Life License Qualification Program (LLQP) Practice Exam

Which plan contracts with doctors and hospitals to provide medical benefits at a predetermined price?

1. Multiple Employer Welfare Arrangement

2. Health Maintenance Organization

3. Multiple Employer Trust

4. Co-op Arrangement

The correct answer is: Health Maintenance Organization

A Health Maintenance Organization (HMO) is a type of managed care plan that contracts with specific doctors, hospitals, and other healthcare providers to deliver medical services to its members at a predetermined price. This arrangement allows the HMO to offer lower costs for care through a network of providers who agree to provide services at reduced rates. Members typically pay a fixed fee, such as a monthly premium, and may need to choose a primary care physician who will coordinate their care within the network. In this structure, the emphasis is on preventive care, and referrals to specialists are often required, ensuring that the members receive comprehensive and well-coordinated medical attention. By pre-negotiating costs with the healthcare providers, HMOs are able to offer their members predictable healthcare expenses, which can be beneficial for budget-conscious individuals. The other options do not specifically define this type of arrangement. For instance, a Multiple Employer Welfare Arrangement is a type of employee benefit plan covering multiple employers, while a Multiple Employer Trust is generally related to employee benefits but does not specifically contract with providers for medical services. A Co-op Arrangement typically refers to a cooperative business model rather than a focused healthcare service plan.