AHM-520 Free Practice Test

- (Topic 1)
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

1. A. $2,080,000
2. B. $2,300,000
3. C. $2,350,000
4. D. $2,380,000

Correct Answer: C

- (Topic 2)
Advantages to a company that elects to self-fund and to administer all aspects of its healthcare benefit plan include:

1. A. Eliminating state premium taxes
2. B. Avoiding state-mandated benefit requirements
3. C. Improving its cash flow position
4. D. All of the above

Correct Answer: D

- (Topic 2)
The Proform Health Plan uses agents to market its small group business. Proform capitalizes the commission expense relating to this line of business by spreading the commissions over thepremium-paying period of the healthcare coverage. This approach to expense recognition is known as:

1. A. Systematic and rational allocation
2. B. Matching principle
3. C. Immediate recognition
4. D. Associating cause and effect

Correct Answer: D

- (Topic 1)
Reconciliation is the process by which a health plan assesses providers' performance relative to contractual terms and reimbursement.
With regard to this process, it can correctly be stated that

1. A. Areconciliation typically includes payment to the providers of any withholds or bonuses due to them
2. B. Ahealth plan typically should conduct a reconciliation immediately after the evaluation period has ended
3. C. Most agreements between health plans and providers require reconciliations to be performed quarterly
4. D. Ahealth plan typically should not conduct reconciliation for a provider until the plan has received all claims or other documentation of services that the physician provided during the evaluation period

Correct Answer: A

- (Topic 2)
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%.
The following statements are about Puma's evaluation of these investment centers. Select the answer choice containing the correct statement.

1. A. Investment Center Y's RI is greater than Investment Center X's RI.
2. B. The ROI for Investment Center X is 16.7%, and the ROI for Investment Center Y is 20.0%.
3. C. Because Investment Centers X and Y are different sizes, Puma should not use ROI to compare these investment centers.
4. D. According to the evaluation of ROI, Investment Center Y achieves a higher return on its available resources than does Investment Center X.

Correct Answer: D