AHIP AHM-520 Exam - Topic 5 Question 35 Discussion

Question

Contingency risks, or C-risks, are general categories of risk that have a direct bearing on both the cash flow and solvency of a health plan. One of these C-risks, pricing risk (C-2 risk), is typically the most important risk a health plan faces. Pricing risk is crucial to a health plan's solvency because:

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D) A sizable portion of the total expenses and liabilities faced by a health plan come from contractual obligations to pay future medical costs, and the exact amounts of those costs are not known at the time a product's premium is established

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A) A sizable portion of any health plan's assets are held in long-term investments and any shift in interest rates can significantly impact a health plan's ability to pay medical benefits

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B) A health plan relies heavily on the sound judgment of its management, and poor management decisions can result in financial losses for the health plan

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C) A situation in which actual expenses exceed the amounts budgeted for those expenses may result in the health plan failing to retain assets sufficient to cover current obligations