Free AHIP AHM-520 Exam Questions

The Fairway health plan is a for-profit health plan that issues stock. The following data was taken from Fairway's financial statements:

Current assets.....$5,000,000 -

Total assets.....$6,000,000 -

Current liabilities.....$2,500,000

Total liabilities.....$3,600,000

Stockholders' equity.....$2,400,000

Fairway's total revenues for the previous financial period were $7,200,000, and its net income for that period was $180,000.

Assume that the healthcare industry average for the debt-to-equity ratio is 0.90.

The following statement(s) can correctly be made about Fairway's debt to equity ratio:

The purest form of a self-funded benefit plan is one in which the employer pays benefits from current revenue, administers all aspects of the plan, and bears the risk that actual benefit payments will exceed the expected amount of payments. A decision to use this kind of self-funding is generally considered most desirable when certain conditions are present.

These conditions most likely include that the benefit plan:

The following statements illustrate the use of different rating methods by health plans: The Dover health plan established rates for small groups by using a rating method which requires that the average premium in each group cannot be more than 120% of the average premium for any other group. Under this method, all members of each group pay the same premium, which is based on the experience of the group.

Under the rating method used by the Rolling Hills health plan, the health plan calculates the ratio of a group's experience to the group's historical manual rate. Rolling Hills then multiplies this ratio by the group's future manual rate. Rolling Hills cannot consider the group's experience in determining premium rates. From the following answer choices, select the response that correctly indicates the rating methods used by Dover and Rolling Hills.

Under GAAP, three approaches to expense recognition are generally allowed: associating cause and effect, systematic and rational allocation, and immediate recognition.

A health plan most likely would use the approach of systematic and rational allocation in order to:

The Fairway health plan is a for-profit health plan that issues stock. The following data was taken from Fairway's financial statements:

Current assets.....$5,000,000 -

Total assets.....$6,000,000 -

Current liabilities.....$2,500,000

Total liabilities.....$3,600,000

Stockholders' equity.....$2,400,000

Fairway's total revenues for the previous financial period were $7,200,000, and its net income for that period was $180,000.

For the previous financial period, Fairway's net profit margin was: