All About Tested AHM-520 Samples

NEW QUESTION 1

With regard to alternative funding arrangements, the part of a health plan premium that is intended to contribute to the claims reserve that a health plan maintains to pay for unusually high utilization is known as the:

• A. Interest charge
• B. Retention charge
• C. Risk charge
• D. Surplus

Answer: C

NEW QUESTION 2

Under GAAP, three approaches to expense recognition are generally allowed: associating cause and effect, systematic and rational allocation, and immediate recognition. A health plan most likely would use the approach of systematic and rational allocation in order to

• A. Report the payment of the health plan's utility bills
• B. Spread the payment of sales force commissions over the premium paying period of healthcare coverage
• C. Report the fees paid by the health plan to attorneys and consultants
• D. Depreciate the cost of a new computer system over the useful life of the system

Answer: D

NEW QUESTION 3

The sentence below contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have chosen. Purchasing stop-loss coverage most likely (increases / reduces) a health plan's underwriting risk and (increases / reduces) the health plan’s affiliate risk.

• A. increases / increases
• B. increases / reduces
• C. reduces / increases
• D. reduces / reduces

Answer: C

NEW QUESTION 4

Experience rating methods can be either prospective or retrospective. With regard to these types of experience rating methods, it can correctly be stated that

• A. A health plan typically can expect much higher profit levels from using retrospective experience rating rather than prospective experience rating a health plan using prospective experience rating is more likely than a
• B. Health plan using retrospective experience rating to have to pay an experience rating dividend if a group's experience has been better than expected during the rating period
• C. The premium determined under retrospective experience rating is usually higher than the premium under prospective experience rating
• D. Most states require HMOs to use retrospective experience rating rather than prospective experience rating

Answer: C

NEW QUESTION 5

The Longview Hospital contracted with the Carlyle Health Plan to provide inpatient services to Carlyle’s enrolled members. Carlyle provides Longview with a type of stop-loss coverage that protects, on a claims incurred and paid basis, against losses arising from significantly higher than anticipated utilization rates among Carlyle’s covered population. The stop-loss coverage specifies an attachment point of 130% of Longview’s projected $2,000,000 costs of treating Carlyle plan members and requires Longview to pay 15% of any costs above the attachment point. In a given plan year, Longview incurred covered costs totaling $3,000,000.
Carlyle most likely is responsible for paying Longview for the claims incurred before Longview has actually paid the medical expenses.

• A. True
• B. False

Answer: B

NEW QUESTION 6

The Poplar Company and a Blue Cross/Blue Shield organization have contracted to provide a typical fully funded health plan for Poplar's employees. One true statement about this health plan for Poplar's employees is that

• A. Poplar bears the entire financial risk if, during a given period, the dollar amount of services rendered to Poplar plan members exceeds the dollar amount of premiums collected for this health plan
• B. Poplar and the Blue Cross/Blue Shield organization share the financial risk of paying for claims under Poplar's health plan
• C. The Blue Cross/Blue Shield organization, upon acceptance of a premium, becomes the group plan sponsor for Poplar's health plan
• D. The Blue Cross/Blue Shield organization, upon acceptance of a premium, bears the entire financial risk of paying for the administrative expenses associated with health plan operations

Answer: D

NEW QUESTION 7

The Eclipse Health Plan is a not-for-profit health plan that qualifies under the Internal Revenue Code for tax-exempt status. This information indicates that Eclipse

• A. Has only one potential source of funding: borrowing money
• B. Does not pay federal, state, or local taxes on its earnings
• C. Must distribute its earnings to its owners-investors for their personal gain
• D. Is a privately held corporation

Answer: B

NEW QUESTION 8

The provider contract that Dr. Zachery Cogan, an internist, has with the Neptune Health Plan calls for Neptune to reimburse him under a typical PCP capitation arrangement. Dr. Cogan serves as the PCP for Evelyn Pfeiffer, a Neptune plan member. After hospitalizing Ms. Pfeiffer and ordering several expensive diagnostic tests to determine her condition, Dr. Cogan referred her to a specialist for further treatment. In this situation, the compensation that Dr. Cogan receives under the PCP capitation arrangement most likely includes Neptune's payment for

• A. All of the diagnostic tests that he ordered on M
• B. Pfeiffer
• C. His visits to M
• D. Pfeiffer while she was hospitalized
• E. The cost of the services that the specialist performed for M
• F. Pfeiffer
• G. All of the above

Answer: B

NEW QUESTION 9

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 ofadjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.
The basic formula for Caribou's income statement is

• A. Cash Inflows – Cash Outflows = Net Cash Inflow (Outflow)
• B. Revenues – Expenses = Net Income (Net Loss)
• C. Sources of Funds – Uses of Funds = Net Change in Cash
• D. Assets = Liabilities + Owners' Equity

Answer: B

NEW QUESTION 10

The following statements are about a health plan's underwriting of small groups. Select the answer choice containing the correct statement.

