Update Health Plan Finance And Risk Management AHM-520 Questions Pool

NEW QUESTION 1

A health plan most likely would use benchmarking in order to

• A. Measure its performance and practices against those of other companies to help identify those practices that will lead to superior performance in a variety of financial and non- financial areas
• B. Calculate the percentage changes in its financial statement items over several consecutive accounting periods
• C. Determine both the direction and velocity of trends in its financial statements
• D. Display only percentage relationships in its financial statements

Answer: A

NEW QUESTION 2

A key factor that distinguishes the various types of health plans is the type and amount of risk that a health plan assumes with respect to the delivery and financing of healthcare benefits. An example of a type of health plan that typically assumes the financial risk of delivering and financing healthcare benefits is a

• A. Third party administrator (TPA)
• B. Utilization review organization (URO)
• C. Preferred provider organization (PPO)
• D. Pharmacy benefit management (PBM) plan

Answer: C

NEW QUESTION 3

A health plan's costs can be classified as committed costs or discretionary costs. An example of a discretionary cost for a health plan is the cost of its

• A. Facilities
• B. Executive salaries
• C. Employee training
• D. Equipment

Answer: A

NEW QUESTION 4

The following paragraph contains an incomplete statement. Select the answer choice containing the term that correctly completes the statement. Health plans face four contingency risks (C-risks): asset risk (C-1), pricing risk (C-2), interest-rate risk (C-3), and general management risk (C-4). Of these risks, _______ is typically the most important risk that health plans face. This is true because a sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay for future medical costs, and the exact amount of these costs is not known when the healthcare coverage is priced.

• A. Asset risk (C-1)
• B. Pricing risk (C-2)
• C. Interest-rate risk (C-3)
• D. General management risk (C-4)

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

One typical characteristic of zero-based budgeting (ZBB) is that this budgeting approach

• A. Treats each activity as though it is a new project under consideration
• B. Applies only to income budgets
• C. Is the least time-consuming of all of the budgeting approaches
• D. Requires the input of top-level employees only

Answer: A

NEW QUESTION 7

The following statements are about the financial risks for health plans in Medicare and Medicaid markets. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

• A. One reason that health plans in the Medicare and Medicaid markets experience financial risk is that government regulations determine which services must be provided to Medicare and Medicaid enrollees.
• B. Effective use of hospital utilization is the single most likely factor to contribute to the success of a Medicare-contracting health plan.
• C. If a Medicare-contracting health plan is a provider-sponsored organization (PSO), it is prohibited from sharing financial risk with its providers.
• D. Typically, providers are more reluctant to accept financial risk in connection with providing services to the Medicaid population than with providing services to the Medicare population.

Answer: C

NEW QUESTION 8

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 9

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 10

The Poplar Company and a Blue Cross/Blue Shield organization have contracted to provide a typical fully funded health plan for Poplar's employees. One true statement about this health plan for Poplar's employees is that

• A. Poplar bears the entire financial risk if, during a given period, the dollar amount of services rendered to Poplar plan members exceeds the dollar amount of premiums collected for this health plan
• B. Poplar and the Blue Cross/Blue Shield organization share the financial risk of paying for claims under Poplar's health plan
• C. The Blue Cross/Blue Shield organization, upon acceptance of a premium, becomes the group plan sponsor for Poplar's health plan
• D. The Blue Cross/Blue Shield organization, upon acceptance of a premium, bears the entire financial risk of paying for the administrative expenses associated with health plan operations

Answer: D

NEW QUESTION 11

The Lindberg Company has decided to terminate its group healthcare coverage with the Benson Health Plan. Lindberg has several former employees who previously experienced qualifying events that caused them to lose their group coverage. One federal law allows these former employees to continue their group healthcare coverage. From the answer choices below, select the response that correctly identifies the federal law that grants these individuals with the right to continue group healthcare coverage, as well as the entity which is responsible for continuing this coverage:

• A. Federal law: Consolidated Omnibus Budget Reconciliation Act (COBRA) Entity: Lindberg
• B. Federal law: Consolidated Omnibus Budget Reconciliation Act (COBRA) Entity: Benson
• C. Federal law: Employee Retirement Income Security Act (ERISA) Entity: Lindberg
• D. Federal law: Employee Retirement Income Security Act (ERISA) Entity: Benson

Answer: A

NEW QUESTION 12

A stop-loss contract may provide that claims are settled using a paid claims method or an incurred claims method. The Concord Company provides health coverage to its employees through a self-funded health plan. On March 17, a Concord employee who is enrolled in this plan underwent surgery, and the surgery was sufficiently expensive to trigger Concord's specific stop-loss coverage. On April 10, Concord paid the medical expenses associated with the surgery. The term of the stop-loss contract ended on April 1. This information indicates that the stop-loss carrier is responsible for paying a portion of the cost of the surgery under

• A. both the paid claims method and the incurred claims method
• B. the paid claims method but not the incurred claims method
• C. the incurred claims method but not the paid claims method
• D. neither the paid claims method nor the incurred claims method

Answer: C

NEW QUESTION 13

The following statements illustrate common forms of capitation:
* 1. The Antler Health Plan pays the Epsilon Group, an integrated delivery system (IDS), a capitated amount to provide substantially all of the inpatient and outpatient services that Antler offers. Under this arrangement, Epsilon accepts much of the risk that utilization rates will behigher than expected. Antler retains responsibility for the plan's marketing, enrollment, premium billing, actuarial, underwriting, and member services functions.
* 2. The Bengal Health Plan pays an independent physician association (IPA) a capitated amount to provide both primary and specialty care to Bengal's plan members. The payments cover all physician services and associated diagnostic tests and laboratory work.
The physicians in the IPA determine as a group how the individual physicians will be paid for their services.
From the following answer choices, select the response that best indicates the form of capitation used by Antler and Bengal.

• A. Antler = subcapitation Bengal = full-risk capitation
• B. Antler = subcapitationBengal = full professional capitation
• C. Antler = global capitation Bengal = subcapitation
• D. Antler = global capitationBengal = full professional capitation

Answer: D

NEW QUESTION 14

The sentence below contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have chosen. Purchasing stop-loss coverage most likely (increases / reduces) a health plan's underwriting risk and (increases / reduces) the health plan’s affiliate risk.

• A. increases / increases
• B. increases / reduces
• C. reduces / increases
• D. reduces / reduces

Answer: C

NEW QUESTION 15

The Sanford Group, a provider group, entered into a risk contract with a health plan. Sanford has purchased aggregate stop-loss coverage with an attachment point of 115% of the group's predicted healthcare costs of $2,000,000 for the year. Sanford has a copayment of 10% for any costs above the attachment point. If Sanford's actual costs for the year are $2,800,000, then, according to the terms of the aggregate stop-loss agreement, the amount that Sanford is responsible for is

• A. $2,080,000
• B. $2,300,000
• C. $2,350,000
• D. $2,380,000

Answer: C

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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