The Secret Of AHIP AHM-520 Samples

NEW QUESTION 1

Correct statements about the financial risks associated with benefits that health plans provide to the Medicare and Medicaid markets include:

• A. That, because the government sets the payments received by health plans, the health plans cannot easily obtain an increase in those payments even in the face of rising costs
• B. That regulators determine which services must be provided under Medicare and Medicaid and which persons are eligible to enroll in a plan
• C. That there is typically more provider reluctance to accept risk in connection withproviding services to the Medicaid population than with providing services to the Medicare population
• D. All of the above

Answer: D

NEW QUESTION 2

Julio Benini is eligible to receive healthcare coverage through a health plan that is under contract to his employer. Mr. Benini is seeking coverage for the following individuals:
✑ Elena Benini, his wife
✑ Maria Benini, his 18-year-old unmarried daughter
✑ Johann Benini, his 80-year-old father who relies on Julio for support and maintenance
The health plan most likely would consider that the definition of a dependent, for purposes of healthcare coverage, applies to:

• A. Elena, Maria, and Johann
• B. Elena and Maria only
• C. Elena only
• D. Maria only

Answer: B

NEW QUESTION 3

Experience rating and manual rating are two rating methods that the Cheshire health plan uses to determine its premium rates. One difference between these two methods is that, under experience rating, Cheshire

• A. Uses a purchaser's actual experience to estimate the group's expected experience, whereas, under manual rating, Cheshire uses its own average experience—and sometimes the experience of other plans—to estimate the group's expected experience
• B. can establish rates for groups that have no previous plan experience, whereas, under manual rating, Cheshire cannot establish rates for groups with no previous plan experience
• C. charges each group in the same class the same premium whereas, under manual rating, Cheshire charges lower premiums to groups that have experienced lower utilization rates
• D. can use group demographics to help determine the rate for a block of business, whereas, under manual rating, Cheshire cannot use group demographics when determining the rate for a block of business

Answer: A

NEW QUESTION 4

An investor deposited $1,000 in an interest-bearing account today. That sum will accumulate to $1,200 two years from now. One true statement about this transaction is that:

• A. The process by which the original $1,000 deposit grows to $1,200 is known as compounding
• B. $1,200 is the present value of the $1,000 deposit
• C. The $200 increase in the deposit’s value is its incremental cash flow
• D. The $200 difference between the original deposit and the accumulated value of the deposit is known as the deposit’s discount

Answer: A

NEW QUESTION 5

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
One difference between the RI method and the ROI method is that

• A. The RI method demands greater goal congruence from Puma's managers than does the ROI method
• B. The RI method favors Puma's small investment centers more than does the ROI method
• C. Only RI can lead to decisions that improve Puma's short-term profits at the expense of its long-term objectives
• D. Only RI is useful to Puma for comparing investment centers of different sizes

Answer: A

NEW QUESTION 6

The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series of adjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.
To prepare its cash flow statement, Caribou uses the direct method rather than the indirect method.

• A. True
• B. False

Answer: B

NEW QUESTION 7

This concept, which is an extension of the going-concern concept, holds that the value of an asset that a company reports in its accounting records should be the asset's historical cost, not its current market value. Although this concept offers objectivity and reliability, it may lack relevance, particularly for assets held for a long period of time.
From the following answer choices, choose the name of the accounting concept that matches the description.

• A. Measuring-unit concept
• B. Full-disclosure concept
• C. Cost concept
• D. Time-period concept

Answer: C

NEW QUESTION 8

In a fee-for-service (FFS) reimbursement method, providers are paid per treatment or per service that they provide. One typical benefit of FFS reimbursement is that it:

• A. Is highly effective in preventing excessive services that take the form of churning, unbundling, and upcoding
• B. Provides physicians who attempt to control costs with a higher rate of compensation than is provided to physicians who make the effort to control costs
• C. Is relatively easy to initiate, especially in markets where managed care penetration is low
• D. Guards against the practice of defensive medicine

Answer: B

NEW QUESTION 9

The provider contract that Dr. Timothy Meyer, a pediatrician, has with the Cardigan health plan states that Cardigan will compensate him under a capitation arrangement. However, the contract also includes a typical low enrollment guarantee provision. Statements that can correctly be made about this arrangement include that the low enrollment guarantee provision most likely:

• A. Causes D
• B. Meyer's capitation contract with Cardigan to transfer more risk to him than the contract otherwise would transfer
• C. Specifies that Cardigan will pay D
• D. Meyer under an arrangement other than capitation until a specified number of children covered by the plan use him as their PCP
• E. Both A and B
• F. A only
• G. B only
• H. Neither A nor B

