All About High Value AHM-520 Free Practice Questions

NEW QUESTION 1

One true statement about the rate ratios used by a health plan is that the

• A. End result of a typical family rate ratio is that the health plan's family rate is subsidized by its single premium rate
• B. health plan cannot arbitrarily increase or decrease its rate ratio for a rate category
• C. rate ratios used by the health plan most likely have been established by government regulations
• D. health plan should determine its rate ratios by considering family size alone rather than competitive factors such as the ratios that competitors are using

Answer: A

NEW QUESTION 2

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 3

One true statement about a health plan's underwriting margin is that

• A. the only way that the health plan can effectively reduce its exposure to underwriting risk, and therefore adjust its underwriting margin, is to control anti selection
• B. a larger assumed underwriting margin will reduce the price of the health plan's product and will make the plan more competitive
• C. the health plan's purchase of stop-loss insurance has no effect on its underwriting margin because stop-loss insurance can help the health plan control its expenses but not its underwriting risk
• D. both the level of underwriting risk that the health plan assumes in providing benefits and the market competition it encounters most likely directly affect the size of its assumed underwriting margin

Answer: D

NEW QUESTION 4

The Kayak Company self funds the health plan for its employees. This plan is an example of a type of self-funded plan known as a general asset plan.
Because Kayak's plan is a general asset plan, the funds that Kayak sets aside for the health plan are

• A. subject to the claims of Kayak's creditors
• B. available to Kayak solely for the purpose of paying for the healthcare expenses of Kayak's covered employees
• C. placed in a trust fund established by Kayak to pay for the health plan
• D. considered separate from Kayak's current operating funds

Answer: A

NEW QUESTION 5

The Longview Hospital contracted with the Carlyle Health Plan to provide inpatient services to Carlyle’s enrolled members. Carlyle provides Longview with a type of stop-loss coverage that protects, on a claims incurred and paid basis, against losses arising from significantly higher than anticipated utilization rates among Carlyle’s covered population. The stop-loss coverage specifies an attachment point of 130% of Longview’s projected $2,000,000 costs of treating Carlyle plan members and requires Longview to pay 15% of any costs above the attachment point. In a given plan year, Longview incurred covered costs totaling $3,000,000.
Carlyle most likely is responsible for paying Longview for the claims incurred before Longview has actually paid the medical expenses.

• A. True
• B. False

Answer: B

NEW QUESTION 6

A health plan may experience negative working capital whenever healthcare expenses generated by plan members exceed the premium income the health plan receives.
Ways in which a health plan can manage the volatility in claims payments, and therefore reduce the risk of negative working capital, include:
* 1.Accurately estimating incurred but not reported (IBNR) claims 2.Using capitation contracts for provider reimbursement

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

Answer: A

NEW QUESTION 7

The types of financial risks and costs to which a health plan is subject depends on whether the health plan provides services to the Medicare and/or Medicaid populations or to the commercial population. One distinction between providing services to the Medicare and Medicaid populations and to the commercial population is that Medicare and Medicaid enrollees typically:

• A. Are locked into a plan for a 12-month period, whereas enrollees from the commercial population may disenroll from a plan on a monthly basis
• B. Require less enrollee education than do enrollees from the commercial population
• C. Have higher incidences of chronic illness than do enrollees from the commercial population
• D. Are enrolled in a health plan through a group situation, whereas the commercial population typically enrolls in a health plan on an individual basis

Answer: C

NEW QUESTION 8

In a comparison of small employer-employee groups to large employer-employee groups, it is correct to say that small employer-employee groups tend to:

• A. More closely follow actuarial predictions with respect to morbidity rates
• B. Generate more administrative expenses as a percentage of the total premium amount the group pays
• C. Have less frequent and smaller claims fluctuations
• D. Expose an health plan to a lower risk of anti selection

Answer: B

NEW QUESTION 9

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 10

The theory of vicarious liability or ostensible agency can expose a health plan to the risk that it could be held liable for the acts of independent contractors. Factors that may give rise to the assumption that an agency relationship exists between a health plan and its independent contractors include:

• A. Requiring the providers to supply their own office space
• B. Employing nurses and other healthcare professionals to support the physician providers
• C. Requiring providers to maintain their own medical records
• D. All of the above

Answer: B

NEW QUESTION 11

With regard to alternative funding arrangements, the part of a health plan premium that is intended to contribute to the claims reserve that a health plan maintains to pay for unusually high utilization is known as the:

• A. Interest charge
• B. Retention charge
• C. Risk charge
• D. Surplus

Answer: C

NEW QUESTION 12

In order to calculate a simple monthly capitation payment, the Argyle Health Plan used the following information:
✑ The average number of office visits each member makes in a year is two
✑ The FFS rate per office visit is $55
✑ The member copayment is $5 per office visit
✑ The reimbursement period is one month
Given this information, Argyle would correctly calculate that the per member per month (PMPM) capitation rate should be

• A. $4.17
• B. $8.33
• C. $9.17
• D. $10.00

Answer: B

NEW QUESTION 13

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 14

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 15

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.
The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is

• A. $10,000
• B. $14,000
• C. $30,000
• D. $34,000

Answer: C

NEW QUESTION 16

The Brookhaven Company is the parent company of two subsidiaries: an HMO and an insurance company. The headings on Brookhaven's financial statements read "Consolidated Financial Statements of Brookhaven Company." From the following answer choices, select the response that correctly indicates, under the entity concept, whether the HMO and the insurance company are accounted for as separate entities and whether the subsidiaries' financial results would be included in Brookhaven's consolidated financial statements.

• A. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = yes
• B. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = no
• C. Accounted for as Separate Entities? = noResults Included in Brookhaven's Statements? = yes
• D. Accounted for as Separate Entities? = no Results Included in Brookhaven's Statements? = no

Answer: A

NEW QUESTION 17
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