CEBS GBA 1 AND 2 EXAM REVIEW SOLVED QUESTIONS COMPLETE ANSWERS GRADED
A PLUS
CEBS GBA 1 AND 2 Examprep 2026/2027 REAL
Questions and Answers Verified Solutions Latest
Update
Question:
The law of large numbers states that:
Answer:
As the size of the same increases, the sample mean gets closer to the population mean.
Question:
Indemnification.
Answer:
Indemnification of losses means reimbursement to the insured if a loss occurs. In theory,
indemnification restores the individual to their preexisting state had the loss not occurred.
Question:
Adverse Selection.
Answer:
Occurs because individuals and businesses that are more likely to have claims are more inclined to
purchase insurance than those that are less likely to have claims. This exists because individuals
know more about their health status than do insurers.
Question:
Moral Hazard.
Answer:
Premise that payments are made only for random losses which creates moral hazard. Moral hazard is
faced by insurers because individuals are more likely to use unneeded health services when they are
not paying the full cost of those services.
,Question:
Coinsurance.
Answer:
A type of insurance in which the insured pays a share of the payment made against a claim in excess
of the deductible.
Question:
Third-Party Payers.
Answer:
Generic term for any outside party, insurance company or a government program, which pays for
part or all of a patient's health care services. Health insurers can be categorized into two broad
groupings: private insurers and public programs.
Question:
Medicare.
Answer:
A federal program of health insurance established by Congress in 1965 to provide medical benefits
to persons 65 years of age and older. Also covers health care costs associated with selected
disabilities and illnesses, regardless of age.
Question:
Medicaid.
Answer:
Began in 1966. A federal and state assistance program that pays for health care services for people
who cannot afford them. Mandatory nursing home benefit added in 1972.
Question:
Four Characteristics of Insurance.
,Answer:
1. Pooling of losses. 2. Payment only for random losses. 3. Risk transfer. 4. Indemnification
Question:
Pooling of losses.
Answer:
Is the basis of insurance. Pooling = losses are spread over a large group of individuals. Pooling
involves the grouping of a large number of homogeneous exposure units. People or things having
the same risk characteristics. Law of large numbers applies.
Question:
Payment only for random losses.
Answer:
A random loss is one that is unforeseen and unexpected and occurs as a result of chance. With
insurance, payments are made only for random losses.
Question:
Risk transfer.
Answer:
The transfer of risk from an insured to an insurer. Insurance involves risk transfer. The exception to
risk transfer is self-insurance. The insurer is in a better financial position to bear the risk than the
insured because of the law of large numbers.
Question:
Private Insurers.
Answer:
Blue Cross/Blue Shield, Commercial Insurers, and Self-insurers.
, Question:
Blue Cross Blue Shield.
Answer:
Blue Cross Blue Shield organizations trace their roots to the Great Depression, when both hospitals
and physicians were concerned about their patients' ability to pay health care bills.
Question:
Blue Cross.
Answer:
Multiple insurance programs offered by hospitals. Hospitals provided services to program members
who made fixed payments to hospitals. Programs expanded from single-hospital programs to
multi-hospital plans called hospital service plans. The Blue Cross name was officially adopted by
most of these plans in 1939.
Question:
Blue Shield.
Answer:
Similar to Blue Cross plans. Providers were physicians not hospitals. 36 Blue Cross Blue Shield
organizations today. The Blues are independent corporations that belong to a single national
association with set standards. The Blues provide health care coverage for 106 million individuals.
Question:
Commercial Insurers.
Answer:
Private, non-government insurers who are often the insurance options available through employers.
All commercial insurance companies are taxable (for-profit) entities.
Question:
Self-Insurers.
A PLUS
CEBS GBA 1 AND 2 Examprep 2026/2027 REAL
Questions and Answers Verified Solutions Latest
Update
Question:
The law of large numbers states that:
Answer:
As the size of the same increases, the sample mean gets closer to the population mean.
Question:
Indemnification.
Answer:
Indemnification of losses means reimbursement to the insured if a loss occurs. In theory,
indemnification restores the individual to their preexisting state had the loss not occurred.
Question:
Adverse Selection.
Answer:
Occurs because individuals and businesses that are more likely to have claims are more inclined to
purchase insurance than those that are less likely to have claims. This exists because individuals
know more about their health status than do insurers.
Question:
Moral Hazard.
Answer:
Premise that payments are made only for random losses which creates moral hazard. Moral hazard is
faced by insurers because individuals are more likely to use unneeded health services when they are
not paying the full cost of those services.
,Question:
Coinsurance.
Answer:
A type of insurance in which the insured pays a share of the payment made against a claim in excess
of the deductible.
Question:
Third-Party Payers.
Answer:
Generic term for any outside party, insurance company or a government program, which pays for
part or all of a patient's health care services. Health insurers can be categorized into two broad
groupings: private insurers and public programs.
Question:
Medicare.
Answer:
A federal program of health insurance established by Congress in 1965 to provide medical benefits
to persons 65 years of age and older. Also covers health care costs associated with selected
disabilities and illnesses, regardless of age.
Question:
Medicaid.
Answer:
Began in 1966. A federal and state assistance program that pays for health care services for people
who cannot afford them. Mandatory nursing home benefit added in 1972.
Question:
Four Characteristics of Insurance.
,Answer:
1. Pooling of losses. 2. Payment only for random losses. 3. Risk transfer. 4. Indemnification
Question:
Pooling of losses.
Answer:
Is the basis of insurance. Pooling = losses are spread over a large group of individuals. Pooling
involves the grouping of a large number of homogeneous exposure units. People or things having
the same risk characteristics. Law of large numbers applies.
Question:
Payment only for random losses.
Answer:
A random loss is one that is unforeseen and unexpected and occurs as a result of chance. With
insurance, payments are made only for random losses.
Question:
Risk transfer.
Answer:
The transfer of risk from an insured to an insurer. Insurance involves risk transfer. The exception to
risk transfer is self-insurance. The insurer is in a better financial position to bear the risk than the
insured because of the law of large numbers.
Question:
Private Insurers.
Answer:
Blue Cross/Blue Shield, Commercial Insurers, and Self-insurers.
, Question:
Blue Cross Blue Shield.
Answer:
Blue Cross Blue Shield organizations trace their roots to the Great Depression, when both hospitals
and physicians were concerned about their patients' ability to pay health care bills.
Question:
Blue Cross.
Answer:
Multiple insurance programs offered by hospitals. Hospitals provided services to program members
who made fixed payments to hospitals. Programs expanded from single-hospital programs to
multi-hospital plans called hospital service plans. The Blue Cross name was officially adopted by
most of these plans in 1939.
Question:
Blue Shield.
Answer:
Similar to Blue Cross plans. Providers were physicians not hospitals. 36 Blue Cross Blue Shield
organizations today. The Blues are independent corporations that belong to a single national
association with set standards. The Blues provide health care coverage for 106 million individuals.
Question:
Commercial Insurers.
Answer:
Private, non-government insurers who are often the insurance options available through employers.
All commercial insurance companies are taxable (for-profit) entities.
Question:
Self-Insurers.