Answer: C

NEW QUESTION 10

In order to determine a health plan's quick liquidity ratio, a financial analyst would divide the health plan's

• A. Total assets not invested in affiliates by its total liabilities
• B. Liquid assets by its total liabilities
• C. Liquid assets by its contractual reserves
• D. Total assets by its contractual reserves

Answer: C

NEW QUESTION 11

The following information was presented on one of the financial statements prepared by the Rouge health plan as of December 31, 1998:

When calculating its cash-to-claims payable ratio, Rouge would correctly divide its:

• A. Cash by its reported claims only
• B. Cash by its reported claims and its incurred but not reported claims (IBNR)
• C. Reported claims by its cash
• D. Reported claims and its incurred but not reported claims (IBNR) by its cash

Answer: B

NEW QUESTION 12

Analysts will use the capital asset pricing model (CAPM) to determine the cost of equity for the Maxim health plan, a for-profit plan. According to the CAPM, Maxim's cost of equity is equal to

• A. The average interest rate that Maxim is paying to debt holders, adjusted for a tax shield
• B. Maxim's risk-free rate minus its beta
• C. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of systematic (non diversifiable) risk
• D. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of nonsystematic (diversifiable) risk

Answer: C

NEW QUESTION 13

All publicly traded health plans in the United States are required to prepare financial statements for use by their external users in accordance with generally accepted accounting principles (GAAP). In addition, health insurers and health plans that fall under the jurisdiction of state insurance departments are required by law to prepare certain financial statements in accordance with statutory accounting practices (SAP). In a comparison of GAAP to SAP, it is correct to say that:

• A. GAAP is established and promoted by the National Association of Insurance Commissioners (NAIC), whereas SAP is established and promoted by the Financial Accounting Standards Board (FASB)
• B. The going-concern concept is an underlying premise of GAAP, whereas SAP tends to focus on the liquidation value of the MCO or the insurer
• C. GAAP provides for a single method of valuing all of a health plan’s assets, whereas SAP offers the health plan more than one method for valuing its assets
• D. The principle of conservatism is fundamental to GAAP, whereas SAP generally is not conservative in nature

Answer: B

NEW QUESTION 14

One true statement about cash-basis accounting is that

• A. Cash receipt, but not cash disbursement, is an important component of cash-basis accounting
• B. Most companies use a pure cash-basis accounting system
• C. Cash-basis accounting records revenue according to the realization principle and expenses according to the matching principle
• D. Health insurance companies and health plans that fall under the jurisdiction of state insurance commissioners must report some items on a cash basis for statutory reporting purposes

Answer: D

NEW QUESTION 15

The purest form of a self-funded benefit plan is one in which the employer pays benefits from current revenue, administers all aspects of the plan, and bears the risk that actual benefit payments will exceed the expected amount of payments. A decision to use this kind of self-funding is generally considered most desirable when certain conditions are present. These conditions most likely include that the benefit plan

• A. Is a contributory plan
• B. Is subject to collective bargaining
• C. Is unable to secure discounts from the physicians who provide medical services to the plan members
• D. Has a relatively high frequency of low severity claims

Answer: D

NEW QUESTION 16

The Jade Health Plan used a profitability index (PI) to rank the following capital proposals:
ProposalPI
A0.45
B1.05
This information indicates that, of these two projects, Jade would most likely select:

• A. Proposal A, and the PI indicates that the net present value (NPV) for this project is less than zero
• B. Proposal A, and the PI indicates that the net present value (NPV) for this project is greater than zero
• C. Proposal B, and the PI indicates that the net present value (NPV) for this project is less than zero
• D. Proposal B, and the PI indicates that the net present value (NPV) for this project is greater than zero

Answer: C

NEW QUESTION 17

The goals of Diane Tsai, the manager of the Oval Health Plan's accounting department, and the goals of Oval are mutually supportive. Oval's accounting department is able to establish and achieve the appropriate objectives, but the department's costs of operation are too high. The following statement(s) can correctly be made about this situation:

• A. M
• B. Tsai most likely is the manager of a profit center.
• C. The business goals of Oval are congruent with M
• D. Tsai's goals.
• E. Oval's accounting department is efficient but not effective.
• F. All of these statements are correct.

Answer: B

NEW QUESTION 18

A financial analyst wants to learn the following information about the Forest health plan for a given financial period:

• A. Forest's beginning-of-period cash balance
• B. Forest's minimum cash balance
• C. The cash needs of Forest during the period
• D. Forest's end-of-period cash balanceFrom Forest's cash budget, the analyst most likely can obtain information about
• E. A, B, C, and D
• F. A, B, and C only
• G. A and D only
• H. B and C only

Answer: A

NEW QUESTION 19
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