The Leading Guide To AHM-520 Exam Prep

NEW QUESTION 1

With regard to the Medicaid program in the United States, it can correctly be stated that

• A. The federal government provides none of the funding for state Medicaid programs
• B. Federal Medicaid law is different from Medicare law in that the federal government explicitly sets forth the methodology for payment of Medicaid-contracting plans but not Medicare-contracting plans
• C. A state's payment to health plans for providing Medicaid services cannot be more than it would have cost the state to provide the services under Medicaid fee-for-service (FFS)
• D. States are prohibited from carving out specific services from the capitation rate that health plans receive for providing Medicaid services

Answer: C

NEW QUESTION 2

The Harp Company self-funds the health plan for its employees. The plan is administered under a typical administrative-services-only (ASO) arrangement. One true statement about this ASO arrangement is that

• A. This arrangement prevents Harp from purchasing stop-loss coverage for its health plan
• B. The amount that Harp pays the administrator to provide the ASO services is not subject to state premium taxes
• C. The administrator is responsible for paying claims from its own assets if Harp's account is insufficient
• D. The charges for the ASO services must be stated as a percentage of the amount of claims paid for medical expenses incurred by Harp's covered employees and their dependents

Answer: B

NEW QUESTION 3

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 4

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 5

For a given healthcare product, the Magnolia Health Plan has a premium of $80 PMPM and a unit variable cost of $30 PMPM. Fixed costs for this product are $30,000 per month. Magnolia can correctly calculate the break-even point for this product to be:

• A. 274 members
• B. 375 members
• C. 600 members
• D. 1,000 members

Answer: C

NEW QUESTION 6

When pricing its product, the Panda Health Plan assumes a 4% interest rate on its investments. Panda also assumes a crediting interest rate of 4%.
The actual interest rate earned by Panda on the assets supporting its product is 6%. The following statements can correctly be made about the investment margin and interest margin for Panda's products.

• A. Panda most likely built the crediting interest rate of 4% into the investment margin of its product.
• B. Panda's investment margin is the difference between its actual benefit costs and the benefit costs that it assumes in its pricing.
• C. The interest margin for this product is 2%.
• D. All of these statements are correct.

Answer: C

NEW QUESTION 7

With regard to a health plan's underwriting of groups, it can correctly be stated that, generally, a

• A. Health plan will require that contributory healthcare plans have a participation level of between 50% and 70%
• B. Health plan will decline to cover a group that has been formed for the sole purpose of obtaining healthcare coverage
• C. Health plan's underwriters will not examine the age spread of the entire group being underwritten
• D. Health plan would expect a group with a large proportion of young females to have lower healthcare costs than does a similar group with a large proportion of young males

Answer: B

NEW QUESTION 8

The following statements are about the option for health plan funding known as a self- funded plan. Select the answer choice containing the correct response:

• A. In a self-funded plan, an employer is relieved of all risk associated with paying for the healthcare costs of its employees.
• B. Self-funded plans are subject to the same state laws and regulations that apply to health insurance policies.
• C. Employers electing to self-fund a health plan are required to pay claims from a separate trust established for that purpose.
• D. An employer electing to self-fund a health plan has the option of purchasing stop-loss insurance to transfer part of the financial risk to an insurer.

Answer: D

NEW QUESTION 9

Julio Benini is eligible to receive healthcare coverage through a health plan that is under contract to his employer. Mr. Benini is seeking coverage for the following individuals:
✑ Elena Benini, his wife
✑ Maria Benini, his 18-year-old unmarried daughter
✑ Johann Benini, his 80-year-old father who relies on Julio for support and maintenance
The health plan most likely would consider that the definition of a dependent, for purposes of healthcare coverage, applies to:

• A. Elena, Maria, and Johann
• B. Elena and Maria only
• C. Elena only
• D. Maria only

Answer: B

NEW QUESTION 10

Users of the Fulcrum Health Plan financial information include:
✑ The independent auditors who review Fulcrum's financial statements
✑ Fulcrum's controller (comptroller)
✑ Fulcrum's plan members
✑ The providers that deliver healthcare services to Fulcrum plan members
✑ Fulcrum's competitors
Of these users, the ones that most likely can correctly be classified as external users with a direct financial interest in Fulcrum are the

• A. Independent auditors, the plan members, the providers, and the
• B. Competitors only
• C. Independent auditors, the controller, and the providers only
• D. Controller and the competitors only
• E. Plan members and the providers only

Answer: D

NEW QUESTION 11

The Eclipse Health Plan is a not-for-profit health plan that qualifies under the Internal Revenue Code for tax-exempt status. This information indicates that Eclipse

• A. Has only one potential source of funding: borrowing money
• B. Does not pay federal, state, or local taxes on its earnings
• C. Must distribute its earnings to its owners-investors for their personal gain
• D. Is a privately held corporation

Answer: B

NEW QUESTION 12

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 13

Dr. Jacob Winburne is compensated by the Honor Health Plan under an arrangement in which Honor establishes at the beginning of a financial period a fund from which claims approved for payment are paid. At the end of the given period, any funds remaining are paid out to providers. This information indicates that the arrangement between Dr. Winburne and Honor includes a provider incentive known as a:

• A. Risk pool, and any deficit in the fund at the end of the period would be the sole responsibility of Honor
• B. Risk pool, and any deficit in the fund at the end of the period would be paid by both D
• C. Winburne and Honor according to percentages agreed upon at the beginning of the contract period
• D. Withhold, and any deficit in the fund at the end of the period would be the sole responsibility of Honor
• E. Withhold, and any deficit in the fund at the end of the period would be paid by both D
• F. Winburne and Honor according to percentages agreed upon at the beginning of the contract period

Answer: A

NEW QUESTION 14

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 15

One true statement about variance analysis is that

• A. A price variance is the difference between the budgeted quantities to be sold and theactual quantities sold, multiplied by the budgeted amount
• B. Variance analysis suggests solutions to a particular problem
• C. Positive variances generally are favorable, from a health plan's point of view, for the plan's expenses but unfavorable for the plan's revenues
• D. An effective variance system typically focuses on matters that require management's attention

Answer: D

NEW QUESTION 16

The following statements are about a health plan's capital budgeting process. Select the answer choice containing the correct statement.

• A. Under sensitivity analysis, a health plan ranks all capital project proposals according to expected rates of return and accepts only those proposals with the highest rankings.
• B. A project that has a profitability index of 0.0 has an NPV of zero.
• C. An underlying assumption of capital budgeting is that a health plan should keep its investing decisions separate from its financing decisions.
• D. Under the internal rate of return (IRR) method, if a project's IRR is less than a health plan's weighted average cost of capital (WACC), then the project's benefits should exceed its costs and the health plan should accept the project.

Answer: C

NEW QUESTION 17
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