• A. Almost all states prohibit health plan s from rejecting a small group because of the nature of the business in which the small business is engaged.
• B. Most states prohibit health plans from setting participation levels as a requirement for coverage, even when coverage is otherwise guaranteed issue.
• C. In underwriting small groups, a health plan's underwriters typically consider both the characteristics of the group members and of the employer.
• D. Generally, a health plan's underwriters require small employers to contribute at least 80% of the cost of the healthcare coverage.

Answer: C

NEW QUESTION 11

For a given healthcare product, the Magnolia Health Plan has a premium of $80 PMPM and a unit variable cost of $30 PMPM. Fixed costs for this product are $30,000 per month. Magnolia can correctly calculate the break-even point for this product to be:

• A. 274 members
• B. 375 members
• C. 600 members
• D. 1,000 members

Answer: C

NEW QUESTION 12

The following statements are about pure risk and speculative risk—two kinds of risk that both businesses and individuals experience. Select the answer choice containing the correct statement.

• A. Healthcare coverage is designed to help plan members avoid pure risk, not speculative risk.
• B. Only pure risk involves the possibility of gain.
• C. An example of speculative risk is the possibility that an individual will contract a serious illness.
• D. Only speculative risk contains an element of uncertainty.

Answer: A

NEW QUESTION 13

The Brookhaven Company is the parent company of two subsidiaries: an HMO and an insurance company. The headings on Brookhaven's financial statements read "Consolidated Financial Statements of Brookhaven Company." From the following answer choices, select the response that correctly indicates, under the entity concept, whether the HMO and the insurance company are accounted for as separate entities and whether the subsidiaries' financial results would be included in Brookhaven's consolidated financial statements.

• A. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = yes
• B. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = no
• C. Accounted for as Separate Entities? = noResults Included in Brookhaven's Statements? = yes
• D. Accounted for as Separate Entities? = no Results Included in Brookhaven's Statements? = no

Answer: A

NEW QUESTION 14

The Coral Health Plan, a for-profit health plan, has two sources of capital:
Debt and equity. With regard to these sources of capital, it can correctly be stated that

• A. Coral's equity holders have an ownership interest in the health plan
• B. The interest that Coral pays on its debt most likely is not tax deductible to Coral
• C. Coral's debt holders have no legal claim to Coral's assets
• D. Equity is a more risky source of capital, from Coral's perspective, than is debt

Answer: A

NEW QUESTION 15

A primary reason that a financial analyst would measure the Tapestry health plan's return on assets (ROA) is to determine the

• A. Amount of net income per share of Tapestry's common stock
• B. Rate of return on the book value of the stockholders' investment in Tapestry
• C. Proportion of earnings paid out to Tapestry stockholders in the form of cash dividends
• D. Efficiency of Tapestry's management

Answer: D

NEW QUESTION 16

Most organizations that obtain group healthcare coverage can be classified as one of three types of groups: employer-employee groups, multiple employer groups, and professional associations. One true statement about these types of groups is that

• A. Anti selection risk is higher for both multiple-employer groups and professional associations than it is for an employer-employee group
• B. Private employers typically present a higher underwriting risk to health plans than do public employers
• C. Individual members of a multiple-employer group or a professional association typically are required to obtain healthcare coverage through the group or association
• D. I health plan is prohibited, when evaluating the risks represented by a professional association, from considering the industry experience of the agent or broker that sells a group plan to the association

Answer: A

NEW QUESTION 17

The following statements are about rate ratios used by health plans. Select the answer choice containing the correct statement:

• A. While rate ratios consider family size, they are most often based on competitive factors, such as the ratios being used by competitors and the ratios that plan sponsors are requesting.
• B. If the rate ratio for a couple rate category is 2.0, then the single premium is divided by 2.0 to derive the couple rate category premium.
• C. A rate ratio can only be increased if the health plan has obtained regulatory approval.
• D. The effect of a typical family rate ratio is that a family rate is somewhat higher than it otherwise should be, and the single rate is somewhat lower that it otherwise should be.

Answer: A

NEW QUESTION 18

The following statements are about carve-out programs. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

• A. In the type of carve-out in which entire categories of care are administered by independent organizations, a health plan typically reimburses these organizations under an FFS contract.
• B. Typically, a health plan will offer carved-out services to its enrollees, but will manage these services separately.
• C. Carve-outs are services that are excluded from a capitation payment, a risk pool, or a health benefit plan.
• D. The most rapidly growing area related to carve-outs is disease management (DM).

Answer: A

NEW QUESTION 19
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