HSA4109 Cost Sharing Exam Questions with
Correct Answers
What is HEALTH INSURANCE?
Health insurance is an agreement between a policy holder (plan member) and a state-licensed
insurer that the insurer will accept the financial risk, administer benefits, and pay claims on
behalf of the member; and the member will prepay a fixed amount (premium) to cover healthcare
costs in the event a catastrophic episode occurs.
What is RISK POOLING?
Spreading the risk
What are PREMIUMS used for?
To offset the risk of those individuals using unexpected high-cost services. risk; unexpected
How does an insurance company make its money?
An insurance company makes revenue when the premium income exceeds the cost of member
healthcare services (and overhead costs).
What is ADVERSE SELECTION?
Only sick people will contribute towards the pot and buy insurance
What is MORAL HAZARD
if people are insured they will increase their utilization of healthcare services
What is the DEATH SPIRAL
when healthy people don't buy health insurance, the risk pool becomes sicker and sicker thus the
insurer's cost savings are getting smaller and smaller which will eventually lead to the insurer's
bankruptcy or market exit
What is an OPEN ENROLLMENT PERIOD and how does it prevent adverse selection and
the death spiral?
OEP is when health plan enrollment is only open during a certain period of time (around fall)
which prevents people from only enrolling when they are sick
What is the INDIVIDUAL MANDATE and how does it prevent adverse selection and the
death spiral?
the ACA requiring everyone to buy health insurance prevented the death spiral because it spreads
the risk further and the insurer does not have to take all the risks for losing income from the
premium
Correct Answers
What is HEALTH INSURANCE?
Health insurance is an agreement between a policy holder (plan member) and a state-licensed
insurer that the insurer will accept the financial risk, administer benefits, and pay claims on
behalf of the member; and the member will prepay a fixed amount (premium) to cover healthcare
costs in the event a catastrophic episode occurs.
What is RISK POOLING?
Spreading the risk
What are PREMIUMS used for?
To offset the risk of those individuals using unexpected high-cost services. risk; unexpected
How does an insurance company make its money?
An insurance company makes revenue when the premium income exceeds the cost of member
healthcare services (and overhead costs).
What is ADVERSE SELECTION?
Only sick people will contribute towards the pot and buy insurance
What is MORAL HAZARD
if people are insured they will increase their utilization of healthcare services
What is the DEATH SPIRAL
when healthy people don't buy health insurance, the risk pool becomes sicker and sicker thus the
insurer's cost savings are getting smaller and smaller which will eventually lead to the insurer's
bankruptcy or market exit
What is an OPEN ENROLLMENT PERIOD and how does it prevent adverse selection and
the death spiral?
OEP is when health plan enrollment is only open during a certain period of time (around fall)
which prevents people from only enrolling when they are sick
What is the INDIVIDUAL MANDATE and how does it prevent adverse selection and the
death spiral?
the ACA requiring everyone to buy health insurance prevented the death spiral because it spreads
the risk further and the insurer does not have to take all the risks for losing income from the
premium
