AHIP AHM-520 FAHM Exam Questions Instant Access

Question 1

The following statements illustrate the use of different rating methods by health plans:

The Dover health plan established rates for small groups by using a rating method which requires that the average premium in each group cannot be more than 120% of the average premium for any other group. Under this method, all members of each group pay the same premium, which is based on the experience of the group.

Under the rating method used by the Rolling Hills health plan, the health plan calculates the ratio of a group's experience to the group's historical manual rate. Rolling Hills then multiplies this ratio by the group's future manual rate. Rolling Hills cannot consider the group's experience in determining premium rates.

From the following answer choices, select the response that correctly indicates the rating methods used by Dover and Rolling Hills.

ADover = modified community rating
Rolling Hills = factored rating

BDover = modified community rating
Rolling Hills = adjusted community rating (ACR)

CDover = community rating by class (CRC)
Rolling Hills = factored rating

DDover = community rating by class (CRC)
Rolling Hills = adjusted community rating (ACR)

Answer : D

Question 2

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

AIndependent auditors, the plan members, the providers, and the

BCompetitors only

CIndependent auditors, the controller, and the providers only

DController and the competitors only

EPlan members and the providers only

Answer : D

Question 3

Experience rating and manual rating are two rating methods that the Cheshire health plan uses to determine its premium rates. One difference between these two methods is that, under experience rating, Cheshire

AUses a purchaser's actual experience to estimate the group's expected experience, whereas, under manual rating, Cheshire uses its own average experience---and sometimes the experience of other plans---to estimate the group's expected experience

Bcan establish rates for groups that have no previous plan experience, whereas, under manual rating, Cheshire cannot establish rates for groups with no previous plan experience

Ccharges each group in the same class the same premium whereas, under manual rating, Cheshire charges lower premiums to groups that have experienced lower utilization rates

Dcan use group demographics to help determine the rate for a block of business, whereas, under manual rating, Cheshire cannot use group demographics when determining the rate for a block of business

Answer : A

Question 4

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

AWhen analyzing budget variances, a health plan's management should pay attention to unfavorable variances only.

BA health plan can reduce the problem of unattainable goals by involving responsibility managers in the preparation of their centers' budgets.

COne 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.

DIn 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

Question 5

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.

The main purpose of Caribou's balance sheet is to

AReveal how Caribou obtained particular assets or liabilities

BShow how much money Caribou has realized from its operations during an accounting period

CMeasure the owners' wealth

DReconcile the cash that Caribou has on hand at the beginning and at the end of an accounting period

Answer : C

Question 6

Because a health plan cannot decline coverage for individuals who are eligible for conversion of group health coverage to individual health coverage, the bulk of the health plan's underwriting for conversion policies is accomplished through health plan design.

ATrue

BFalse

Answer : A

Question 7

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

AHIP Health Plan Finance and Risk Management AHM-520 FAHM Exam Questions