Passleader offers free demo for AHM-520 exam. "Health Plan Finance and Risk Management", also known as AHM-520 exam, is a AHIP Certification. This set of posts, Passing the AHIP AHM-520 exam, will help you answer those questions. The AHM-520 Questions & Answers covers all the knowledge points of the real exam. 100% real AHIP AHM-520 exams and revised by experts!
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NEW QUESTION 1
The ability of a health plan to effectively perform the rating and underwriting functions has become critical to the plan's success. In developing its pricing strategy, a health plan has to address the marketplace's ongoing trends and factors, which include
- A. a decreased focus on small to mid-size employer groups
- B. an improvement in the financial performance of health plans
- C. a consolidation of the key players in the health plan industry
- D. a decreased complexity of the products being offered.
Answer: C
NEW QUESTION 2
The process of converting the present value of a specified amount of money to its future value is known as
- A. Capital budgeting
- B. Compounding
- C. Capital rationing
- D. Discounting
Answer: B
NEW QUESTION 3
The Violin Company offers its employees a triple option of health plans: an HMO, an HMO with a point of service (POS) option, and an indemnity plan.
Premiums are lowest for the HMO option and highest for the indemnity plan. Violin employees who anticipate that they will be individual low utilizes of healthcare services are most likely to enroll in the
- A. HMO and are least likely to enroll in the HMO with the POS option
- B. HMO and are least likely to enroll in the indemnity plan
- C. Indemnity plan and are least likely to enroll in the HMO
- D. Indemnity plan and are least likely to enroll in the HMO with the POS option
Answer: B
NEW QUESTION 4
The Rathbone Company has contracted with the Jarvin Insurance Company to provide healthcare benefits to its employees. Under this contract, Rathbone assumes financial responsibility for paying 80% of its estimated annual claims and for depositing the funds necessary to pay these claims into a bank account. Although Rathbone owns the bank account, Jarvin, acting as Rathbone’s agent, makes the actual claims payments from this account. Claims in excess of Rathbone’s contracted percentage are paid by Jarvin. Rathbone pays to Jarvin a premium for administering the entire plan and bearing the costs of claims in excess of Rathbone’s obligation. This premium is substantially lower than would be charged if Jarvin were providing healthcare coverage under a traditional fully insured group plan. Jarvin is required to pay premium taxesonly on the premiums it receives from Rathbone. This information indicates that the type of alternative funding method used by Rathbone is known as a:
- A. Premium-delay arrangement
- B. Reserve-reduction arrangement
- C. Minimum-premium plan
- D. Retrospective-rating arrangement
Answer: C
NEW QUESTION 5
The Montvale Health Plan purchased a piece of real estate 20 years ago for $40,000. It recently sold the real estate for $80,000 and reported a capital gain of $40,000 on this sale. Even though the purchasing power of the dollar declined by half during this period and Montvale realized no actual gain in purchasing power, Montvale recorded in its accounting records the $40,000 gain from this sale. This situation best illustrates the accounting concept known as the:
- A. Measuring-unit concept
- B. Time-period concept
- C. Full-disclosure concept
- D. Concept of periodicity
Answer: A
NEW QUESTION 6
The Challenger Group is a type of management services organization (MSO) that purchases the assets of physician practices, provides practice management andadministrative support servicesto participating providers, and offers physicians a long- term contract and an equity position in Challenger. This information indicates that Challenger is a type of health plan
- A. Known as
- B. An integrated delivery system (IDS)
- C. Amedical foundation
- D. Aprovider-sponsored organization (PSO)
- E. Aphysician practice management (PPM) company
Answer: D
NEW QUESTION 7
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 8
As part of the first step in its strategic planning process, the Trout health plan developed the following statements:
✑ Statement A—Trout will deliver quality healthcare to our customers at a reasonable cost.
✑ Statement B—Within five years, Trout will be recognized as the industry leader in
all of our markets.
Statement A can best be described as a
- A. Vision statement, and Statement B also can best be described as a vision statement
- B. Vision statement, whereas Statement B can best be described as a mission statement
- C. Mission statement, whereas Statement B can best be described as a vision statement
- D. Mission statement, and Statement B also can best be described as a mission statement
Answer: C
NEW QUESTION 9
With regard to the Medicaid program in the United States, it can correctly be stated that
- A. The federal government provides none of the funding for state Medicaid programs
- B. Federal Medicaid law is different from Medicare law in that the federal government explicitly sets forth the methodology for payment of Medicaid-contracting plans but not Medicare-contracting plans
- C. A state's payment to health plans for providing Medicaid services cannot be more than it would have cost the state to provide the services under Medicaid fee-for-service (FFS)
- D. States are prohibited from carving out specific services from the capitation rate that health plans receive for providing Medicaid services
Answer: C
NEW QUESTION 10
Companies typically produce three types of budgets: operational budgets, cash budgets, and capital budgets. The following statements are about operational budgets. Select the answer choice containing the correct statement.
