKETS & ACCESS TO CARE (12 Questions)
Question 1 (Multiple-Choice)
The Affordable Care Act (ACA) established three premium stabilization programs known as the
"Three R's" to protect insurers against adverse selection in the individual and small-group health
insurance marketplaces. Which of the following correctly identifies the three programs and
their primary functions?
A. Risk Adjustment (redistributes funds from low-risk to high-risk enrollees), Reinsurance (covers
high-cost claims above a threshold), and Risk Corridors (limits insurer profit/loss margins)
B. Risk Adjustment (sets premium caps), Reinsurance (covers all catastrophic claims), and Risk
Corridors (guarantees zero losses to insurers)
C. Risk Adjustment (subsidizes low-income enrollees), Reinsurance (reinsures all marketplace
plans), and Risk Corridors (provides tax credits)
D. Risk Adjustment (eliminates premium differences), Reinsurance (covers administrative costs),
and Risk Corridors (sets actuarial value minimums)
[CORRECT: A]
Rationale: Under ACA §1341–1343 (42 U.S.C. §18061–18063), the Three R's function as follows:
Risk Adjustment permanently redistributes premium revenue among insurers based on the
actuarial risk of their enrolled populations—funds flow from plans with healthier enrollees to
plans with sicker enrollees. Reinsurance (2014–2016, with state-based extensions) provided
payments to insurers for enrollees with high-cost claims exceeding an attachment point (e.g.,
$45,000 in 2014), funded by a per-capita fee on all commercial health plans. Risk Corridors
(2014–2016) limited insurer gains and losses by requiring profitable insurers to contribute a
percentage of profits into a pool that was distributed to insurers with losses, effectively capping
profit/loss margins. The Risk Corridors program was underfunded after 2014 due to
congressional appropriations riders (P.L. 113–235), leading to significant insurer losses.
,2
Question 2 (Multiple-Choice)
Under the ACA Risk Adjustment program, which of the following demographic and clinical
factors is used by CMS's HHS-HCC (Hierarchical Condition Category) model to calculate risk
scores for the individual and small-group markets?
A. Only age and gender
B. Age, gender, and geographic location only
C. Age, gender, diagnoses from inpatient, outpatient, and professional claims, and Medicaid
status
D. Age, gender, and prior-year total medical expenditures
[CORRECT: C]
Rationale: The HHS-HCC risk adjustment model, codified in 45 CFR §153.320, uses a
comprehensive set of variables to predict healthcare spending: demographic factors (age,
gender), clinical conditions (diagnoses from inpatient hospital, outpatient hospital, and
professional claims mapped to HCCs), and enrollment status (Medicaid eligibility as a proxy for
socioeconomic risk). The model does NOT use prior-year expenditures (unlike some Medicare
Advantage models) because that would create perverse incentives to increase spending.
Geographic location is NOT a direct risk adjustment factor in the HHS-HCC model, though it
affects premium setting through the geographic rating area. The model includes approximately
127 HCCs grouped from thousands of ICD-10-CM diagnosis codes.
Question 3 (Select-All-That-Apply)
Which of the following statements about the ACA's Risk Corridor program are TRUE? (Select all
that apply.)
☐ A. The Risk Corridor program was designed to operate from 2014 through 2016.
☐ B. The program required insurers with medical loss ratios below 85% to contribute funds into
a risk corridor pool.
☐ C. The program guaranteed that no insurer would lose more than 3% of their target amount.
,3
☐ D. Congress passed appropriations riders in 2014 and 2015 that prohibited HHS from using
other funding sources to make Risk Corridor payments, resulting in prorated payments of
approximately 12.6% of claims in 2014.
☐ E. The Risk Corridor program was permanently extended through 2027 under the Inflation
Reduction Act.
[CORRECT: A, B, D]
Rationale: Per ACA §1342 (42 U.S.C. §18062) and subsequent CMS guidance: (A) is correct—the
Risk Corridor program was explicitly a temporary three-year program (2014–2016) to stabilize
the marketplace during initial implementation. (B) is correct—insurers with medical loss ratios
(MLRs) below the target range (85% for individual/small group, 80% for large group) were
required to contribute a percentage of their profits into the risk corridor pool; the exact
contribution rate varied by profit margin. (C) is INCORRECT—the Risk Corridor did not guarantee
losses would be capped at 3%; rather, it used a tiered sharing formula where insurers retained
50% of gains/losses between 3% and 8%, and 80% of gains/losses above 8% of the target
amount. (D) is correct—the Consolidated and Further Continuing Appropriations Act, 2015 (P.L.
113–235) included Section 227, which prohibited HHS from transferring funds from other
accounts to pay Risk Corridor obligations. This resulted in prorated payments of approximately
12.6% of valid claims in 2014, causing several nonprofit consumer-oriented and operated plans
(CO-OPs) to fail. (E) is INCORRECT—the Risk Corridor program expired as scheduled in 2016 and
was NOT extended by the Inflation Reduction Act (P.L. 117–169, 2022).
Question 4 (Calculation-Based)
A Silver-tier health plan on the ACA Health Insurance Marketplace has the following cost-sharing
structure for an in-network hospitalization:
• Deductible: $3,000
• Coinsurance: 20% (patient pays 20% after deductible is met)
• Out-of-Pocket Maximum: $7,150
A 45-year-old enrollee is hospitalized and incurs $45,000 in covered medical expenses. Calculate
the enrollee's total out-of-pocket cost for this hospitalization.
A. $3,000
B. $7,150
, 4
C. $11,400
D. $9,000
[CORRECT: B]
Rationale: Under ACA §1302(d) (42 U.S.C. §18022(d)), the out-of-pocket maximum (OOPM) is
the absolute ceiling on enrollee cost-sharing for essential health benefits in a given plan year.
The calculation proceeds as follows:
Step 1: The enrollee first pays the deductible: $3,000
Step 2: After the deductible, the enrollee pays 20% coinsurance on the remaining balance:
Remaining after deductible = $45,000 − $3,000 = $42,000
Coinsurance = $42,000 × 0.20 = $8,400
Step 3: Total without OOPM cap = $3,000 + $8,400 = $11,400
Step 4: However, the ACA-mandated out-of-pocket maximum for an individual in 2024 is $9,450
(this question uses the 2023 value of $7,150 for the Silver plan). Since $11,400 exceeds the
OOPM of $7,150, the enrollee's cost is capped at $7,150.
Final Answer: $7,150 (Option B)
The ACA OOPM limits are indexed annually by the percentage increase in average per capita
premium health insurance costs. For 2026, the individual OOPM limit is projected at
approximately $9,700–$9,900.
Question 5 (Multiple-Choice)
Which ACA metal tier has an actuarial value (AV) of approximately 70%, meaning the health
plan is designed to pay 70% of the total cost of covered benefits for a standard population?
A. Bronze
B. Silver
C. Gold
D. Platinum
[CORRECT: B]
Rationale: Under ACA §1302(d)(1) (42 U.S.C. §18022(d)(1)), the actuarial value (AV) standards
for each metal tier are:
