CEBS GBA Comprehensive Exam Prep | GBA 1, GBA 2 &
GBA/RPA 3 Practice Questions with Detailed Rationales
2026/2027
Question 1
What is a primary distinguishing characteristic of group insurance
compared to individual insurance policies?
• A. Group insurance relies on the law of large numbers and
economies of scale to reduce adverse selection and administrative
costs per insured person.
• B. Group insurance requires individual medical underwriting and
physical examinations for every applicant before approval.
• C. Group insurance policies are legally non-transferable and can
never be modified by the employer.
• D. Group insurance prohibits employers from contributing any
portion of the premium costs.
Correct Answer: A. Group insurance relies on the law of large numbers
and economies of scale to reduce adverse selection and administrative
costs per insured person.
Detailed Rationale: Group insurance pools risks across a larger
population formed for purposes other than obtaining insurance, which
minimizes individual underwriting costs and mitigates adverse selection
compared to individual markets.
Question 2
,How does group underwriting mitigate the risk of adverse selection
among employee populations?
• A. By relying on natural groups formed for employment, enforcing
minimum participation requirements, and utilizing eligibility
waiting periods.
• B. By allowing employees to select coverage only when they
become acutely ill.
• C. By prohibiting employers from offering health insurance
options.
• D. By requiring 100% employee self-pay without any corporate
contribution.
Correct Answer: A. By relying on natural groups formed for
employment, enforcing minimum participation requirements, and
utilizing eligibility waiting periods.
Detailed Rationale: Natural groups (like employees of a company)
typically include healthy individuals as well as those needing care;
underwriting rules ensure participation is broad enough to prevent only
high-risk individuals from enrolling.
Question 3
What is the fundamental financial difference between a fully insured
group health plan and a self-funded (self-insured) group health plan?
• A. In a fully insured plan, the insurance carrier assumes the
financial risk for claims in exchange for a fixed premium; in a self-
funded plan, the employer pays actual claims directly and
assumes financial risk.
, • B. Self-funded plans are completely exempt from all federal laws
and state taxes.
• C. Fully insured employers pay claims out of pocket while
insurance companies retain zero risk.
• D. There is zero financial difference between the two models.
Correct Answer: A. In a fully insured plan, the insurance carrier assumes
the financial risk for claims in exchange for a fixed premium; in a self-
funded plan, the employer pays actual claims directly and assumes
financial risk.
Detailed Rationale: Self-funding shifts financial risk from an insurer to
the employer, allowing organizations to retain savings when claims are
low while utilizing stop-loss insurance for catastrophic claims.
Question 4
What is the primary purpose of purchasing specific (individual) stop-loss
insurance for a self-funded health plan?
• A. To reimburse the employer for any individual employee's claims
that exceed a predetermined attachment point or deductible
threshold within a plan year.
• B. To eliminate all administrative responsibilities for the employer
permanently.
• C. To guarantee that employees pay zero deductibles or
coinsurance.
• D. To transfer all state tax liabilities to individual plan participants.
, Correct Answer: A. To reimburse the employer for any individual
employee's claims that exceed a predetermined attachment point or
deductible threshold within a plan year.
Detailed Rationale: Specific stop-loss protects self-funded employers
from catastrophic financial loss caused by a single high-cost claimant
exceeding the attachment point.
Question 5
How do Health Maintenance Organizations (HMOs) fundamentally
differ from Preferred Provider Organizations (PPOs)?
• A. HMOs require members to select a primary care physician (PCP)
and obtain referrals for specialist care, restricting coverage
primarily to network providers, whereas PPOs offer out-of-
network benefits and do not require referrals.
• B. HMOs allow patients to visit any doctor worldwide without pre-
approval.
• C. PPOs prohibit members from ever visiting network hospitals.
• D. There are no operational differences between HMOs and PPOs.
Correct Answer: A. HMOs require members to select a primary care
physician (PCP) and obtain referrals for specialist care, restricting
coverage primarily to network providers, whereas PPOs offer out-of-
network benefits and do not require referrals.
Detailed Rationale: HMOs emphasize managed care coordination and
cost containment through strict provider networks and gatekeeping,
while PPOs provide greater provider choice at higher cost-sharing levels.
