How Many Questions Of AHM-520 Exam Engine

NEW QUESTION 1

A cost for which a benefit is forfeited in choosing one decision alternative over another alternative is known as

• A. A marginal unit cost
• B. An opportunity cost
• C. An incremental cost
• D. A differential cost

Answer: B

NEW QUESTION 2

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 3

Health plans have access to a variety of funding sources depending on whether they are operated as for-profit or not-for-profit organizations. The Verde Health Plan is a for-profit health plan and the Noir Health Plan is a not-for-profit health plan. From the answer choices below, select the response that correctly identifies whether funds from debt markets and equity markets are available to Verde and Noir:

• A. Funds from Debt Markets: available to Verde and Noir Funds from Equity Markets: available to Verde and Noir
• B. Funds from Debt Markets: available to Verde and Noir Funds from Equity Markets: available to Verde only
• C. Funds from Debt Markets: available to Verde only Funds from Equity Markets: available to Noir only
• D. Funds from Debt Markets: available to Noir only Funds from Equity Markets: available to Verde only

Answer: B

NEW QUESTION 4

A financial analyst wants to learn the following information about the Forest health plan for a given financial period:

• A. Forest's beginning-of-period cash balance
• B. Forest's minimum cash balance
• C. The cash needs of Forest during the period
• D. Forest's end-of-period cash balanceFrom Forest's cash budget, the analyst most likely can obtain information about
• E. A, B, C, and D
• F. A, B, and C only
• G. A and D only
• H. B and C only

Answer: A

NEW QUESTION 5

The following statements are about the capital budgeting technique known as the payback method. Select the answer choice containing the correct statement:

• A. The main benefit of the payback method is that it is simple to use.
• B. The payback method measures the profitability of a given capital project.
• C. The payback method considers the time value of money.
• D. The payback method states a proposed project’s cash flow in terms of present value for the life of the entire project.

Answer: A

NEW QUESTION 6

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 7

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%.
One likely way in which Investment Center X or Y could effectively increase its ROI is by

• A. Focusing only on increasing its total revenues
• B. Increasing its controllable investments
• C. Increasing total revenues, accompanied by a proportionate increase in operating income
• D. Increasing expenses in order to increase operating income

Answer: C

NEW QUESTION 8

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

• A. Uses 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
• B. can 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
• C. charges 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
• D. can 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

NEW QUESTION 9

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:

• 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

Answer: A

NEW QUESTION 10

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.

• A. Dover = modified community rating Rolling Hills = factored rating
• B. Dover = modified community rating Rolling Hills = adjusted community rating (ACR)
• C. Dover = community rating by class (CRC) Rolling Hills = factored rating
• D. Dover = community rating by class (CRC) Rolling Hills = adjusted community rating (ACR)

Answer: D

NEW QUESTION 11

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 12

Over time, health plans and their underwriters have gathered increasingly reliable information about the morbidity experience of small groups.
Generally, in comparison to large groups, small groups tend to

• A. Have more frequent and larger claims fluctuations
• B. Generate lower administrative expenses as a percentage of the total premium amount the group pays
• C. More closely follow actuarial predictions regarding morbidity rates
• D. All of the above

Answer: A

NEW QUESTION 13

The following statements are about various reimbursement arrangements that health plans have with hospitals. Select the answer choice containing the correct statement.

• A. A sliding scale per-diem charges arrangement differs from a sliding scale discount on charges arrangement in that only a sliding scale per-diem charges arrangement is based on total volume of admissions and outpatient procedures.
• B. Under a typical reimbursement arrangement that is based on diagnosisrelated groups (DRGs), if the payment amount is fixed on the basis of diagnosis, then any reduction in costs resulting from a reduction in days will go to the health plan rather than to the hospital.
• C. A negotiated straight per-diem charge requires payment of a single charge for a day in the hospital, regardless of any actual charges or costs incurred during the hospital stay.
• D. A straight discount on charges arrangement is the most common reimbursement method in markets with high levels of health plans.

Answer: C

NEW QUESTION 14

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 15

Variance analysis is the study of the difference between expected results and actual results. Variances can be positive or negative. A positive variance is typically considered:

• A. favorable for both expenses and revenues
• B. favorable for expenses, but unfavorable for revenues
• C. favorable for revenues, but unfavorable for expenses
• D. unfavorable for both expenses and revenues

Answer: C

NEW QUESTION 16

One true statement about capital and surplus ratios for health plans is that

• A. This ratio is calculated by dividing a health plan's total liabilities by its capital and surplus
• B. A health plan's capital and surplus position would be likely to weaken because of reserve valuation changes that reduce the health plan's reserves
• C. The primary purpose of these ratios is to compare a health plan's obligations to its ability to meet those obligations
• D. An increase in the value of a health plan's capital and surplus ratio most likely indicates that the health plan's financial position has strengthened

Answer: D

NEW QUESTION 17
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