AHM-520 AHIP Exam Questions and Free Practice Test

Question 49

- (Topic 1)
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.

A. Dover = modified community rating Rolling Hills = factored rating

B. Dover = modified community rating Rolling Hills = adjusted community rating (ACR)

C. Dover = community rating by class (CRC) Rolling Hills = factored rating

D. Dover = community rating by class (CRC) Rolling Hills = adjusted community rating (ACR)

Correct Answer:D

Question 50

- (Topic 2)
An investor deposited $1,000 in an interest-bearing account today. That sum will accumulate to $1,200 two years from now. One true statement about this transaction is that:

A. The process by which the original $1,000 deposit grows to $1,200 is known as compounding

B. $1,200 is the present value of the $1,000 deposit

C. The $200 increase in the deposit’s value is its incremental cash flow

D. The $200 difference between the original deposit and the accumulated value of the deposit is known as the deposit’s discount

Correct Answer:A

Question 51

- (Topic 2)
Analysts will use the capital asset pricing model (CAPM) to determine the cost of equity for the Maxim health plan, a for-profit plan. According to the CAPM, Maxim's cost of equity is equal to

A. The average interest rate that Maxim is paying to debt holders, adjusted for a tax shield

B. Maxim's risk-free rate minus its beta

C. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of systematic (non diversifiable) risk

D. Maxim's risk-free rate plus an adjustment that considers the market rate, at a given level of nonsystematic (diversifiable) risk

Correct Answer:C

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