AHM-520 | All About Accurate AHM-520 Samples

NEW QUESTION 1

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 2

One way that the Medicare and Medicaid programs differ is that under Medicare, a smaller proportion of provider reimbursement goes to the primary care providers and a greater proportion of the reimbursement goes to hospitals and specialists.

• A. True
• B. False

Answer: A

NEW QUESTION 3

The Arista Health Plan is evaluating the following four groups that have applied for group
healthcare coverage:
✑ The Blaise Company, a large private employer
✑ The Colton County Department of Human Services (DHS)
✑ A multiple-employer group comprised of four companies
✑ The Professional Society of Daycare Providers
With respect to the relative degree of risk to Arista represented by these four companies, the company that would most likely expose Arista to the lowest risk is the:

• A. Blaise Company
• B. Colton County DHS
• C. Multiple-employer group
• D. Professional Society of Daycare Providers

Answer: A

NEW QUESTION 4

In order to print all of its forms in-house, the Prism health plan is considering the purchase of 10 new printers at a total cost of $30,000. Prism estimates that the proposed printers have a useful life of 5 years. Under its current system, Prism spends $10,000 a year to have forms printed by a local printing company. Assume that Prism selects a 15% discount rate based on its weighted-average costs of capital. The cash inflows for each year, discounted to their present value, are shown in the following chart:

Prism will use both the payback method and the discounted payback methodto analyze the worthiness of this potential capital investment. Prism's decisionrule is to accept all proposed capital projects that have payback periods offour years or less.
After analyzing this information, Prism would accept this proposed capitalproject under

• A. Both the payback method and the discounted payback method
• B. The payback method but not the discounted payback method
• C. The discounted payback method but not the payback method
• D. Neither the payback method nor the discounted payback method

Answer: B

NEW QUESTION 5

The following statements are about 501(c)(9) trusts. Select the answer choice containing the correct statement:

• A. In the event a 501(c)(9) trust is terminated, any funds remaining in the trust revert backto the employer.
• B. In order to satisfy Internal Revenue Code (IRC) requirements, membership in a 501(c)(9) trust is mandatory for all employees.
• C. Contributions made by an employer to a 501(c)(9) trust are deductible for federal income tax purposes.
• D. Typically, a 501(c)(9) trust is controlled solely by the employer that established the trust.

Answer: C

NEW QUESTION 6

A health plan can use cost accounting in order to

• A. Determine premium rates for its products
• B. Match the costs incurred during a given accounting period to the income earned in, or attributed to, that same period
• C. Both A and B
• D. A only
• E. B only
• F. Neither A nor B

Answer: A

NEW QUESTION 7

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 8

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 9

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 10

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 11

The following statements are about a health plan's evaluation of its responsibility centers. Select the answer choice containing the correct statement.

• A. When analyzing budget variances, a health plan's management should pay attention to unfavorable variances only.
• B. A health plan can reduce the problem of unattainable goals by involving responsibility managers in the preparation of their centers' budgets.
• C. One reason that a health plan would use cost-based transfer prices to evaluate the performance of its profit centers and investment centers is because, under this method of setting transfer prices, the selling center has maximum incentive to operate effectively and control costs.
• D. In responsibility accounting, all employees who have any influence over a health plan's department are held equally accountable for the operations and financial outcomes of that department.

Answer: B

NEW QUESTION 12

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 13

Mandated benefit laws are state or federal laws that require health plans to arrange for the financing and delivery of particular benefits. Within a market, the implementation of mandated benefit laws is likely to cause _______.

• A. A reduction in the number of self-funded healthcare plans
• B. An increase in the cost to the health plans
• C. A reduction in the size of the provider panels of health plans
• D. A reduction in the uniformity among the healthcare plans of competing health plans

Answer: B

NEW QUESTION 14

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 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

One true statement about capital and surplus ratios for health plans is that

• A. This ratio is calculated by dividing a health plan's total liabilities by its capital and surplus
• B. A health plan's capital and surplus position would be likely to weaken because of reserve valuation changes that reduce the health plan's reserves
• C. The primary purpose of these ratios is to compare a health plan's obligations to its ability to meet those obligations
• D. An increase in the value of a health plan's capital and surplus ratio most likely indicates that the health plan's financial position has strengthened

Answer: D

NEW QUESTION 17

The following statements illustrate the use of different rating methods by health plans:
✑ The Dover health plan established rates for small groups by using a rating method which requires that the average premium in each group cannot be more than 120% of the average premium for any other group. Under this method, all members of each group pay the same premium, which is based on the experience of the group.
✑ Under the rating method used by the Rolling Hills health plan, the health plan
calculates the ratio of a group's experience to the group's historical manual rate. Rolling Hills then multiplies this ratio by the group's future manual rate. Rolling Hills cannot consider the group's experience in determining premium rates.
From the following answer choices, select the response that correctly indicates the rating methods used by Dover and Rolling Hills.

• A. Dover = modified community rating Rolling Hills = factored rating
• B. Dover = modified community rating Rolling Hills = adjusted community rating (ACR)
• C. Dover = community rating by class (CRC) Rolling Hills = factored rating
• D. Dover = community rating by class (CRC) Rolling Hills = adjusted community rating (ACR)

Answer: D

NEW QUESTION 18
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