Top Tips Of Renewal AHM-520 Question

NEW QUESTION 1

The Essential Health Plan markets a product for which it assumed total expenses to equal 92% of premiums. Actual data relating to this product indicate that expenses equal 89% of premiums. This information indicates that the expense margin for this product has:

• A. a 3% favorable deviation
• B. a 3% adverse deviation
• C. an 11% favorable deviation
• D. an 11% adverse deviation

Answer: A

NEW QUESTION 2

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 3

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 4

Dr. Martin Cassini is an obstetrician who is under contract with the Bellerby Health Plan. Bellerby compensates Dr. Cassini for each obstetrical patient he sees in the form of a single amount that covers the costs of prenatal visits, the delivery itself, and post-delivery care . This information indicates that Dr. Cassini is compensated under the provider reimbursement method known as a:

• A. global fee
• B. relative value scale
• C. unbundling
• D. discounted fee-for-service

Answer: A

NEW QUESTION 5

The following statements are about carve-out programs. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

• A. In the type of carve-out in which entire categories of care are administered by independent organizations, a health plan typically reimburses these organizations under an FFS contract.
• B. Typically, a health plan will offer carved-out services to its enrollees, but will manage these services separately.
• C. Carve-outs are services that are excluded from a capitation payment, a risk pool, or a health benefit plan.
• D. The most rapidly growing area related to carve-outs is disease management (DM).

Answer: A

NEW QUESTION 6

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 7

The HMO Model Act sets certain requirements that an entity that wishes to operate as an HMO must meet. These requirements include:

• A. Having an initial net worth of at least $5 million
• B. Maintaining a net worth equal to at least 5% of premium revenues for the first $150 million in premium revenue
• C. Using a prospective method to estimate future risk
• D. Obtaining a certificate of authority (COA) before beginning operations

Answer: D

NEW QUESTION 8

The Proform Health Plan uses agents to market its small group business. Proform capitalizes the commission expense relating to this line of business by spreading the commissions over thepremium-paying period of the healthcare coverage. This approach to expense recognition is known as:

• A. Systematic and rational allocation
• B. Matching principle
• C. Immediate recognition
• D. Associating cause and effect

Answer: D

NEW QUESTION 9

The Wallaby Health Plan purchased an asset two years ago for $50,000. At the time of purchase, the asset had an appraised value of $52,000. The asset carries a value on Wallaby’s general ledger of $47,000, and its current market value is $80,000. According to the cost concept, Wallaby would report on its financial statements a value for this asset equal to:

• A. $47,000
• B. $50,000
• C. $52,000
• D. $80,000

Answer: B

NEW QUESTION 10

The following information relates to the Hardcastle Health Plan for the month of June:
✑ Incurred claims (paid and IBNR) equal $100,000
✑ Earned premiums equal $120,000
✑ Paid claims, excluding IBNR, equal $80,000
✑ Total health plan expenses equal $300,000
This information indicates that Hardcastle’s medical loss ratio (MLR) for the month of June was approximately equal to:

• A. 40%
• B. 67%
• C. 83%
• D. 120%

Answer: C

NEW QUESTION 11

Health plans have access to a variety of funding sources depending on whether they are operated as for-profit or not-for-profit organizations. The Verde Health Plan is a for-profit health plan and the Noir Health Plan is a not-for-profit health plan. From the answer choices below, select the response that correctly identifies whether funds from debt markets and equity markets are available to Verde and Noir:

• A. Funds from Debt Markets: available to Verde and Noir Funds from Equity Markets: available to Verde and Noir
• B. Funds from Debt Markets: available to Verde and Noir Funds from Equity Markets: available to Verde only
• C. Funds from Debt Markets: available to Verde only Funds from Equity Markets: available to Noir only
• D. Funds from Debt Markets: available to Noir only Funds from Equity Markets: available to Verde only

Answer: B

NEW QUESTION 12

Health plans seeking to provide comprehensive healthcare plans must contract with a variety of providers for ancillary services. One characteristic of ancillary services is that

• A. Physician behavior typically does not impact the utilization rates for these services
• B. Package pricing is the preferred reimbursement method for ancillary service providers
• C. These services include physical therapy, behavior therapy, and home healthcare, but not diagnostic services such as laboratory tests
• D. Few plan members seek these services without first being referred to the ancillary provider by a physician

Answer: D

NEW QUESTION 13

The traditional financial ratios that analysts use to study a health plan's GAAP-based financial statements include liquidity ratios, activity ratios, leverage ratios, and profitability ratios. Of these categories of ratios, analysts are most likely to use

• A. Liquidity ratios to measure a health plan's ability to meet its current liabilities
• B. Activity ratios relate the returns of a health plan to its sales, total revenues, assets, stockholders' equity, capital, surplus, or stock share price
• C. Leverage ratios to measure how quickly a health plan converts specified financial statement items into premium income or cash
• D. Profitability ratios to measure the effect that fixed costs have on magnifying a health plan's risk and return

Answer: A

NEW QUESTION 14

The amount of risk for health plan products is dependent on the degree of influence and the relationships that the health plan maintains with its providers. Consider the following types of managed care structures:
✑ Preferred provider organization (PPO)
✑ Group model HMO
✑ Staff model health maintenance organization (HMO)
✑ Traditional health insurance
Of these health plan products, the one that would most likely expose a health plan to the highest risk is the:

• A. preferred provider organization (PPO)
• B. group model HMO
• C. staff model health maintenance organization (HMO)
• D. traditional health insurance

Answer: C

NEW QUESTION 15

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 16

The following statements are about a health plan's pricing of a preferred provider organization (PPO) plan. Three of the statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

• A. Typically, the first step in pricing a PPO is to develop a base indemnity claims cost, which results from adjusting the indemnity plan as though the entire eligible group of employees is enrolled in the indemnity plan.
• B. To develop the expected claims costs for the in-network PPO plan, the health plan's actuaries adjust the base indemnity claims costs to reflect pertinent characteristics of the plan, including the specific network plan design and provider discount arrangements.
• C. One difficulty in pricing a PPO is that the health plan's actuaries have no method of estimating which employees would be likely to select which provider groups.
• D. After the health plan's actuaries use risk adjustment factors to adjust the existing claims costs for selection issues, the actuaries weight the in network and out-of-network costs to arrive at a composite claims cost for the PPO plan.

Answer: C

NEW QUESTION 17
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