CEBS GBA COMPLETE EXAM REVIEW WITH
FULL SOLUTIONS
●● What are the 4 distinct characteristics of insurance?
Answer: 1) Pooling of losses
2) Payment only for random losses
3) Risk transfer
4) Indemnification
●● According to the law of numbers, pooling implies what 2 things?
Answer: 1) The sharing of losses by the entire group
2) The prediction of future losses with some accuracy.
●● A __________ loss is one that is unforseen and unexpected and
occurs as a result of chance.
Answer: random
●● What is the sole exception to the element of risk transfer, assuming
the risk itself rather than an insurance company?
Answer: self-insurance
,●● _____________________ restores the individual to their preexisting
state had the loss not occurred.
Answer: indemnification
●● ________________ occurs because individuals and businesses are
more likely to have claims, and more inclined to purchase insurance,
than those who are less likely to have claims.
Answer: Adverse selection
●● True or False: Adverse selection, if unchecked, will lead toward
more healthy individuals seeking insurance and lowering premiums.
Answer: False: Adverse selection, if unchecked, will lead toward more
sick individuals seeking insurance, driving up insurance premiums, and
then even fewer healthy individuals will purchase, continuing the spiral
of higher costs.
●● True or False: Adverse selection occurs when individual buyers of
health insurance know more about their health status than do insurers.
Answer: True
●● _______________ is the problem faced by insurers because
individuals are more likely to use unneeded health services when they
are not paying the full cost of those services.
Answer: Moral hazard
,●● What is the primary tool that insurers have to combat the moral
hazard problem?
Answer: Coinsurancce (%) and copayments ($)
●● What is the generic term for any outside party, typically an insurance
company or a a government program, which pays for part or all of a
patient's health care services?
Answer: third-party payer
●● What are the two broad categories of health insurers?
Answer: 1) Private insurers
2) Public programs / insurers
●● What are the 3 major private insurers?
Answer: 1) Blue Cross Blue Shield
2) Commercial insurers
3) Self-insurers
●● _________________ Plans originated as a number of separate
insurance programs offered by individual hospitals.
a) Blue Cross
b) Red Cross
c) Blue Shield
, d) Red Shield
e) Humana
Answer: a) Blue Cross
●● _________________ Plans originated as a number of separate
insurance programs offered by individual physicians.
a) Blue Cross
b) Red Cross
c) Blue Shield
d) Red Shield
e) Humana
Answer: c) Blue Shield
●● What type of health insurance is issued by life insurance companies,
casualty insurance companies, and companies formed exclusively to
offer health care insurance?
Answer: commercial health insurance
●● True or False: Commercial insurance companies are taxable (for-
profit) entities.
Answer: True
FULL SOLUTIONS
●● What are the 4 distinct characteristics of insurance?
Answer: 1) Pooling of losses
2) Payment only for random losses
3) Risk transfer
4) Indemnification
●● According to the law of numbers, pooling implies what 2 things?
Answer: 1) The sharing of losses by the entire group
2) The prediction of future losses with some accuracy.
●● A __________ loss is one that is unforseen and unexpected and
occurs as a result of chance.
Answer: random
●● What is the sole exception to the element of risk transfer, assuming
the risk itself rather than an insurance company?
Answer: self-insurance
,●● _____________________ restores the individual to their preexisting
state had the loss not occurred.
Answer: indemnification
●● ________________ occurs because individuals and businesses are
more likely to have claims, and more inclined to purchase insurance,
than those who are less likely to have claims.
Answer: Adverse selection
●● True or False: Adverse selection, if unchecked, will lead toward
more healthy individuals seeking insurance and lowering premiums.
Answer: False: Adverse selection, if unchecked, will lead toward more
sick individuals seeking insurance, driving up insurance premiums, and
then even fewer healthy individuals will purchase, continuing the spiral
of higher costs.
●● True or False: Adverse selection occurs when individual buyers of
health insurance know more about their health status than do insurers.
Answer: True
●● _______________ is the problem faced by insurers because
individuals are more likely to use unneeded health services when they
are not paying the full cost of those services.
Answer: Moral hazard
,●● What is the primary tool that insurers have to combat the moral
hazard problem?
Answer: Coinsurancce (%) and copayments ($)
●● What is the generic term for any outside party, typically an insurance
company or a a government program, which pays for part or all of a
patient's health care services?
Answer: third-party payer
●● What are the two broad categories of health insurers?
Answer: 1) Private insurers
2) Public programs / insurers
●● What are the 3 major private insurers?
Answer: 1) Blue Cross Blue Shield
2) Commercial insurers
3) Self-insurers
●● _________________ Plans originated as a number of separate
insurance programs offered by individual hospitals.
a) Blue Cross
b) Red Cross
c) Blue Shield
, d) Red Shield
e) Humana
Answer: a) Blue Cross
●● _________________ Plans originated as a number of separate
insurance programs offered by individual physicians.
a) Blue Cross
b) Red Cross
c) Blue Shield
d) Red Shield
e) Humana
Answer: c) Blue Shield
●● What type of health insurance is issued by life insurance companies,
casualty insurance companies, and companies formed exclusively to
offer health care insurance?
Answer: commercial health insurance
●● True or False: Commercial insurance companies are taxable (for-
profit) entities.
Answer: True
