Experience Rating Does Not Generally Cause People to Make Choices

question 26

Multiple Choice

Experience rating does not generally cause people to make choices that reduce their use of the health care system because:

• A) the use of partial-cost payments offsets any incentives people have to decrease their use of the health care system.
• B) government programs such as Medicaid and Medicare offset any incentives people have to decrease their use of the health care system.
• C) most of the individual variation in the use of health care comes from factors beyond individual control.
• D) most of the individual variation in the use of health care arises because of the way insurance companies structure payments to providers.

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Definitions:

Net Operating Income

A measure of a company's profitability from its regular business operations, deducting operating expenses from gross income.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its sales revenue, indicating the proportion of fixed to variable costs.

Net Operating Income

The profit a company generates from its operations, before taxes and interest, from its primary business activities.

Sales Decline

A decrease in the volume or value of sales over a specific period.