Free AHM-520: Health Plan Finance and Risk Management Exam Questions and Answers

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.

• AA. Dover = modified community rating Rolling Hills = factored rating
• BB. Dover = modified community rating Rolling Hills = adjusted community rating (ACR)
• CC. Dover = community rating by class (CRC) Rolling Hills = factored rating
• DD. Dover = community rating by class (CRC) Rolling Hills = adjusted community rating (ACR)

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

• AA. The federal government provides none of the funding for state Medicaid programs
• BB. 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
• CC. 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)
• DD. States are prohibited from carving out specific services from the capitation rate that health plans receive for providing Medicaid services

One true statement about a type of capitation known as a percent-of-premium arrangement is that this arrangement

• AA. Is the most common type of capitation
• BB. Is less attractive to providers when the arrangement sets provisions to limit risk
• CC. Sets provider reimbursement at a specific dollar amount per plan member
• DD. Transfers some of the risk associated with underwriting and rating from a health plan to a provider

The Brookhaven Company is the parent company of two subsidiaries: an HMO and an insurance company. The headings on Brookhaven's financial statements read "Consolidated Financial Statements of Brookhaven Company." From the following answer choices, select the response that correctly indicates, under the entity concept, whether the HMO and the insurance company are accounted for as separate entities and whether the subsidiaries' financial results would be included in Brookhaven's consolidated financial statements.

• AA. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = yes
• BB. Accounted for as Separate Entities? = yes Results Included in Brookhaven's Statements? = no
• CC. Accounted for as Separate Entities? = no Results Included in Brookhaven's Statements? = yes
• DD. Accounted for as Separate Entities? = no Results Included in Brookhaven's Statements? = no

If the Ascot health plan's accountants follow the going-concern concept under GAAP, then these accountants most likely

• AA. Assume that Ascot will pay its liabilities immediately or in full during the current accounting period
• BB. Defer certain costs that Ascot has incurred, unless these costs contribute to the health plan's future earnings
• CC. Assume that Ascot is not about to be liquidated, unless there is evidence to the contrary
• DD. Value Ascot's assets more conservatively than they would under SAP

One true statement about a health plan's underwriting margin is that

• AA. the only way that the health plan can effectively reduce its exposure to underwriting risk, and therefore adjust its underwriting margin, is to control anti selection
• BB. a larger assumed underwriting margin will reduce the price of the health plan's product and will make the plan more competitive
• CC. the health plan's purchase of stop-loss insurance has no effect on its underwriting margin because stop-loss insurance can help the health plan control its expenses but not its underwriting risk
• DD. both the level of underwriting risk that the health plan assumes in providing benefits and the market competition it encounters most likely directly affect the size of its assumed underwriting margin

This concept, which holds that a company should record the amounts associated with its business transactions in monetary terms, assumes that the value of money is stable over time. This concept provides objectivity and reliability, although its relevance may fluctuate. From the following answer choices, choose the name of the accounting concept that matches the description.

• AA. Measuring-unit concept
• BB. Full-disclosure concept
• CC. Cost concept
• DD. Time-period concept

With regard to capitation arrangements for hospitals, it can correctly be stated that

• AA. The most common reimbursement method for hospitals is professional services capitation
• BB. Most jurisdictions prohibit hospitals and physicians from joining together to receive global capitations that cover institutional services provided by the hospitals
• CC. A health plan typically can capitate a hospital for outpatient laboratory and X-ray services only if the health plan also capitates the hospital for inpatient care
• DD. Many hospitals have formed physician hospital organizations (PHOs), hospital systems, or integrated delivery systems (IDSs) that can accept global capitation payments from health plans

A key factor that distinguishes the various types of health plans is the type and amount of risk that a health plan assumes with respect to the delivery and financing of healthcare benefits. An example of a type of health plan that typically assumes the financial risk of delivering and financing healthcare benefits is a

• AA. Third party administrator (TPA)
• BB. Utilization review organization (URO)
• CC. Preferred provider organization (PPO)
• DD. Pharmacy benefit management (PBM) plan

Provider reimbursement methods that transfer some utilization risk from a health plan to providers affect the health plan's RBC formula. A health plan's use of these reimbursement methods is likely to result in

• AA. An increase the health plan's underwriting risk
• BB. A decrease the health plan's credit risk
• CC. A decrease the health plan's net worth requirement
• DD. All of the above