CPHRM Risk Financing 3

Question 1

A healthcare organization's risk financing feasibility study should include all of the following EXCEPT:

Accepted Answer

The organization's marketing strategy for new service lines

Answer

A risk financing feasibility study focuses on financial, actuarial, and operational factors related to insurance alternatives — marketing strategy is outside its scope.

Question 2

Which financial metric best measures the adequacy of a self-insured healthcare organization's loss reserves relative to its exposure?

Accepted Answer

Loss development factor (LDF)

Answer

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.

Question 3

Under a finite risk insurance arrangement, the insured organization transfers:

Accepted Answer

Limited underwriting risk combined with significant timing risk, usually with profit-sharing provisions

Answer

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.

Question 4

What is the primary advantage of a group captive compared to a pure captive for a mid-sized healthcare organization?

Accepted Answer

Lower capitalization requirements through shared ownership and pooled risk among members

Answer

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.

Question 5

In healthcare risk financing, the term 'funded retention' means the organization:

Accepted Answer

Sets aside dedicated assets to cover anticipated self-insured losses

Answer

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.

CPHRM Exam Practice Test

CPHRM Exam Practice Test

CPHRM Risk Financing 3