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Free AHM-520 Exam Braindumps
Health Plan Finance and Risk Management Questions 76–80 (page: 17)

Updated On: 10-Feb-2026
Page 17 of 44
PDF with 215 Questions

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

  1. larger than its assumed underwriting margin, and the plan's actual expense margin was higher than its assumed expense margin
  2. larger than its assumed underwriting margin, but the plan's actual expense margin was lower than its assumed expense margin
  3. smaller than its assumed underwriting margin, but the plan's actual expense margin was higher than its assumed expense margin
  4. smaller than its assumed underwriting margin, and the plan's actual expense margin was lower than its assumed expense margin

Answer(s): B



A product is often described as having a thin margin or a wide margin. With regard to the factors that help determine the size of the margin of a health plan's product, it can correctly be stated that the

  1. greater the risk a health plan assumes in a health plan, the thinner the product margin should be
  2. more that competition acts to force prices down, the wider the product margins tend to become
  3. greater the demand for the product, the thinner the margin for this product tends to become
  4. longer the premium rates are guaranteed to a group, the wider the health plan's margin should be

Answer(s): D



One true statement about a health plan's underwriting margin is that

  1. the only way that the health plan can effectively reduce its exposure to underwriting risk, and therefore adjust its underwriting margin, is to control anti selection
  2. a larger assumed underwriting margin will reduce the price of the health plan's product and will make the plan more competitive
  3. the health plan's purchase of stop-loss insurance has no effect on its underwriting margin because stop-loss insurance can help the health plan control its expenses but not its underwriting risk
  4. both the level of underwriting risk that the health plan assumes in providing benefits and the market competition it encounters most likely directly affect the size of its assumed underwriting margin

Answer(s): D



For each of its products, the Wisteria Health Plan monitors the provider reimbursement trend and the residual trend. One true statement about these trends is that

  1. The provider reimbursement trend probably is more difficult for Wisteria to quantify than is the residual trend
  2. Wisteria's residual trend is the difference between the total trend and the portion of the total trend caused by changes in Wisteria's provider reimbursement levels
  3. The residual trend most likely has more impact on Wisteria's total trend than does the provider reimbursement trend
  4. An example of a residual trend would be a 5% increase in the capitation rate paid to a PCP by Wisteria

Answer(s): B



One true statement about the rate ratios used by a health plan is that the

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

Answer(s): A



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