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Ace the AHIP AHM-520 Exam: Ultimate Preparation Guide

Questions 21

Analysts will use the capital asset pricing model (CAPM) to determine the cost of equity for the Maxim health plan, a for-profit plan. According to the CAPM, Maxim's cost of equity is equal to

Options:

A.

The average interest rate that Maxim is paying to debt holders, adjusted for a tax shield

B.

Maxim's risk-free rate minus its beta

C.

Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of systematic (non diversifiable) risk

D.

Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of nonsystematic (diversifiable) risk

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Questions 22

If the operational budget prepared by the Satilla health plan is typical of most operational budgets, then

Options:

A.

Its purpose is to track Satilla's operations and short-term profitability

B.

The key information source for this operational budget is Satilla's external environment

C.

The time frame for this operational budget is three to five years

D.

Its focus is on the threats that Satilla faces from its external environment

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Questions 23

The risk-based capital formula for health plans defines a number of risks that can impact a health plan’s solvency. These categories reflect the fact that the level of risk faced by health plans is significantly impacted by provider reimbursement methods that shift utilization risk to providers. The following statements are about the effect of a health plan transferring utilization risk to providers. Select the answer choice containing the correct statement:

Options:

A.

The net effect of using provider reimbursement contracts to transfer risk is that the health plan’s net worth requirement increases.

B.

Once the health plan has transferred utilization risk to its providers, it is relieved of the legal obligation to provide medical services to plan members in the event of the provider’s insolvency.

C.

The greater the amount of risk the health plan transfers to providers, the larger the credit-risk factor becomes in the health plan’s RBC formula.

D.

By decreasing its utilization risk, the health plan increases its underwriting risk.

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Questions 24

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

Options:

A.

Examples 1 and 2

B.

Examples 1 and 4

C.

Examples 2 and 3

D.

Examples 2 and 4

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Questions 25

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:

Options:

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

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Questions 26

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:

Options:

A.

a 3% favorable deviation

B.

a 3% adverse deviation

C.

an 11% favorable deviation

D.

an 11% adverse deviation

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Questions 27

Assume that the Lambda, Mesa, and Novella health plans are equal in every way except that the health plans have obtained equal amounts of net cash inflows from different sources, as shown below:

HealthPlan Source

LambdaFinancing activities

Mesa Investing activities

NovellaOperating activities

From the following answer choices, select the response which indicates the health plan that would most likely be the most attractive to a potential plan sponsor, to a potential creditor, and to a potential investor.

Options:

A.

Potential Plan Sponsor = Lambda

Potential Creditor = Mesa

Potential Investor = Novella

B.

Potential Plan Sponsor = Lambda

Potential Creditor = Novella

Potential Investor = Mesa

C.

Potential Plan Sponsor = Novella

Potential Creditor = Lambda

Potential Investor = Mesa

D.

Potential Plan Sponsor = Novella

Potential Creditor = Novella

Potential Investor = Novella

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Questions 28

A health plan can use a SWOT (strengths, weaknesses, opportunities, and threats) analysis to analyze its relationships with the major providers in each market in which it conducts business.

Options:

A.

True

B.

False

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Questions 29

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:

Options:

A.

PCP capitation

B.

Partial capitation

C.

Full professional capitation

D.

Specialty capitation

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Questions 30

Companies typically produce three types of budgets: operational budgets, cash budgets, and capital budgets. The following statements are about operational budgets. Select the answer choice containing the correct statement.

Options:

A.

Expense budgets, a type of operational budget, typically describe fixed expenses rather than variable expenses.

B.

Operational budgets can only show information by department or by line of business.

C.

Operational budgets begin with a forecast of sales revenue and investment income.

D.

Revenue budgets, a type of operational budget, indicate the amount of income from operations that a company received from the previous budget period

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Exam Code: AHM-520
Exam Name: Health Plan Finance and Risk Management
Last Update: Jun 23, 2024
Questions: 215

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