IHOP Exam 2 Questions and Answers
100% Pass
How We Pay for Health Care - ✔✔Insurance or Self Pay
Complexity of US Health Care System - ✔✔Many payers, many private plans, many
government programs, many payment methods, many uninsured
Financing Influence on Demand - ✔✔This determines who has access to care
Health Insurance - ✔✔lowers out-of-pocket costs, patient's consumer more, leads to a
"moral hazard"
Financing Influence on Supply - ✔✔New services proliferate when they are covered by
health insurance, given rise to subindustries, influence on technology diffusion and
utilization, get more of what is paid for and provide more of what they are paid for
Consequences of Financing - ✔✔Various Management Decisions Influenced By
Reimbursement, Financing affects supply & distribution of health professionals,
financing eventually affects total health care expenditures
Expenditures = Price * Quantity - ✔✔
Expenditures are Increase By - ✔✔Expansion of health insurance, increase in health
insurance premiums
COPYRIGHT © 2025 BY KATELYN WHITMAN, ALL RIGHTS RESERVED 1
,Expenditures Can Be Reduced By - ✔✔Restricting Insurance, Restricting
Reimbursement to Providers, Having Few Specialists, Spending Less on R & D, Direct
control over utilization, Designating certain services as not covered
Insurance - ✔✔Protects against risk
Risk - ✔✔The possibility of substantial financial loss from some event, where
probability of occurrence is small
Four Principles of Insurance - ✔✔1. Risk is Unpredictable for the Individual 2. Risk can
be predicted with some accuracy in a large group 3. Insurance pools resources to spread
risk 4. Losses are shared by all members
Underwriting - ✔✔Process of using a large group to estimate total risk for an individual
and spread the risk
Health Insurance - ✔✔Is designed to be used, unlike homeowner's insurance, flood
insurance, car insurance, life insurance etc.
Premiums - ✔✔amount charged by insurer to insure against risk, involves employer &
employee cost sharing
Cost sharing - ✔✔deductibles, co-payments, coinsurance reduces moral hazard
Moral hazard - ✔✔using lots of resources because you have them
Rand Cost Sharing Experiment of 1980s - ✔✔Identified the concept that cost sharing
reduces moral hazard
Deductibles - ✔✔amount paid before insurance covers costs, applied annually
First dollar coverage plans - ✔✔plans without co-pays or deductibles, very rare
Co-payments - ✔✔amount paid along with insurance payment for services
COPYRIGHT © 2025 BY KATELYN WHITMAN, ALL RIGHTS RESERVED 2
, Coinsurance - ✔✔another insurance plan besides primary plan to cover other
uncovered costs
Two Risk Assessment Methods - ✔✔experience rating, community rating
Experience rating - ✔✔group's medical claims experience, vary from group to group
Community Rating - ✔✔risk spread among a larger community, risks include smoking,
pre-existing conditions etc. good risks help pay for poor risks
Indemnity plan - ✔✔reimburses the insured a predetermined amount per service,
insured is responsible for paying provider
Service Plan - ✔✔provides services to the insured, plan pays the provider directly-
except for deductibles and co-payments
Health Insurance Coverage - ✔✔only what is considered "medically necessary", vision
and dental are often separate
Group Insurance - ✔✔Tax advantages when obtained through employer
Individual insurance - ✔✔cost based on individual's health, this is most expensive way
of obtaining insurance
Managed Care Plans - ✔✔Group plans where every member has primary care doctor,
you need primary care doctor to refer to specialists, were designed to try to control
costs
Self Insurance - ✔✔group insurance offered by large firms, ie. The University of Iowa,
spurred by public policy, No premium tax on employers
ERISA - ✔✔Passed in 1974 exempts self insured from state insurance regulations
COPYRIGHT © 2025 BY KATELYN WHITMAN, ALL RIGHTS RESERVED 3
100% Pass
How We Pay for Health Care - ✔✔Insurance or Self Pay
Complexity of US Health Care System - ✔✔Many payers, many private plans, many
government programs, many payment methods, many uninsured
Financing Influence on Demand - ✔✔This determines who has access to care
Health Insurance - ✔✔lowers out-of-pocket costs, patient's consumer more, leads to a
"moral hazard"
Financing Influence on Supply - ✔✔New services proliferate when they are covered by
health insurance, given rise to subindustries, influence on technology diffusion and
utilization, get more of what is paid for and provide more of what they are paid for
Consequences of Financing - ✔✔Various Management Decisions Influenced By
Reimbursement, Financing affects supply & distribution of health professionals,
financing eventually affects total health care expenditures
Expenditures = Price * Quantity - ✔✔
Expenditures are Increase By - ✔✔Expansion of health insurance, increase in health
insurance premiums
COPYRIGHT © 2025 BY KATELYN WHITMAN, ALL RIGHTS RESERVED 1
,Expenditures Can Be Reduced By - ✔✔Restricting Insurance, Restricting
Reimbursement to Providers, Having Few Specialists, Spending Less on R & D, Direct
control over utilization, Designating certain services as not covered
Insurance - ✔✔Protects against risk
Risk - ✔✔The possibility of substantial financial loss from some event, where
probability of occurrence is small
Four Principles of Insurance - ✔✔1. Risk is Unpredictable for the Individual 2. Risk can
be predicted with some accuracy in a large group 3. Insurance pools resources to spread
risk 4. Losses are shared by all members
Underwriting - ✔✔Process of using a large group to estimate total risk for an individual
and spread the risk
Health Insurance - ✔✔Is designed to be used, unlike homeowner's insurance, flood
insurance, car insurance, life insurance etc.
Premiums - ✔✔amount charged by insurer to insure against risk, involves employer &
employee cost sharing
Cost sharing - ✔✔deductibles, co-payments, coinsurance reduces moral hazard
Moral hazard - ✔✔using lots of resources because you have them
Rand Cost Sharing Experiment of 1980s - ✔✔Identified the concept that cost sharing
reduces moral hazard
Deductibles - ✔✔amount paid before insurance covers costs, applied annually
First dollar coverage plans - ✔✔plans without co-pays or deductibles, very rare
Co-payments - ✔✔amount paid along with insurance payment for services
COPYRIGHT © 2025 BY KATELYN WHITMAN, ALL RIGHTS RESERVED 2
, Coinsurance - ✔✔another insurance plan besides primary plan to cover other
uncovered costs
Two Risk Assessment Methods - ✔✔experience rating, community rating
Experience rating - ✔✔group's medical claims experience, vary from group to group
Community Rating - ✔✔risk spread among a larger community, risks include smoking,
pre-existing conditions etc. good risks help pay for poor risks
Indemnity plan - ✔✔reimburses the insured a predetermined amount per service,
insured is responsible for paying provider
Service Plan - ✔✔provides services to the insured, plan pays the provider directly-
except for deductibles and co-payments
Health Insurance Coverage - ✔✔only what is considered "medically necessary", vision
and dental are often separate
Group Insurance - ✔✔Tax advantages when obtained through employer
Individual insurance - ✔✔cost based on individual's health, this is most expensive way
of obtaining insurance
Managed Care Plans - ✔✔Group plans where every member has primary care doctor,
you need primary care doctor to refer to specialists, were designed to try to control
costs
Self Insurance - ✔✔group insurance offered by large firms, ie. The University of Iowa,
spurred by public policy, No premium tax on employers
ERISA - ✔✔Passed in 1974 exempts self insured from state insurance regulations
COPYRIGHT © 2025 BY KATELYN WHITMAN, ALL RIGHTS RESERVED 3
