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AHIP AHM-520 - Health Plan Finance and Risk Management

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Total 215 questions

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:

A.

GAAP 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)

B.

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

C.

GAAP 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

D.

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

The Chamber Health Plan reimburses primary care physicians on a monthly basis by using a simple capitation method. Chamber assumes an annual utilization rate of three visits per year. The FFS rate per office visit is $75, and all plan members are required to make a $10 copayment for each office visit. This information indicates that the capitation rate that Chamber calculates per member per month (PMPM) is equal to:

A.

$6.25

B.

$16.25

C.

$18.75

D.

$21.25

A financial analyst wants to learn the following information about the

Forest health plan for a given financial period:

A.

Forest's beginning-of-period cash balance

B.

Forest's minimum cash balance

C.

The cash needs of Forest during the period

D.

Forest's end-of-period cash balance

From Forest's cash budget, the analyst most likely can obtain information about

E.

A, B, C, and D

F.

A, B, and C only

G.

A and D only

Doctors’ Care is an individual practice association (IPA) under contract to the Jasper Health Plan to provide primary and secondary care to Jasper’s members. Jasper’s capitation payments compensate Doctors’ Care for all physician services and associated diagnostic tests and laboratory work. The physicians at Doctors’ Care, as a group, determine how individual physicians in the group will be remunerated. The type of capitation used by Jasper to compensate Doctors’ Care is known as:

A.

PCP capitation

B.

Partial capitation

C.

Full professional capitation

D.

Specialty capitation

The risk-based capital formula for health plans defines a number of risks that can impact a health plan’s solvency. These categories reflect the fact that the level of risk faced by health plans is significantly impacted by provider reimbursement methods that shift utilization risk to providers. The following statements are about the effect of a health plan transferring utilization risk to providers. Select the answer choice containing the correct statement:

A.

The net effect of using provider reimbursement contracts to transfer risk is that the health plan’s net worth requirement increases.

B.

Once the health plan has transferred utilization risk to its providers, it is relieved of the legal obligation to provide medical services to plan members in the event of the provider’s insolvency.

C.

The greater the amount of risk the health plan transfers to providers, the larger the credit-risk factor becomes in the health plan’s RBC formula.

D.

By decreasing its utilization risk, the health plan increases its underwriting risk.

One true statement about capital and surplus ratios for health plans is that

A.

This ratio is calculated by dividing a health plan's total liabilities by its capital and surplus

B.

A health plan's capital and surplus position would be likely to weaken because of reserve valuation changes that reduce the health plan's reserves

C.

The primary purpose of these ratios is to compare a health plan's obligations to its ability to meet those obligations

D.

An increase in the value of a health plan's capital and surplus ratio most likely indicates that the health plan's financial position has strengthened

The following statements are about state health coverage reinsurance programs.

A.

The reinsurance offered through these programs is administered on a for-profit basis by the federal government.

B.

The purpose of these programs is to reinsure MCOs and other carriers who offer guaranteed healthcare plans to small employers.

C.

These programs must reinsure only an entire small group, not specific individuals within a group.

D.

Any shortfalls in the pool established by these programs are funded by the state government.

A primary reason that a financial analyst would measure the Tapestry health plan's return on assets (ROA) is to determine the

A.

Amount of net income per share of Tapestry's common stock

B.

Rate of return on the book value of the stockholders' investment in Tapestry

C.

Proportion of earnings paid out to Tapestry stockholders in the form of cash dividends

D.

Efficiency of Tapestry's management

The Arista Health Plan is evaluating the following four groups that have applied for group healthcare coverage:

    The Blaise Company, a large private employer

    The Colton County Department of Human Services (DHS)

    A multiple-employer group comprised of four companies

    The Professional Society of Daycare Providers

With respect to the relative degree of risk to Arista represented by these four companies, the company that would most likely expose Arista to the lowest risk is the:

A.

Blaise Company

B.

Colton County DHS

C.

Multiple-employer group

D.

Professional Society of Daycare Providers

The goal of the investment department at the Wayfarer Health Plan is to maximize investment return. The investment department executes investments on time and at a low cost. However, these transactions often result in low returns or risks that are deemed too high for Wayfarer. With regard to effectiveness and efficiency, it is correct to say that Wayfarer’s investment department is:

A.

both effective and efficient

B.

efficient, but not effective

C.

effective, but not efficient

D.

neither effective nor efficient