AHM-520 Free Practice Test

- (Topic 1)
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

1. A. subject to the claims of Kayak's creditors
2. B. available to Kayak solely for the purpose of paying for the healthcare expenses of Kayak's covered employees
3. C. placed in a trust fund established by Kayak to pay for the health plan
4. D. considered separate from Kayak's current operating funds

Correct Answer: A

- (Topic 2)
A health plan most likely would use benchmarking in order to

1. A. Measure its performance and practices against those of other companies to help identify those practices that will lead to superior performance in a variety of financial and non- financial areas
2. B. Calculate the percentage changes in its financial statement items over several consecutive accounting periods
3. C. Determine both the direction and velocity of trends in its financial statements
4. D. Display only percentage relationships in its financial statements

Correct Answer: A

- (Topic 1)
Three general strategies that health plans use for controlling types of risk are risk avoidance, risk transfer, and risk acceptance. The following statements are about these strategies. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

1. A. Generally, the smaller the likely benefits of accepting a risk, and the lower the costs of avoiding that risk, the greater the likelihood that a health plan will elect to avoid the risk.
2. B. A health plan is seldom able to transfer any of the risk that utilization rates will be higher than expected and that its cost of providing healthcare will exceed the revenues it receives.
3. C. If a risk is a pure risk from the point of view of a health plan, then the health plan most likely will attempt to avoid the risk.
4. D. A health plan would most likely transfer some or all of its utilization risk if it pays a provider a rate that is based on the number of plan enrollees that choose the provider as their primary care provider (PCP).

Correct Answer: B

- (Topic 2)
The theory of vicarious liability or ostensible agency can expose a health plan to the risk that it could be held liable for the acts of independent contractors. Factors that may give rise to the assumption that an agency relationship exists between a health plan and its independent contractors include:

1. A. Requiring the providers to supply their own office space
2. B. Employing nurses and other healthcare professionals to support the physician providers
3. C. Requiring providers to maintain their own medical records
4. D. All of the above

Correct Answer: B

- (Topic 2)
Contingency risks, or C-risks, are general categories of risk that have a direct bearing on both the cash flow and solvency of a health plan. One of these C-risks, pricing risk (C-2 risk), is typically the most important risk a health plan faces. Pricing risk is crucial to a health plan’s solvency because:

1. A. A sizable portion of any health plan’s assets are held in long-term investments and anyshift in interest rates can significantly impact a health plan’s ability to pay medical benefits
2. B. A health plan relies heavily on the sound judgment of its management, and poor management decisions can result in financial losses for the health plan
3. C. A situation in which actual expenses exceed the amounts budgeted for those expenses may result in the health plan failing to retain assets sufficient to cover current obligations
4. D. A sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay future medical costs, and the exact amounts of those costs are not known at the time a product’s premium is established

Correct Answer: D