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AHIP AHM-520 Exam
Health Plan Finance and Risk Management (Page 3 )

Updated On: 7-Feb-2026
Page 3 of 44
PDF with 215 Questions

The following paragraph contains an incomplete statement. Select the answer choice containing the term that correctly completes the statement. Health plans face four contingency risks (C-risks): asset risk (C-1), pricing risk (C-2), interest-rate risk (C-3), and general management risk (C-4). Of these risks, ________________ is typically the most important risk that health plans face. This is true because a sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay for future medical costs, and the exact amount of these costs is not known when the healthcare coverage is priced.

  1. Asset risk (C-1)
  2. Pricing risk (C-2)
  3. Interest-rate risk (C-3)
  4. General management risk (C-4)

Answer(s): B



The Health Maintenance Organization (HMO) Model Act, developed by the National Association of Insurance Commissioners (NAIC), represents one approach to developing solvency standards. One drawback to this type of solvency regulation is that it

  1. Uses estimates of future expenditures and premium income to estimate future risk
  2. Fails to adjust the solvency requirement to account for the size of an HMO's premiums and expenditures
  3. Assumes that the amount of premiums an HMO charges always directly corresponds to the level of the risk that the HMO faces
  4. Fails to mandate a minimum level of capital and surplus that an HMO must maintain

Answer(s): C



The NAIC has developed a risk-based capital (RBC) formula for all health plans that accept risk. One true statement about the RBC formula for health plans is that it

  1. is a set of calculations, based on information in a health plan's annual financial report, that yields a target capital requirement for the organization
  2. fails to take into account a health plan's underwriting risk, which is the risk that the premiums the health plan receives will be insufficient to pay for the healthcare services it provides to its plan members
  3. applies to all health plans in the United States
  4. fails to assess the specific level of risk faced by each health plan

Answer(s): A



Provider reimbursement methods that transfer some utilization risk from a health plan to providers affect the health plan's RBC formul

  1. A health plan's use of these reimbursement methods is likely to result in
  2. An increase the health plan's underwriting risk
  3. A decrease the health plan's credit risk
  4. A decrease the health plan's net worth requirement
  5. All of the above

Answer(s): C



Three general strategies that health plans use for controlling types of risk are risk avoidance, risk transfer, and risk acceptance. The following statements are about these strategies. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

  1. Generally, the smaller the likely benefits of accepting a risk, and the lower the costs of avoiding that risk, the greater the likelihood that a health plan will elect to avoid the risk.
  2. A health plan is seldom able to transfer any of the risk that utilization rates will be higher than expected and that its cost of providing healthcare will exceed the revenues it receives.
  3. If a risk is a pure risk from the point of view of a health plan, then the health plan most likely will attempt to avoid the risk.
  4. A health plan would most likely transfer some or all of its utilization risk if it pays a provider a rate that is based on the number of plan enrollees that choose the provider as their primary care provider (PCP).

Answer(s): B



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