FREE AHIP (Health Plan Finance and Risk Management) Questions and Answers

Question 1

A for-profit company runs the Caribou health plan. Balance sheets, income statements, and cash flow statements are all parts of the financial statements that Caribou creates. Caribou starts with the net income amount on its income statement and then adjusts this figure to operating cash flows to create its cash flow statement. The health plan's operating, investing, and financing operations all impact Caribou's cash flow.

The basic formula for Caribou's Income statement is

Accepted Answer

Revenues – Expenses = Net Income (Net Loss)

Answer

Assets = Liabilities + Owners' Equity

Answer

Cash Inflows – Cash Outflows = Net Cash Inflow (Outflow)

Answer

Sources of Funds – Uses of Funds = Net Change in Cash

Question 2

An actuary for the Noble Health Plan noted that its real administrative costs were greater than its projected administrative costs and that the actual morbidity was lower than its assumed morbidity. Noble's real underwriting margin, in this case, was

Accepted Answer

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

Answer

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

Answer

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

Answer

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

Question 3

Two word pairs in parenthesis are used in the statement below. Find the word in each combination that completes the sentence appropriately. Choose the response option that includes the two words you've chosen. The underwriting risk and affiliate risk of a health plan are most likely (increased/reduced) by purchasing stop-loss coverage.

Accepted Answer

reduces / increases

Answer

reduces / reduces

Answer

increases / increases

Answer

increases / reduces

Question 4

A stop-loss contract may provide that either the paid claims method or the incurred claims method will be used to resolve claims. Employees at The Concord Company have access to a self-funded health plan for their medical care. A Concord employee covered by this plan had surgery on March 17, and because the procedure was so expensive, Concord's particular stop-loss coverage was triggered. On April 10, Concord covered the costs of the associated medical care. The stop-loss contract's term expired on April 1. According to this information, the stop-loss carrier is liable for covering a portion of the surgery's expense under

Accepted Answer

the incurred claims method but not the paid claims method

Answer

both the paid claims method and the incurred claims method

Answer

the paid claims method but not the incurred claims method

Answer

neither the paid claims method nor the incurred claims method

Question 5

The underwriting margin of a health plan can be accurately stated as follows:

Accepted Answer

The health plan's projected underwriting margin is likely directly impacted by both the amount of risk it takes on when delivering benefits and the quantity of competition it faces in the market.

Answer

Controlling anti selection is the only way the health plan can successfully decrease its exposure to underwriting risk and thus change its underwriting margin.

Answer

The health plan's product will cost less and become more affordable with a higher assumed underwriting margin, increasing the plan's competitiveness.

Answer

Because stop-loss insurance can help the health plan control its spending but not its underwriting risk, it has no impact on the health plan's underwriting margin.

Question 6

The health care plan for its employees is self-funded by the Kayak Company. This plan is an illustration of a general asset plan, a subtype of self-funded plan. This strategy is entirely self-funded, which suggests that

Accepted Answer

The plan is exempt from the state laws and regulations that apply to health insurance policies

Answer

The plan most likely is exempt from ERISA requirements concerning the limits on benefit discrimination for classes of employees

Answer

The plan has no funding vehicle

Answer

Kayak passes to its employees the financial risk of providing healthcare coverage

Question 7

When it comes to going-concern accounting under GAAP, the Ascot health plan's accountants probably

Accepted Answer

Assume that Ascot is not about to be liquidated, unless there is evidence to the contrary

Answer

Assume that Ascot will pay its liabilities immediately or in full during the current accounting period

Answer

Defer certain costs that Ascot has incurred, unless these costs contribute to the health plan's future earnings

Answer

Value Ascot's assets more conservatively than they would under SAP