Question 6
GBA/RPA 3 Practice Questions with Detailed Rationales
2026/2027
Question 1
What is a primary distinguishing characteristic of group insurance
compared to individual insurance policies?
• A. Group insurance relies on the law of large numbers and
economies of scale to reduce adverse selection and administrative
costs per insured person.
• B. Group insurance requires individual medical underwriting and
physical examinations for every applicant before approval.
• C. Group insurance policies are legally non-transferable and can
never be modified by the employer.
• D. Group insurance prohibits employers from contributing any
portion of the premium costs.
Correct Answer: A. Group insurance relies on the law of large numbers
and economies of scale to reduce adverse selection and administrative
costs per insured person.
Detailed Rationale: Group insurance pools risks across a larger
population formed for purposes other than obtaining insurance, which
minimizes individual underwriting costs and mitigates adverse selection
compared to individual markets.
Question 2
,How does group underwriting mitigate the risk of adverse selection
among employee populations?
• A. By relying on natural groups formed for employment, enforcing
minimum participation requirements, and utilizing eligibility
waiting periods.
• B. By allowing employees to select coverage only when they
become acutely ill.
• C. By prohibiting employers from offering health insurance
options.
• D. By requiring 100% employee self-pay without any corporate
contribution.
Correct Answer: A. By relying on natural groups formed for
employment, enforcing minimum participation requirements, and
utilizing eligibility waiting periods.
Detailed Rationale: Natural groups (like employees of a company)
typically include healthy individuals as well as those needing care;
underwriting rules ensure participation is broad enough to prevent only
high-risk individuals from enrolling.
Question 3
What is the fundamental financial difference between a fully insured
group health plan and a self-funded (self-insured) group health plan?
• A. In a fully insured plan, the insurance carrier assumes the
financial risk for claims in exchange for a fixed premium; in a self-
funded plan, the employer pays actual claims directly and
assumes financial risk.
, • B. Self-funded plans are completely exempt from all federal laws
and state taxes.
• C. Fully insured employers pay claims out of pocket while
insurance companies retain zero risk.
• D. There is zero financial difference between the two models.
Correct Answer: A. In a fully insured plan, the insurance carrier assumes
the financial risk for claims in exchange for a fixed premium; in a self-
funded plan, the employer pays actual claims directly and assumes
financial risk.
Detailed Rationale: Self-funding shifts financial risk from an insurer to
the employer, allowing organizations to retain savings when claims are
low while utilizing stop-loss insurance for catastrophic claims.
Question 4
What is the primary purpose of purchasing specific (individual) stop-loss
insurance for a self-funded health plan?
• A. To reimburse the employer for any individual employee's claims
that exceed a predetermined attachment point or deductible
threshold within a plan year.
• B. To eliminate all administrative responsibilities for the employer
permanently.
• C. To guarantee that employees pay zero deductibles or
coinsurance.
• D. To transfer all state tax liabilities to individual plan participants.
, Correct Answer: A. To reimburse the employer for any individual
employee's claims that exceed a predetermined attachment point or
deductible threshold within a plan year.
Detailed Rationale: Specific stop-loss protects self-funded employers
from catastrophic financial loss caused by a single high-cost claimant
exceeding the attachment point.
Question 5
How do Health Maintenance Organizations (HMOs) fundamentally
differ from Preferred Provider Organizations (PPOs)?
• A. HMOs require members to select a primary care physician (PCP)
and obtain referrals for specialist care, restricting coverage
primarily to network providers, whereas PPOs offer out-of-
network benefits and do not require referrals.
• B. HMOs allow patients to visit any doctor worldwide without pre-
approval.
• C. PPOs prohibit members from ever visiting network hospitals.
• D. There are no operational differences between HMOs and PPOs.
Correct Answer: A. HMOs require members to select a primary care
physician (PCP) and obtain referrals for specialist care, restricting
coverage primarily to network providers, whereas PPOs offer out-of-
network benefits and do not require referrals.
Detailed Rationale: HMOs emphasize managed care coordination and
cost containment through strict provider networks and gatekeeping,
while PPOs provide greater provider choice at higher cost-sharing levels.
Question 6
