Download Health Plan Finance and Risk Management.AHM-520.Pass4Success.2026-02-05.112q.tqb

Vendor: AHIP
Exam Code: AHM-520
Exam Name: Health Plan Finance and Risk Management
Date: Feb 05, 2026
File Size: 843 KB
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Demo Questions

Question 1
In order to print all of its forms in-house, the Prism health plan is considering the purchase of 10 new printers at a total cost of $30,000. Prism estimates that the proposed printers have a useful life of 5 years. Under its current system, Prism spends $10,000 a year to have forms printed by a local printing company. Assume that Prism selects a 15% discount rate based on its weighted-average costs of capital. The cash inflows for each year, discounted to their present value, are shown in the following chart:
Prism will use both the payback method and the discounted payback method to analyze the worthiness of this potential capital investment. Prism's decision rule is to accept all proposed capital projects that have payback periods of four years or less.
Now assume that Prism decides to use the net present value (NPV) method to evaluate this potential investment's worthiness and that Prism will accept the project if the project's NPV is greater than $4,000. Using the NPV method, Prism would correctly conclude that this project should be
  1. Rejected because its NPV is $3,520
  2. Accepted because its NPV is $5,028
  3. Accepted because its NPV is $16,480
  4. Accepted because its NPV is $23,520
Correct answer: A
Question 2
The core of a health plan's strategic financial plan is the development of its pro forma financial statements. The following statements are about these pro forma financial statements. Select the answer choice containing the correct statement.
  1. A health plan's pro forma financial statements forecast what the plan's financial condition will be at the end of an accounting period, without regard to whether the health plan achieves its objectives.
  2. Forecasting the balance sheet is more critical to the health plan than forecasting either the cash flow statement or the income statement, because the balance sheet drives the development of the other two statements.
  3. In order to avoid allowing the desired financial results to drive the assumptions used in developing the pro forma income statement, a health plan should avoid linking these assumptions to the health plan's overall strategic plan.
  4. A health plan can use its pro forma cash flow statement to calculate the net present value of the health plan's strategic plan.
Correct answer: D
Question 3
Mandated benefit laws are state or federal laws that require health plans to arrange for the financing and delivery of particular benefits. Within a market, the implementation of mandated benefit laws is likely to cause __________.
  1. A reduction in the number of self-funded healthcare plans
  2. An increase in the cost to the health plans
  3. A reduction in the size of the provider panels of health plans
  4. A reduction in the uniformity among the healthcare plans of competing health plans
Correct answer: B
Question 4
The ability of a health plan to effectively perform the rating and underwriting functions has become critical to the plan's success. In developing its pricing strategy, a health plan has to address the marketplace's ongoing trends and factors, which include
  1. a decreased focus on small to mid-size employer groups
  2. an improvement in the financial performance of health plans
  3. a consolidation of the key players in the health plan industry
  4. a decreased complexity of the products being offered.
Correct answer: C
Question 5
The theory of vicarious liability or ostensible agency can expose a health plan to the risk that it could be held liable for the acts of independent contractors. Factors that may give rise to the assumption that an agency relationship exists between a health plan and its independent contractors include:
  1. Requiring the providers to supply their own office space
  2. Employing nurses and other healthcare professionals to support the physician providers
  3. Requiring providers to maintain their own medical records
  4. All of the above
Correct answer: B
Question 6
Advantages to a company that elects to self-fund and to administer all aspects of its healthcare benefit plan include:
  1. Eliminating state premium taxes
  2. Avoiding state-mandated benefit requirements
  3. Improving its cash flow position
  4. All of the above
Correct answer: D
Question 7
The Longview Hospital contracted with the Carlyle Health Plan to provide inpatient services to Carlyle's enrolled members. Carlyle provides Longview with a type of stop-loss coverage that protects, on a claims incurred and paid basis, against losses arising from significantly higher than anticipated utilization rates among Carlyle's covered population. The stop-loss coverage specifies an attachment point of 130% of Longview's projected $2,000,000 costs of treating Carlyle plan members and requires Longview to pay 15% of any costs above the attachment point. In a given plan year, Longview incurred covered costs totaling $3,000,000.
With regard to the type of stop-loss coverage provided to Longview by Carlyle and to whether this coverage is classified as insurance or reinsurance, the risk transfer approach used in this situation can be described as:
  1. aggregate stop-loss reinsurance
  2. aggregate stop-loss insurance
  3. specific stop-loss reinsurance
  4. specific stop-loss insurance
Correct answer: C
Question 8
If the total asset turnover ratio for the Fjord health plan is 1.08 and the total asset turnover ratio for the Grove health plan is 1.35, then a financial analyst could correctly infer that Fjord has used its assets more effectively than has Grove.
  1. True
  2. False
Correct answer: B
Question 9
In the following paragraph, a sentence contains two pairs of words enclosed in parentheses. Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have selected.
The Igloo health plan recognizes the receipt of its premium income during the accounting period in which the income is earned, regardless of when cash changes hands. However, Igloo recognizes its expenses when it earns the revenues related to those expenses, regardless of when it receives cash for the revenues earned. This information indicates that the (realization/capitalization) principle governs Igloo's revenue recognition, whereas the (matching/initial-recording) principle governs its expense recognition.
  1. realization / matching
  2. realization / initial-recording
  3. capitalization / matching
  4. capitalization / initial-recording
Correct answer: A
Question 10
The Danube Health Plan's planning activities include tactical planning, which is primarily concerned with
  1. Establishing standards of performance for Danube's cost centers
  2. Forecasting Danube's premium income
  3. Planning for the short-term, day-to-day activities of Danube
  4. Identifying the markets in which Danube should concentrate its marketing efforts
Correct answer: C
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