Insurance and Finance Flashcards
7 cards from real CPHRM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance and Finance flashcards as text
An occurrence-based medical malpractice policy with a $1M/$3M limit structure means:
Answer: $1M maximum per individual claim and $3M maximum for all claims during the policy year
The per-occurrence limit ($1M) caps payment on any single claim, while the aggregate limit ($3M) caps total payments for all claims during the policy period.
A risk financing strategy that spreads retained losses over time through annual contributions to a dedicated fund best describes:
Answer: Funded self-insurance reserve
A funded self-insurance reserve accumulates contributions each year to pay retained losses, smoothing cash flow rather than funding each loss as it occurs.
Under GASB standards applicable to public hospital self-insurance programs, claim liabilities must be reported when:
Answer: It is probable a loss has occurred and the amount can be reasonably estimated
GASB standards require recognizing a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated, regardless of whether litigation has begun.
A risk manager reviews an actuarial loss reserve study. The actuary uses an 'ultimate loss' estimate rather than paid losses. Why is ultimate loss the more appropriate figure for funding decisions?
Answer: It includes both paid amounts and estimated future payments on open and IBNR claims
Ultimate loss includes paid amounts, case reserves on open claims, and incurred-but-not-reported (IBNR) estimates, giving the full projected cost of all claims from a period.
Which type of reinsurance protects a self-insured health system against an unusually high volume of individual losses in a single year, rather than a single catastrophic loss?
Answer: Aggregate excess (stop-loss) reinsurance
Aggregate excess (stop-loss) reinsurance triggers when total losses across all claims in a period exceed a set threshold, protecting against a bad year rather than any one large loss.
A hospital's risk retention group (RRG) differs from a standard commercial insurer primarily because:
Answer: RRGs are owned by and insure only members who face similar liability risks
Under the Liability Risk Retention Act, RRGs are member-owned entities that insure only their members, who must share a common business or liability exposure.
A risk manager calculates the 'cost of risk' for an annual report. Which of the following expenses should be INCLUDED in this calculation?
Answer: Insurance premiums, retained losses, risk management department costs, and administrative expenses
Cost of risk encompasses all expenses attributable to managing risk: premiums paid, losses retained (paid out-of-pocket), and the internal costs of operating the risk management function.