- A. Expense budgets, a type of operational budget, typically describe fixed expenses rather than variable expenses.
- B. Operational budgets can only show information by department or by line of business.
- C. Operational budgets begin with a forecast of sales revenue and investment income.
- D. Revenue budgets, a type of operational budget, indicate the amount of income from operations that a company received from the previous budget period
Answer: C
NEW QUESTION 11
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 12
The Lighthouse health plan operates in a state that allows the health plan to use an underwriting method of determining a group's premium in which underwriters treat several small groups as one large group for risk assessment purposes. This method, which helps Lighthouse more accurately estimate a small group's probable claims costs, is known as
- A. Case stripping
- B. The low-option rating method
- C. The rate spread method
- D. Pooling
Answer: D
NEW QUESTION 13
The Lindberg Company has decided to terminate its group healthcare coverage with the Benson Health Plan. Lindberg has several former employees who previously experienced qualifying events that caused them to lose their group coverage. One federal law allows these former employees to continue their group healthcare coverage. From the answer choices below, select the response that correctly identifies the federal law that grants these individuals with the right to continue group healthcare coverage, as well as the entity which is responsible for continuing this coverage:
- A. Federal law: Consolidated Omnibus Budget Reconciliation Act (COBRA) Entity: Lindberg
- B. Federal law: Consolidated Omnibus Budget Reconciliation Act (COBRA) Entity: Benson
- C. Federal law: Employee Retirement Income Security Act (ERISA) Entity: Lindberg
- D. Federal law: Employee Retirement Income Security Act (ERISA) Entity: Benson
Answer: A
NEW QUESTION 14
The Health Maintenance Organization (HMO) Model Act, developed by the National Association of Insurance Commissioners (NAIC), represents one approach to developing solvency standards. One drawback to this type of solvency regulation is that it
- A. Uses estimates of future expenditures and premium income to estimate future risk
- B. Fails to adjust the solvency requirement to account for the size of an HMO's premiums and expenditures
- C. Assumes that the amount of premiums an HMO charges always directly corresponds to the level of the risk that the HMO faces
- D. Fails to mandate a minimum level of capital and surplus that an HMO must maintain
Answer: C
NEW QUESTION 15
Costs that can be defined by behavior are most commonly classified as fixed costs, variable costs and semi-variable costs. Examples of fixed costs include:
- A. Rent, insurance expense, and depreciation on computer equipment
- B. Rent, claims processing costs, and selling expenses
- C. Claims processing costs, telephone expense, and depreciation on computer equipment
- D. Premium processing, rent, and selling expenses
Answer: A
NEW QUESTION 16
The following information was presented on one of the financial statements prepared by the Rouge Health Plan as of December 31, 1998:
Rouge’s current ratio at the end of 1998 was approximately equal to:
- A. 0.84
- B. 1.06
- C. 1.19
- D. 1.31
Answer: C
NEW QUESTION 17
In the following paragraph, a sentence 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 selected.
The Igloo health plan recognizes the receipt of its premium income during the accounting
period in which the income is earned, regardless of when cash changes hands. However, Igloo recognizes its expenses when it earns the revenues related to those expenses, regardless of when it receives cash for the revenues earned. This information indicates that the (realization/capitalization) principle governs Igloo's revenue recognition, whereas the (matching/initial-recording) principle governs its expense recognition.
- A. realization / matching
- B. realization / initial-recording
- C. capitalization / matching
- D. capitalization / initial-recording
Answer: A
NEW QUESTION 18
The Sesame health plan uses a method of accumulating cost data that enables the health plan to satisfy financial reporting requirements for compiling financial statements and corporate tax returns. Although this method assists Sesame's managers in studying which types of costs are rising and falling over time, it does not explain which areas of Sesame incur each cost. This method, which is the most basic level of cost accumulation, is known as accumulating costs by
- A. Cost center
- B. Type of cost
- C. Lines of business
- D. Function
Answer: B
NEW QUESTION 19
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