CPHRM Insurance and Finance 3

Question 1

An occurrence-based medical malpractice policy with a $1M/$3M limit structure means:

Accepted Answer

$1M maximum per individual claim and $3M maximum for all claims during the policy year

Answer

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.

Question 2

A risk financing strategy that spreads retained losses over time through annual contributions to a dedicated fund best describes:

Accepted Answer

Funded self-insurance reserve

Answer

A funded self-insurance reserve accumulates contributions each year to pay retained losses, smoothing cash flow rather than funding each loss as it occurs.

Question 3

Under GASB standards applicable to public hospital self-insurance programs, claim liabilities must be reported when:

Accepted Answer

It is probable a loss has occurred and the amount can be reasonably estimated

Answer

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.

Question 4

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?

Accepted Answer

It includes both paid amounts and estimated future payments on open and IBNR claims

Answer

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.

Question 5

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?

Accepted Answer

Aggregate excess (stop-loss) reinsurance

Answer

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.

CPHRM Exam Practice Test

CPHRM Exam Practice Test

CPHRM Insurance and Finance 3