AHIP AHM-520 FAHM Exam Practice Test Instant Access

Question 1

For a given healthcare product, the Magnolia Health Plan has a premium of $80 PMPM and a unit variable cost of $30 PMPM. Fixed costs for this product are $30,000 per month. Magnolia can correctly calculate the break-even point for this product to be:

A274 members

B375 members

C600 members

D1,000 members

Answer : C

Question 2

The following information was presented on one of the financial statements prepared by the Rouge Health Plan as of December 31, 1998:

Rouge's current ratio at the end of 1998 was approximately equal to:

A0.84

B1.06

C1.19

D1.31

Answer : C

Question 3

All publicly traded health plans in the United States are required to prepare financial statements for use by their external users in accordance with generally accepted accounting principles (GAAP). In addition, health insurers and health plans that fall under the jurisdiction of state insurance departments are required by law to prepare certain financial statements in accordance with statutory accounting practices (SAP). In a comparison of GAAP to SAP, it is correct to say that:

AGAAP is established and promoted by the National Association of Insurance Commissioners (NAIC), whereas SAP is established and promoted by the Financial Accounting Standards Board (FASB)

BThe going-concern concept is an underlying premise of GAAP, whereas SAP tends to focus on the liquidation value of the MCO or the insurer

CGAAP provides for a single method of valuing all of a health plan's assets, whereas SAP offers the health plan more than one method for valuing its assets

DThe principle of conservatism is fundamental to GAAP, whereas SAP generally is not conservative in nature

Answer : B

Question 4

The following statements are about rate ratios used by health plans. Select the answer choice containing the correct statement:

AWhile rate ratios consider family size, they are most often based on competitive factors, such as the ratios being used by competitors and the ratios that plan sponsors are requesting.

BIf the rate ratio for a couple rate category is 2.0, then the single premium is divided by 2.0 to derive the couple rate category premium.

CA rate ratio can only be increased if the health plan has obtained regulatory approval.

DThe effect of a typical family rate ratio is that a family rate is somewhat higher than it otherwise should be, and the single rate is somewhat lower that it otherwise should be.

Answer : A

Question 5

Residual trend is the difference between total trend and the portion of the total trend caused by changes in provider reimbursement levels.

Consider the following events that could affect an health plan's provider reimbursement levels:

Event 1 --- The disenrollment of a large group with unusually high utilization rates

Event 2 --- The introduction of a new treatment for infertility

Event 3 --- A serious flu epidemic

Event 4 --- A shift in inpatient medical services from obstetrical care to neonatal intensive care

One cause of residual trend is change in intensity, which would be represented by:

AEvent 1

BEvent 2

CEvent 3

DEvent 4

Answer : D

Question 6

The following statements are about 501(c)(9) trusts. Select the answer choice containing the correct statement:

AIn the event a 501(c)(9) trust is terminated, any funds remaining in the trust revert back to the employer.

BIn order to satisfy Internal Revenue Code (IRC) requirements, membership in a 501(c)(9) trust is mandatory for all employees.

CContributions made by an employer to a 501(c)(9) trust are deductible for federal income tax purposes.

DTypically, a 501(c)(9) trust is controlled solely by the employer that established the trust.

Answer : C

Question 7

Advantages to a company that elects to self-fund and to administer all aspects of its healthcare benefit plan include:

AEliminating state premium taxes

BAvoiding state-mandated benefit requirements

CImproving its cash flow position

DAll of the above

Answer : D

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