CPHRM Risk Financing 2

Question 1

Which risk financing option provides the greatest potential cost savings to a healthcare organization with consistently favorable loss experience?

Accepted Answer

Self-insurance with a funded reserve

Answer

Guaranteed-cost insurance

Answer

Finite risk insurance

Answer

Occurrence-based commercial insurance

Question 2

Loss reserves established in a healthcare self-insurance program represent:

Accepted Answer

An estimate of the total cost of known and unreported claims yet to be fully paid

Answer

Collected premiums held in escrow by the state

Answer

Surplus funds transferred to a captive insurer

Answer

Reinsurance recoverables already received

Question 3

The 'tail' coverage endorsement in a claims-made professional liability policy covers:

Accepted Answer

Claims arising from incidents that occurred during the policy period but reported after it expires

Answer

Claims filed before the policy inception date

Answer

Third-party bodily injury claims only

Answer

Claims arising from contractual liability

Question 4

When evaluating alternative risk transfer (ART) mechanisms, a healthcare risk manager should primarily assess:

Accepted Answer

Cost-effectiveness, financial security of the arrangement, and alignment with the organization's risk tolerance

Answer

The credit rating of the reinsurance broker only

Answer

Whether the ART vehicle complies with IRS Section 831(b)

Answer

The geographic diversification of the insurer's portfolio

Question 5

Which term describes the annual premium paid to a captive insurer that is set to cover expected losses plus administrative and reinsurance costs?

Accepted Answer

Pure premium

Answer

Burning cost premium

Answer

Loss-sensitive premium

Answer

Prospective premium

Question 6

Aggregate stop-loss coverage in a self-insured healthcare program is designed to:

Accepted Answer

Limit the total amount the organization pays in losses during a policy year

Answer

Cap individual large claims at a per-occurrence limit

Answer

Provide coverage for claims reported in prior policy years

Answer

Replace occurrence-based coverage for surgical events

Question 7

The primary reason a healthcare organization would choose an occurrence-based professional liability policy over a claims-made policy is:

Accepted Answer

Coverage applies to any incident that occurs during the policy period regardless of when the claim is reported

Answer

Lower upfront premiums in the first policy year

Answer

Occurrence policies do not require tail coverage

Answer

Occurrence policies provide higher per-incident limits