CPHRM Risk Financing 1

Question 1

Which risk financing technique involves a healthcare organization retaining financial responsibility for losses within a defined layer before insurance coverage applies?

Accepted Answer

Self-insured retention (SIR)

Answer

A self-insured retention (SIR) requires the organization to pay losses up to a set threshold before excess or umbrella coverage is triggered.

Question 2

A captive insurance company owned and controlled by a single parent healthcare organization is best described as a:

Accepted Answer

Pure captive

Answer

A pure captive is wholly owned by one parent entity and exists solely to insure the risks of that parent organization.

Question 3

Which actuarial method estimates ultimate losses by comparing paid losses at successive evaluation dates to project future development?

Accepted Answer

Loss development (chain-ladder) method

Answer

The chain-ladder (loss development) method uses historical loss development factors applied to current paid or incurred losses to project ultimate losses.

Question 4

Under a retrospective rating plan, the final premium is determined primarily by:

Accepted Answer

The insured's actual loss experience during the policy period

Answer

Retrospective rating adjusts the premium after the policy period ends based on the organization's actual losses, rewarding favorable experience with lower costs.

Question 5

What is the primary purpose of an insurance trust fund or funded reserve in a healthcare self-insurance program?

Accepted Answer

To ensure adequate financial resources are available to pay future claims

Answer

A funded reserve ensures the organization has liquid assets set aside to cover anticipated losses, maintaining financial solvency for self-insured programs.

CPHRM Exam Practice Test

CPHRM Exam Practice Test

CPHRM Risk Financing 1