AHIP AHM-520 Free Practice Questions

NEW QUESTION 1

A stop-loss contract may provide that claims are settled using a paid claims method or an incurred claims method. The Concord Company provides health coverage to its employees through a self-funded health plan. On March 17, a Concord employee who is enrolled in this plan underwent surgery, and the surgery was sufficiently expensive to trigger Concord's specific stop-loss coverage. On April 10, Concord paid the medical expenses associated with the surgery. The term of the stop-loss contract ended on April 1. This information indicates that the stop-loss carrier is responsible for paying a portion of the cost of the surgery under

• A. both the paid claims method and the incurred claims method
• B. the paid claims method but not the incurred claims method
• C. the incurred claims method but not the paid claims method
• D. neither the paid claims method nor the incurred claims method

Answer: C

NEW QUESTION 2

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 likely way in which Investment Center X or Y could effectively increase its ROI is by

• A. Focusing only on increasing its total revenues
• B. Increasing its controllable investments
• C. Increasing total revenues, accompanied by a proportionate increase in operating income
• D. Increasing expenses in order to increase operating income

Answer: C

NEW QUESTION 3

Several federal agencies establish rules and requirements that affect health plans. One of these agencies is the Department of Labor (DOL), which is primarily responsible for ______.

• A. Issuing regulations pertaining to the Health Insurance Portability and Accountability Act (HIPAA) of 1996
• B. Administering the Medicare and Medicaid programs
• C. Administering ERISA, which imposes various documentation, appeals, reporting, and disclosure requirements on employer group health plans
• D. Administering the Federal Employees Health BenefitsProgram (FEHBP), which providesvoluntary health insurance coverage to federal employees, retirees, and dependents

Answer: C

NEW QUESTION 4

The Danner Bank loaned money to the CareWell Health Plan to fund an expansion of a healthcare facility. With respect to the type of financial information user Danner represents to CareWell, it is correct to say that Danner is an:

• A. Internal user with a direct financial interest
• B. Internal user with an indirect financial interest
• C. External user with a direct financial interest
• D. Case-mix adjustment

Answer: C

NEW QUESTION 5

Cascade Hospital has negotiated with the McBee Health Plan a straight per-diem rate of $1,000 per day for medical admissions. One of McBee’s plan members was admitted to Cascade for 10 days. Total billed charges equaled $10,000, of which $2,000 were for noncovered items. This information indicates that, for this admission, the amount that McBee was obligated to reimburse Cascade was:

• A. $0
• B. $8,000
• C. $10,000
• D. $12,000

Answer: C

NEW QUESTION 6

The following statements are about federal laws and regulations which affect health plans that offer products and services to the employer group market. Select the answer choice containing the correct statement.

• A. Amendments to the HMO Act of 1973 require federally qualified HMOs to adjust a group's prior premiums on the basis of the group's experience during the prior rating period.
• B. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 requires that, if a plan sponsor elects to terminate its group coverage with a health plan, then the health plan must continue its coverage for the COBRA-qualified beneficiaries in the group.
• C. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 generally requires the guaranteed renewal of healthcare coverage for certain individuals and for both small and large groups, regardless of the health status of any member.
• D. The Mental Health Parity Act (MHPA) of 1996 mandates that all health plans must offer benefits for mental healthcare.

Answer: C

NEW QUESTION 7

The following transactions occurred at the Lane Health Plan:
✑ Transaction 1 — Lane recorded a $25,000 premium prior to receiving the payment
✑ Transaction 2 — Lane purchased $500 in office expenses on account, but did not record the expense until it received the bill a month later
✑ Transaction 3 — Fire destroyed one of Lane’s facilities; Lane waited until the facility was rebuilt before assessing and recording the amount of loss
✑ Transaction 4 — Lane sold an investment on which it realized a $14,000 gain; Lane recorded the gain only after the sale was completed.
Of these transactions, the one that is consistent with the accounting principle of conservatism is:

• A. Transaction 1
• B. Transaction 2
• C. Transaction 3
• D. Transaction 4

Answer: D

NEW QUESTION 8

The Titanium health plan's product has a unit price of $120 PMPM and a unit variable cost of $80 PMPM. Titanium has $100,000 in fixed costs per month. This information indicates that, for its product, Titanium's

• A. Unit contribution margin is $80
• B. Unit contribution margin is $200
• C. Break-even point is 500 members
• D. Break-even point is 2,500 members

Answer: D

NEW QUESTION 9

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 10

Doctors’ Care is an individual practice association (IPA) under contract to the Jasper Health Plan to provide primary and secondary care to Jasper’s members. Jasper’s capitation payments compensate Doctors’ Care for all physician services and associated diagnostic tests and laboratory work. The physicians at Doctors’ Care, as a group, determine how individual physicians in the group will be remunerated. The type of capitation used by Jasper to compensate Doctors’ Care is known as:

• A. PCP capitation
• B. Partial capitation
• C. Full professional capitation
• D. Specialty capitation

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

Mandated benefit laws are state or federal laws that require health plans to arrange for the financing and delivery of particular benefits. Ways that mandated benefits have the potential to influence health plans include:
* 1. Causing a lower degree of uniformity among health plans of competing health plans in a given market
* 2. Increasing the cost of the benefit plan to the extent that the plan must cover mandated benefits that would not have been included in the plan in the absence of the law or regulation that mandates the benefits

• A. Both 1 and 2
• B. 1 only
• C. 2 only
• D. Neither 1 nor 2

Answer: C

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 following examples describe situations that expose an individual or a health plan to either pure risk or speculative risk:
Example 1 — A health plan invested in 1,000 shares of stock issued by a technology company.
Example 2 — An individual could contract a terminal illness.
Example 3 — A health plan purchased a new information system.
Example 4 — A health plan could be held liable for the negligent acts of an employee.
The examples that describe pure risk are

• A. Examples 1 and 2
• B. Examples 1 and 4
• C. Examples 2 and 3
• D. Examples 2 and 4

Answer: A

NEW QUESTION 15

A health plan can use a SWOT (strengths, weaknesses, opportunities, and threats) analysis to analyze its relationships with the major providers in each market in which it conducts business.

• A. True
• B. False

Answer: A

NEW QUESTION 16

Many clinicians are concerned about the development of practice guidelines that seek to define appropriate healthcare services that should be provided to a patient who has been diagnosed with a specific condition. To avoid the risk associated with using such guidelines, health plans should advise clinicians that the existence of such a guideline:
* 1. Establishes standards of care to be routinely utilized with all patients presenting a specific condition
* 2. Preempts a physician’s judgment when assessing the specific factors related to a patient’s condition

• A. Both 1 and 2
• B. 1 only
• C. 2 only
• D. Neither 1 nor 2

Answer: D

NEW QUESTION 17
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