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AHM-520 Exam Dumps : Health Plan Finance and Risk Management

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Health Plan Finance and Risk Management Questions and Answers

Question 1

An actuary for the Noble Health Plan observed that the plan's actual morbidity was lower than its assumed morbidity and that the plan's actual administrative expenses were higher than its assumed administrative expenses. In this situation, Noble's actual underwriting margin was

Options:

A.

larger than its assumed underwriting margin, and the plan's actual expense margin was higher than its assumed expense margin

B.

larger than its assumed underwriting margin, but the plan's actual expense margin was lower than its assumed expense margin

C.

smaller than its assumed underwriting margin, but the plan's actual expense margin was higher than its assumed expense margin

D.

smaller than its assumed underwriting margin, and the plan's actual expense margin was lower than its assumed expense margin

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Question 2

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:

Options:

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

Question 3

The Rathbone Company has contracted with the Jarvin Insurance Company to provide healthcare benefits to its employees. Under this contract, Rathbone assumes financial responsibility for paying 80% of its estimated annual claims and for depositing the funds necessary to pay these claims into a bank account. Although Rathbone owns the bank account, Jarvin, acting as Rathbone’s agent, makes the actual claims payments from this account. Claims in excess of Rathbone’s contracted percentage are paid by Jarvin. Rathbone pays to Jarvin a premium for administering the entire plan and bearing the costs of claims in excess of Rathbone’s obligation. This premium is substantially lower than would be charged if Jarvin were providing healthcare coverage under a traditional fully insured group plan. Jarvin is required to pay premium taxes only on the premiums it receives from Rathbone. This information indicates that the type of alternative funding method used by Rathbone is known as a:

Options:

A.

Premium-delay arrangement

B.

Reserve-reduction arrangement

C.

Minimum-premium plan

D.

Retrospective-rating arrangement