AHM-520 Free Practice Test

- (Topic 1)
The following paragraph contains an incomplete statement. Select the answer choice containing the term that correctly completes the statement. Health plans face four contingency risks (C-risks): asset risk (C-1), pricing risk (C-2), interest-rate risk (C-3), and general management risk (C-4). Of these risks, _______ is typically the most important risk that health plans face. This is true because a sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay for future medical costs, and the exact amount of these costs is not known when the healthcare coverage is priced.

1. A. Asset risk (C-1)
2. B. Pricing risk (C-2)
3. C. Interest-rate risk (C-3)
4. D. General management risk (C-4)

Correct Answer: B

- (Topic 1)
One true statement about the rate ratios used by a health plan is that the

1. A. End result of a typical family rate ratio is that the health plan's family rate is subsidized by its single premium rate
2. B. health plan cannot arbitrarily increase or decrease its rate ratio for a rate category
3. C. rate ratios used by the health plan most likely have been established by government regulations
4. D. health plan should determine its rate ratios by considering family size alone rather than competitive factors such as the ratios that competitors are using

Correct Answer: A

- (Topic 2)
The medical loss ratio (MLR) for the Peacock health plan is 80%. Peacock's expense ratio is 16%.
Peacock's MLR and its expense ratio indicate that Peacock

1. A. Has a 4% potential profit margin
2. B. Has a combined ratio of 64%
3. C. Must increase its premium income in order to remain in business
4. D. Must rely on investment income in order to avoid financial losses

Correct Answer: A

- (Topic 1)
A health plan that capitates a provider group typically provides or offers to provide stop-loss coverage to that provider group.

1. A. True
2. B. False

Correct Answer: A

- (Topic 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:

1. A. 0.84
2. B. 1.06
3. C. 1.19
4. D. 1.31

Correct Answer: C