Breathing AHIP AHM-520 Practice Exam Online

NEW QUESTION 1

The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series of adjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.
Caribou is engaged in an operating activity when it

• A. Purchases or sells assets of the health plan
• B. Disposes of a subsidiary
• C. Repays funds loaned by its creditors
• D. Pays expenses associated with the healthcare services provided to its members

Answer: D

NEW QUESTION 2

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.
For the year in which Longview’s incurred covered costs were $3,000,000, the amount for which Longview will be responsible is:

• A. $2,000,000
• B. $2,600,000
• C. $2,660,000
• D. $3,900,000

Answer: C

NEW QUESTION 3

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 4

The following statements are about a health plan's evaluation of its responsibility centers. Select the answer choice containing the correct statement.

• A. When analyzing budget variances, a health plan's management should pay attention to unfavorable variances only.
• B. A health plan can reduce the problem of unattainable goals by involving responsibility managers in the preparation of their centers' budgets.
• C. One reason that a health plan would use cost-based transfer prices to evaluate the performance of its profit centers and investment centers is because, under this method of setting transfer prices, the selling center has maximum incentive to operate effectively and control costs.
• D. In responsibility accounting, all employees who have any influence over a health plan's department are held equally accountable for the operations and financial outcomes of that department.

Answer: B

NEW QUESTION 5

Doctors’ Care is an individual practice association (IPA) under contract to the Jasper Health Plan to provide primary and secondary care to Jasper’s members. Jasper’s capitation payments compensate Doctors’ Care for all physician services and associated diagnostic tests and laboratory work. The physicians at Doctors’ Care, as a group, determine how individual physicians in the group will be remunerated. The type of capitation used by Jasper to compensate Doctors’ Care is known as:

• A. PCP capitation
• B. Partial capitation
• C. Full professional capitation
• D. Specialty capitation

Answer: C

NEW QUESTION 6

The following examples describe situations that expose an individual or a health plan to either pure risk or speculative risk:
Example 1 — A health plan invested in 1,000 shares of stock issued by a technology company.
Example 2 — An individual could contract a terminal illness.
Example 3 — A health plan purchased a new information system.
Example 4 — A health plan could be held liable for the negligent acts of an employee.
The examples that describe pure risk are

• A. Examples 1 and 2
• B. Examples 1 and 4
• C. Examples 2 and 3
• D. Examples 2 and 4

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

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
The following statements are about Puma's evaluation of these investment centers. Select the answer choice containing the correct statement.

• A. Investment Center Y's RI is greater than Investment Center X's RI.
• B. The ROI for Investment Center X is 16.7%, and the ROI for Investment Center Y is 20.0%.
• C. Because Investment Centers X and Y are different sizes, Puma should not use ROI to compare these investment centers.
• D. According to the evaluation of ROI, Investment Center Y achieves a higher return on its available resources than does Investment Center X.

Answer: D

NEW QUESTION 9

The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series of adjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.
To prepare its cash flow statement, Caribou uses the direct method rather than the indirect method.

• A. True
• B. False

Answer: B

NEW QUESTION 10

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 11

One way that a health plan can protect itself against case stripping is by requiring:

• A. Employees covered by a small group plan to contribute 100% of the cost of the healthcare coverage
• B. The small group to have no more than 10 members
• C. A minimum level of participation in order for a small group to be eligible for healthcare coverage
• D. Its underwriters to consider the characteristics of the employer, but not of the group members, when underwriting the group

Answer: C

NEW QUESTION 12

The following statements are about the Health Insurance Portability and Accountability Act (HIPAA) as it relates to the small group market. Three of these statements are true and one statement is false. Select the answer choice containing the FALSE statement:

• A. A health plan that participates in the small group market is required to issue a contract to any employer that requests healthcare benefits, as long as the employer meets the statutory definition of a small group.
• B. A small group must consist of more than 10 employees in order to be underwritten on a group, rather than an individual, basis.
• C. A health plan is prohibited from canceling a small group’s healthcare coverage because of poor claims experience.
• D. A health plan that participates in the small group market is limited in placing restrictions such as waiting periods and pre-existing conditions exclusions to individuals in high risk categories.

Answer: B

NEW QUESTION 13

Geena Falk is eligible for both Medicare and Medicaid coverage. If Ms. Falk incurs a covered expense, then:

• A. Medicaid will be M
• B. Falk’s primary insurer
• C. Medicare will be M
• D. Falk’s primary insurer
• E. Either Medicare or Medicaid will be M
• F. Falk’s primary insurer depending on her election
• G. Medicare and Medicaid will each be responsible for one-half of M
• H. Falk’s covered expense

Answer: B

NEW QUESTION 14

A health plan can use cost accounting in order to

• A. Determine premium rates for its products
• B. Match the costs incurred during a given accounting period to the income earned in, or attributed to, that same period
• C. Both A and B
• D. A only
• E. B only
• F. Neither A nor B

Answer: A

NEW QUESTION 15

Under the alternative funding method used by the Flair Company, Flair assumes financial responsibility for paying claims up to a specified level and deposits the funds necessary to pay these claims into a bank account that belongs to Flair. However, an insurer, which acts as an agent of Flair, makes the actual payment of claims from this account. When claims exceed the specified level, the insurer pays the balance from its own funds. No state premium tax is levied on the amounts that Flair deposits into this bank account.
From the following answer choices, choose the name of the alternative funding method described.

• A. Retrospective-rating arrangement
• B. Premium-delay arrangement
• C. Reserve-reduction arrangement
• D. Minimum-premium plan

Answer: D

NEW QUESTION 16

Cascade Hospital has negotiated with the McBee Health Plan a straight per-diem rate of $1,000 per day for medical admissions. One of McBee’s plan members was admitted to Cascade for 10 days. Total billed charges equaled $10,000, of which $2,000 were for noncovered items. This information indicates that, for this admission, the amount that McBee was obligated to reimburse Cascade was:

• A. $0
• B. $8,000
• C. $10,000
• D. $12,000

Answer: C

NEW QUESTION 17

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 18

The ability of a health plan to effectively perform the rating and underwriting functions has become critical to the plan's success. In developing its pricing strategy, a health plan has to address the marketplace's ongoing trends and factors, which include

• A. a decreased focus on small to mid-size employer groups
• B. an improvement in the financial performance of health plans
• C. a consolidation of the key players in the health plan industry
• D. a decreased complexity of the products being offered.

Answer: C

NEW QUESTION 19

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 20
......