Risk Financing 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 Risk Financing flashcards as text
A healthcare organization's risk financing feasibility study should include all of the following EXCEPT:
Answer: The organization's marketing strategy for new service lines
A risk financing feasibility study focuses on financial, actuarial, and operational factors related to insurance alternatives — marketing strategy is outside its scope.
Which financial metric best measures the adequacy of a self-insured healthcare organization's loss reserves relative to its exposure?
Answer: Loss development factor (LDF)
The loss development factor (LDF) quantifies how much reported losses are expected to grow to their ultimate value, directly measuring reserve adequacy relative to future payments.
Under a finite risk insurance arrangement, the insured organization transfers:
Answer: Limited underwriting risk combined with significant timing risk, usually with profit-sharing provisions
Finite risk programs transfer a limited amount of underwriting risk while the insurer primarily assumes timing risk, with provisions that return favorable underwriting results to the insured.
What is the primary advantage of a group captive compared to a pure captive for a mid-sized healthcare organization?
Answer: Lower capitalization requirements through shared ownership and pooled risk among members
Group captives allow multiple organizations to share formation costs and capital requirements, making captive ownership financially feasible for organizations that could not support a pure captive alone.
In healthcare risk financing, the term 'funded retention' means the organization:
Answer: Sets aside dedicated assets to cover anticipated self-insured losses
Funded retention requires the organization to establish and maintain assets specifically earmarked to pay losses within its retention layer, ensuring financial capacity to meet obligations.
When a risk manager benchmarks the organization's total cost of risk (TCOR), which components should be included?
Answer: Insurance premiums, retained losses, risk management administrative costs, and indirect costs of risk
TCOR is a comprehensive metric that aggregates all costs associated with risk, including premiums paid, self-insured losses, program administration, and uninsured indirect costs.
A healthcare organization using a loss-sensitive insurance program will see its renewal premium increase if:
Answer: The organization's actual losses during the policy period exceed expected losses
Loss-sensitive programs adjust premium based on actual experience; higher-than-expected losses trigger additional premium charges or reduced credits at audit.