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NEW QUESTION 1
Analysts will use the capital asset pricing model (CAPM) to determine the cost of equity for the Maxim health plan, a for-profit plan. According to the CAPM, Maxim's cost of equity is equal to
- A. The average interest rate that Maxim is paying to debt holders, adjusted for a tax shield
- B. Maxim's risk-free rate minus its beta
- C. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of systematic (non diversifiable) risk
- D. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of nonsystematic (diversifiable) risk
Answer: C
NEW QUESTION 2
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 3
In evaluating the claims experience during a given rating period of the Lucky Company, the Calaway Health Plan determined that the claims incurred by Lucky were lower than Calaway anticipated when it established Lucky’s premium rate for the rating period. Calaway, therefore,refunded a portion of Lucky’s premium to reflect the better-than- anticipated claims experience. This rating method is known as:
- A. durational rating
- B. retrospective experience rating
- C. blended rating
- D. prospective experience rating
Answer: B
NEW QUESTION 4
The following paragraph contains two pair of terms enclosed in parentheses. Determine which term in each pair correctly completes the statements. Then select the answer choice containing the two terms you have chosen.
In a typical health plan, an (actuary / underwriter) is ultimately responsible for the determination of the appropriate rate to charge for a given level of healthcare benefits and administrative services in a particular market. The (actuary / underwriter) assesses and classifies the degree of risk represented by a proposed group or individual.
- A. actuary / actuary
- B. actuary / underwriter
- C. underwriter / actuary
- D. underwriter / underwriter
Answer: B
NEW QUESTION 5
The Landau health plan will switch from using top-down budgeting to using bottom-up budgeting. One potential advantage to Landau of making this switch is that, compared to top-down budgeting, bottom-up budgeting is more likely to
- A. Require little time or labor to complete
- B. Enable Landau to incorporate key changes in regulatory requirements on a timely basis
- C. Reflect top management's intentions for Landau
- D. Reflect the realities of day-to-day operations
Answer: B
NEW QUESTION 6
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 7
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 8
Provider reimbursement methods that transfer some utilization risk from a health plan to providers affect the health plan's RBC formula. A health plan's use of these reimbursement methods is likely to result in
- A. An increase the health plan's underwriting risk
- B. A decrease the health plan's credit risk
- C. A decrease the health plan's net worth requirement
- D. All of the above
Answer: C
NEW QUESTION 9
Reconciliation is the process by which a health plan assesses providers' performance relative to contractual terms and reimbursement.
With regard to this process, it can correctly be stated that
- A. Areconciliation typically includes payment to the providers of any withholds or bonuses due to them
- B. Ahealth plan typically should conduct a reconciliation immediately after the evaluation period has ended
- C. Most agreements between health plans and providers require reconciliations to be performed quarterly
- D. Ahealth plan typically should not conduct reconciliation for a provider until the plan has received all claims or other documentation of services that the physician provided during the evaluation period
Answer: A
NEW QUESTION 10
The physicians who work for the Sunrise Health Plan, a staff model HMO, are paid a salary that is not augmented with another type of incentive plan. Compared to the use of a traditional reimbursement method, Sunrise's use of a salary reimbursement method is more likely to
- A. Encourage Sunrise's physicians to perform services that are not medically necessary
- B. Completely eliminate service risk for Sunrise's physicians
- C. Decrease Sunrise's liability for any negligent acts of the physicians in the plan's network of providers
- D. Help stabilize expenses for Sunrise
Answer: D
NEW QUESTION 11
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 12
Most organizations that obtain group healthcare coverage can be classified as one of three types of groups: employer-employee groups, multiple employer groups, and professional associations. One true statement about these types of groups is that
- A. Anti selection risk is higher for both multiple-employer groups and professional associations than it is for an employer-employee group
- B. Private employers typically present a higher underwriting risk to health plans than do public employers
- C. Individual members of a multiple-employer group or a professional association typically are required to obtain healthcare coverage through the group or association
- D. I health plan is prohibited, when evaluating the risks represented by a professional association, from considering the industry experience of the agent or broker that sells a group plan to the association
Answer: A
NEW QUESTION 13
The Norton Health Plan used blended rating to develop a premium rate for the Roswell Company, a large employer group. Norton assigned Roswell a credibility factor of 0.7 (or 70%). Norton calculated Roswell’s manual rate to be $200 and its experience claims cost as $180. Norton’s retention charge is $3. This information indicates that Roswell’s blended rate is:
- A. $186
- B. $189
- C. $194
- D. $197
Answer: B
NEW QUESTION 14
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 15
The goal of the investment department at the Wayfarer Health Plan is to maximize investment return. The investment department executes investments on time and at a low cost. However, these transactions often result in low returns or risks that are deemed too high for Wayfarer. With regard to effectiveness and efficiency, it is correct to say that Wayfarer’s investment department is:
- A. both effective and efficient
- B. efficient, but not effective
- C. effective, but not efficient
- D. neither effective nor efficient
Answer: B
NEW QUESTION 16
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 17
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