The Down To Date Guide To AHM-520 Sample Question

NEW QUESTION 1

The methods of alternative funding for health coverage can be divided into the following general categories:
✑ Category A—Those methods that primarily modify traditional fully insured group insurance contracts
✑ Category B—Those methods that have either partial or total self funding
Typically, small employers are able to use some of the alternative funding methods in

• A. Both Category A and Category B
• B. Category A only
• C. Category B only
• D. Neither Category A nor Category B

Answer: C

NEW QUESTION 2

The risk-based capital formula for health plans defines a number of risks that can impact a health plan’s solvency. These categories reflect the fact that the level of risk faced by health plans is significantly impacted by provider reimbursement methods that shift utilization risk to providers. The following statements are about the effect of a health plan transferring utilization risk to providers. Select the answer choice containing the correct statement:

• A. The net effect of using provider reimbursement contracts to transfer risk is that the health plan’s net worth requirement increases.
• B. Once the health plan has transferred utilization risk to its providers, it is relieved of the legal obligation to provide medical services to plan members in the event of the provider’s insolvency.
• C. The greater the amount of risk the health plan transfers to providers, the larger the credit-risk factor becomes in the health plan’s RBC formula.
• D. By decreasing its utilization risk, the health plan increases its underwriting risk.

Answer: C

NEW QUESTION 3

The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs.
One true statement about this specific stop-loss coverage is that

• A. The carrier is Newfeld
• B. The attachment point is $20,000
• C. The shared-risk corridor is between $0 and $70,000
• D. This coverage can also be activated when the total covered medical expensesgenerated by the hospitalizations of Azalea plan members reach a specified level

Answer: B

NEW QUESTION 4

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 5

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 6

The following statements are about risk management in health plans. Select the answer choice containing the correct response.

• A. Risk management is especially important to health plans because the Employee Retirement Income Security Act of 1974 (ERISA) allows plan members to recover punitive damages from healthcare plans.
• B. With regard to the relative risk for health plan structures based upon the degree of influence and relationships that health plans maintain with their providers, preferred provider organizations (PPOs) typically have a higher risk than do group HMOs and staff HMOs.
• C. Although there are clear risks associated with the provision of healthcare services and coverage decisions surrounding that care, the bulk of risk in health plans is associated with a health plan's benefit administration and contracting activities.
• D. A health plan generally structures its risk management process around loss reduction techniques and loss transfer techniques.

Answer: D

NEW QUESTION 7

A health plan can use segment margins to evaluate the profitability of its profit centers. One characteristic of a segment margin is that this margin

• A. Is the portion of the contribution margin that remains after a segment has covered its direct fixed costs
• B. Incorporates only the costs attributable to a segment, but it does not incorporate revenues
• C. Considers only a segment's costs that fluctuate in direct proportion to changes in thesegment's level of operating activity
• D. Evaluates the profit center's effective use of assets employed to earn a profit

Answer: A

NEW QUESTION 8

In order to print all of its forms in-house, the Prism health plan isconsidering the purchase
of 10 new printers at a total cost of $30,000. Prismestimates that the proposed printers have a useful life of 5 years. Under itscurrent system, Prism spends $10,000 a year to have forms printed by a localprinting company. Assume that Prism selects a 15% discount rate based onits 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.
Now assume that Prism decides to use the net present value (NPV) method toevaluate this potential investment's worthiness and that Prism will accept theproject if the project's NPV is greater than $4,000. Using the NPV method,Prism would correctly conclude that this project should be

• A. Rejected because its NPV is $3,520
• B. Accepted because its NPV is $5,028
• C. Accepted because its NPV is $16,480
• D. Accepted because its NPV is $23,520

Answer: A

NEW QUESTION 9

The following statements are about various reimbursement arrangements that health plans have with hospitals. Select the answer choice containing the correct statement.

• A. A sliding scale per-diem charges arrangement differs from a sliding scale discount on charges arrangement in that only a sliding scale per-diem charges arrangement is based on total volume of admissions and outpatient procedures.
• B. Under a typical reimbursement arrangement that is based on diagnosisrelated groups (DRGs), if the payment amount is fixed on the basis of diagnosis, then any reduction in costs resulting from a reduction in days will go to the health plan rather than to the hospital.
• C. A negotiated straight per-diem charge requires payment of a single charge for a day in the hospital, regardless of any actual charges or costs incurred during the hospital stay.
• D. A straight discount on charges arrangement is the most common reimbursement method in markets with high levels of health plans.

Answer: C

NEW QUESTION 10

Providing services under Medicare or Medicaid can impose on health plans financial risks and costs that are greater than those related to providing services to the commercial population. Reasons that an health plan's financial risks and costs for providing services to Medicare and Medicaid enrollees tend to be higher include

• A. Most Medicare and Medicaid enrollees can disenroll from a health plan on a monthly basis
• B. The high incidences of chronic illness in both the Medicare and Medicaid populations results in higher costs related to coordinating care and case management
• C. Medicare and Medicaid enrollees tend to have a high level of costs in the first few months of enrollment as the health plan educates them about the health plan system and performs initial health screening to evaluate their health
• D. all of the above

Answer: D

NEW QUESTION 11

Variance analysis is the study of the difference between expected results and actual results. Variances can be positive or negative. A positive variance is typically considered:

• A. favorable for both expenses and revenues
• B. favorable for expenses, but unfavorable for revenues
• C. favorable for revenues, but unfavorable for expenses
• D. unfavorable for both expenses and revenues

Answer: C

NEW QUESTION 12

Ways in which a company can increase its return on investment (ROI) include: 1.Reducing expenses to increase operating income 2.Increasing controllable investment

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

Answer: B

NEW QUESTION 13

An actuary for the Noble Health Plan observed that the plan's actual morbidity was lower than its assumed morbidity and that the plan's actual administrative expenses were higher than its assumed administrative expenses. In this situation, Noble's actual underwriting margin was

• A. larger than its assumed underwriting margin, and the plan's actual expense margin was higher than its assumed expense margin
• B. larger than its assumed underwriting margin, but the plan's actual expense margin was lower than its assumed expense margin
• C. smaller than its assumed underwriting margin, but the plan's actual expense margin was higher than its assumed expense margin
• D. smaller than its assumed underwriting margin, and the plan's actual expense margin was lower than its assumed expense margin

Answer: B

NEW QUESTION 14

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 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

Health plans sometimes use global fees to reimburse providers. Health plans would use this method of provider reimbursement for all of the following reasons EXCEPT that global fees

• A. Eliminate any motivation the providermay have to engage in churning
• B. Transfer some of the risk of overutilization of care from the health plan to the providers
• C. Eliminate the practice of upcoding within specific treatments
• D. Reward providers who deliver cost-effective care

Answer: A

NEW QUESTION 17

One true statement about a type of capitation known as a percent-of-premium arrangement is that this arrangement

• A. Is the most common type of capitation
• B. Is less attractive to providers when the arrangement sets provisions to limit risk
• C. Sets provider reimbursement at a specific dollar amount per plan member
• D. Transfers some of the risk associated with underwriting and rating from a health plan to a provider

Answer: D

NEW QUESTION 18
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