AHIP AHM-520 Free Practice Questions

NEW QUESTION 1

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 2

With regard to a health plan's underwriting of groups, it can correctly be stated that, generally, a

• A. Health plan will require that contributory healthcare plans have a participation level of between 50% and 70%
• B. Health plan will decline to cover a group that has been formed for the sole purpose of obtaining healthcare coverage
• C. Health plan's underwriters will not examine the age spread of the entire group being underwritten
• D. Health plan would expect a group with a large proportion of young females to have lower healthcare costs than does a similar group with a large proportion of young males

Answer: B

NEW QUESTION 3

The Atoll Health Plan must comply with a number of laws that directly affect the plan's contracts. One of these laws allows Atoll's plan members to receive medical services from certain specialists without first being referred to those specialists by a primary care provider (PCP). This law, which reduces the PCP's ability to manage utilization of these specialists, is known as ______.

• A. A due process law
• B. An any willing provider law
• C. A direct access law
• D. A fair procedure law

Answer: C

NEW QUESTION 4

The Eagle health plan wants to limit the possibility that it will be held vicariously liable for the negligent acts of providers. Dr. Michael Chan is a member of an independent practice association (IPA) that has contracted with Eagle. One step that Eagle could take in order to limit its exposure under the theory of vicarious liability is to

• A. Supply D
• B. Chan with office space
• C. Employ nurses, laboratory technicians, and therapists to support Dr.Chan
• D. Be responsible for keeping D
• E. Chan's medical records updated
• F. Ensure that documents provided to D
• G. Chan's patients describe him as an independent practitioner

Answer: D

NEW QUESTION 5

Contingency risks, or C-risks, are general categories of risk that have a direct bearing on both the cash flow and solvency of a health plan. One of these C-risks, pricing risk (C-2 risk), is typically the most important risk a health plan faces. Pricing risk is crucial to a health plan’s solvency because:

• A. A sizable portion of any health plan’s assets are held in long-term investments and anyshift in interest rates can significantly impact a health plan’s ability to pay medical benefits
• B. A health plan relies heavily on the sound judgment of its management, and poor management decisions can result in financial losses for the health plan
• C. A situation in which actual expenses exceed the amounts budgeted for those expenses may result in the health plan failing to retain assets sufficient to cover current obligations
• D. A sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay future medical costs, and the exact amounts of those costs are not known at the time a product’s premium is established

Answer: D

NEW QUESTION 6

The following statement(s) can correctly be made about a health plan's underwriting of small groups:

• A. Typically, a health plan medically underwrites both the employees of a small group and their dependents, even though small group reform laws prohibit health plans from singling out individuals for rejection or substandard rate-ups.
• B. In the absence of laws mandating otherwise, a health plan's underwriting standardsgrow stricter as group size gets smaller.
• C. Both A and B
• D. A only
• E. B only
• F. Neither A nor B

Answer: A

NEW QUESTION 7

The Fiesta Health Plan prices its products in such a way that the rates for its products are reasonable, adequate, equitable, and competitive. Fiesta is using blended rating to calculate a premium rate for the Murdock Company, a large employer. Fiesta has assigned a credibility factor of 0.6 to Murdock. Fiesta has also determined that Murdock's manual rate is $200 PMPM and that Murdock's experience rate is $180 PMPM.
According to regulations, Fiesta's premium rates are reasonable if they

• A. vary only on the factors that affect Fiesta's costs
• B. are at a level that balances Fiesta's need to generate a profit against its need to obtain or retain a specified share of the market in which it conducts business
• C. are high enough to ensure that Fiesta has enough money on hand to pay operating expenses as they come due
• D. do not exceed what Fiesta needs to cover its costs and provide the plan with a fair profit

Answer: D

NEW QUESTION 8

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 9

With regard to the financial statements prepared by health plans, it can correctly be stated that

• A. both for-profit, publicly owned health plans and not-for-profit health plans are required by law to provide all interested parties with an annual report
• B. a health plan's annual report typically includes an independent auditor's report and notes to the financial statements
• C. any health plan that owns more than 20% of the stock of a subsidiary company must compile the financial statements for the health plan's annual report on a consolidated basis
• D. a health plan typically must prepare the financial statements included in its annual report according to SAP

Answer: B

NEW QUESTION 10

A health plan that capitates a provider group typically provides or offers to provide stop-loss coverage to that provider group.

• A. True
• B. False

Answer: A

NEW QUESTION 11

The Northwest Company offers its employees the option of choosing to receive their
healthcare benefits from an HMO or from a traditional indemnity plan. The premiums for the HMO are lower than for the traditional indemnity plan. In this situation, it is correct to assume that:
* 1.Individual low utilizers are more likely to enroll in the traditional indemnity plan 2.Individual high utilizers are more likely to enroll in the HMO

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

Answer: D

NEW QUESTION 12

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 13

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 14

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 15

The following statements are about the Health Insurance Portability and Accountability Act (HIPAA) as it relates to the small group market. Three of these statements are true and one statement is false. Select the answer choice containing the FALSE statement:

• A. A health plan that participates in the small group market is required to issue a contract to any employer that requests healthcare benefits, as long as the employer meets the statutory definition of a small group.
• B. A small group must consist of more than 10 employees in order to be underwritten on a group, rather than an individual, basis.
• C. A health plan is prohibited from canceling a small group’s healthcare coverage because of poor claims experience.
• D. A health plan that participates in the small group market is limited in placing restrictions such as waiting periods and pre-existing conditions exclusions to individuals in high risk categories.

Answer: B

NEW QUESTION 16

The NAIC has developed a risk-based capital (RBC) formula for all health plans that accept risk. One true statement about the RBC formula for health plans is that it

• A. is a set of calculations, based on information in a health plan's annual financial report, that yields a target capital requirement for the organization
• B. fails to take into account a health plan's underwriting risk, which is the risk that the premiums the health plan receives will be insufficient to pay for the healthcare services it provides to its plan members
• C. applies to all health plans in the United States
• D. fails to assess the specific level of risk faced by each health plan

Answer: A

NEW QUESTION 17
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