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Free AHM-520 Exam Braindumps (page: 22)

Page 21 of 55
PDF with 215 Questions

The following statements indicate the pricing policies of two health plans that operate in a particular market:
The Accent Health Plan consistently underprices its product The Bolton Health Plan uses extremely strict underwriting practices for the small groups to which it markets its plan

From the following answer choices, select the response that correctly indicates the most likely market effects of the pricing policies used by Accent and Bolton.

  1. Accent = unprofitable business
    Bolton = high acquisition rate
  2. Accent = unprofitable business
    Bolton = low acquisition rate
  3. Accent = high profits
    Bolton = high acquisition rate
  4. Accent = high profits
    Bolton = low acquisition rate

Answer(s): B



The following statements are about a health plan's pricing of a preferred provider organization (PPO) plan. Three of the statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

  1. Typically, the first step in pricing a PPO is to develop a base indemnity claims cost, which results from adjusting the indemnity plan as though the entire eligible group of employees is enrolled in the indemnity plan.
  2. To develop the expected claims costs for the in-network PPO plan, the health plan's actuaries adjust the base indemnity claims costs to reflect pertinent characteristics of the plan, including the specific network plan design and provider discount arrangements.
  3. One difficulty in pricing a PPO is that the health plan's actuaries have no method of estimating which employees would be likely to select which provider groups.
  4. After the health plan's actuaries use risk adjustment factors to adjust the existing claims costs for selection issues, the actuaries weight the in network and out-of-network costs to arrive at a composite claims cost for the PPO plan.

Answer(s): C



Two sets of financial accounting standards are generally accepted accounting principles (GAAP) and statutory accounting practices (SAP). One true statement about these financial accounting standards is that

  1. State laws and regulations in the United States govern the implementation of GAAP, but not the implementation of SAP
  2. Health plans must prepare their financial statements for their external users according to applicable laws, regulations, and accounting principles, particularly GAAP
  3. GAAP specifically focuses on the requirements of insurance regulators and policyholder interests
  4. The Financial Accounting Standards Board (FASB) is a private organization whose purpose is to establish and promote SAP in the United States

Answer(s): B



The Brookhaven Company is the parent company of two subsidiaries: an HMO and an insurance company. The headings on Brookhaven's financial statements read "Consolidated Financial Statements of Brookhaven Company." From the following answer choices, select the response that correctly indicates, under the entity concept, whether the HMO and the insurance company are accounted for as separate entities and whether the subsidiaries' financial results would be included in Brookhaven's consolidated financial statements.

  1. Accounted for as Separate Entities? = yes
    Results Included in Brookhaven's Statements? = yes
  2. Accounted for as Separate Entities? = yes
    Results Included in Brookhaven's Statements? = no
  3. Accounted for as Separate Entities? = no
    Results Included in Brookhaven's Statements? = yes
  4. Accounted for as Separate Entities? = no
    Results Included in Brookhaven's Statements? = no

Answer(s): A






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