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
Which risk financing technique involves a healthcare organization retaining financial responsibility for losses within a defined layer before insurance coverage applies?
Answer: Self-insured retention (SIR)
A self-insured retention (SIR) requires the organization to pay losses up to a set threshold before excess or umbrella coverage is triggered.
A captive insurance company owned and controlled by a single parent healthcare organization is best described as a:
Answer: Pure captive
A pure captive is wholly owned by one parent entity and exists solely to insure the risks of that parent organization.
Which actuarial method estimates ultimate losses by comparing paid losses at successive evaluation dates to project future development?
Answer: Loss development (chain-ladder) method
The chain-ladder (loss development) method uses historical loss development factors applied to current paid or incurred losses to project ultimate losses.
Under a retrospective rating plan, the final premium is determined primarily by:
Answer: The insured's actual loss experience during the policy period
Retrospective rating adjusts the premium after the policy period ends based on the organization's actual losses, rewarding favorable experience with lower costs.
What is the primary purpose of an insurance trust fund or funded reserve in a healthcare self-insurance program?
Answer: To ensure adequate financial resources are available to pay future claims
A funded reserve ensures the organization has liquid assets set aside to cover anticipated losses, maintaining financial solvency for self-insured programs.
Excess-of-loss reinsurance in healthcare risk financing protects the primary insurer or self-insurer against:
Answer: Losses that exceed a specified retention per occurrence or in aggregate
Excess-of-loss reinsurance triggers when a single loss or aggregate losses exceed a predetermined threshold, transferring catastrophic exposure to the reinsurer.
A risk retention group (RRG) under the Liability Risk Retention Act of 1986 must be:
Answer: Owned by its policyholder members who share similar liability exposures
RRGs are member-owned entities in which all policyholders share similar liability risks, and once licensed in one state they may operate in others with limited additional regulation.