CEBS - GBA 1 & 2 PRACTICE ACTUAL
EXAM PAPER 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ 1.4 What does the ACA require in terms of MLR(medical loss ratio) for
small groups up to 100 workers, nongroup plans and what is its mandate for
fully insured large groups?.
Answer: MLR for small groups and for individual plans can be no less than
80%. For large fully insured, MLR can be no less than 85%. If insurer has a
threshold below the limit it must refund a share of its premiums back to
purchaser. Does not apply to self-insured.
◍ FAS 112 requirements.
Answer: Annually estimate the accrued liability for salary continuation
program, put aside (reserve) funds for it and report it on their annual
financial statements.
◍ Nonguaranteed cash surrender values.
Answer: No minimum guaranteed cash values. The risk of excessive
mortality and expenses is borne by the insurer, the investment risk is
retained entirely by the policyholder.
◍ ACA Provision to Reduce Costs.
Answer: Insurers must charge same premium to all applicants of the same
age and geographic location, regardless of preexisting conditions or sex.
Insurers must spend at least 80% to 85% of premium dollars on health costs
and claims, not administrative costs and profits. Lifetime limits on most
benefits are prohibited for all new health insurance plans.
◍ What is the waiting period for Social Security Disability In come (SSDI)
benefits
, A. One month
B. Three consecutive months
C. Five consecutive months
D. Six consecutive months
E. Twelve consecutive months.
Answer: C. Five consecutive months
◍ A safety culture.
Answer: The biggest challenge to moving toward a safer health system is
changing the culture from one of blaming individuals for errors to one in
which errors are treated not as personal failures, but as opportunities to
improve the system and prevent harm.
◍ Provider Incentives Under Charge Based Reimbursement.
Answer: Providers have incentives to set high charge rates, which lead to
high revenues. Charge-based reimbursement creates incentives for providers
to contain costs because 1. the spread between charges and costs represents
profits, and the more the better, and 2. lower costs can lead to lower charges,
which can increase volume.
◍ Independent agents (brokers).
Answer: Represent any number of insurance companies through contractual
agreements with each insurer
◍ 4.1 How did ERISA (1974) impact retrospective experience-rated health
plans?.
Answer: When ERISA was enacted, the legislation allowed plans that were
self-insured under the terms of the legislation to be exempt from state regs.
Although many retrospective experience-rated health plans were
substantively self-insured, employers had to switch to being truly
self-insured to avoid the premium taxes and other regulations that the states
could impose.
◍ Affordable Care Act (ACA) subsidies.
Answer: The vast majority of people with coverage through ACA exchanges
receive a subsidy.
,◍ Selective contracting.
Answer: When a managed care organization contracts with an exclusive set
of providers based on quality or cost-effectiveness.
◍ 3.1 Is community rating relevant in today's market?.
Answer: Community rating was used by Blue Cross and Blue Shield in the
early year of HMO'sand well into the 1970's. It has some relevance in
today's market because it is advocated by proponents of universal health
insurance plans. It is also the basis of some modern rating systems.
◍ 6.3 What stipulation does the ACA make regarding the relationship in health
insurance premium between and aged insured and younger insured?.
Answer: The ACA requires premiums for the oldest insured to be no more
than three times that of the youngest insured.
◍ 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.
◍ 2.3 Describe the purpose of underwriting using the concept of reliable risk
pools..
Answer: To establish risk classes, with each having expected losses
significantly different from the others, a small dispersion of possible
outcomes and a large number of covered lives. Differences can include
gender, age, geographic location, occupation or industry.
◍ Per Diagnosis.
Answer: Provider payment rate depends on the patient's diagnosis.
Diagnoses with higher resource utilization and are more costly to treat have
higher reimbursement rates. Medicare pioneered this basis of payment in its
diagnosis-related group (DRG) system, first used for hospital inpatient
reimbursement in 1983.
◍ Medical errors.
, Answer: Third leading cause of death, after heart disease and cancer.
Estimated that 206,201 avoidable deaths occur in hospitals annually.
◍ Disadvantages of group term life insurance.
Answer: Policies can be terminated by employer. Rarely portable. Provides
pure protection only, no cash value.
◍ System of Profound Knowledge (Deming).
Answer: Knowledge of the system, knowledge of psychology, the theory of
knowledge, and knowledge of variation.
◍ 4.3 What is the approx percentage of workers in partially or completely
self-insured health plans?.
Answer: approximately 60%
◍ 6.1 Explain the consequences of combining groups with significantly
different claims experience into the same risk pool?.
Answer: produces lower premiums and more coverage for high-risk groups
but higher premiums and less coverage for low risk groups.
◍ Limitations of term life insurance.
Answer: Premiums increase with age at an increasing rate and eventually
reach prohibitive levels. Is inappropriate if you wish to save money since
there is no buildup of policy cash value.
◍ Fee-for-service (FFS).
Answer: Many variations exist. The greater the amount of services provided,
the higher the amount of reimbursement.
◍ 2.1 What is a care-out coverage?.
Answer: Coverage that may have been provided as part of a particular plan
but is now provided separately is care-out coverage. Prescription drug and
mental health benefits are often cared out.
◍ 3.4 What is credibility factor?.
Answer: Credibility refers to the extent the insurer can rely on the loss data
when using experience rating. The loss data of a small group for a short
EXAM PAPER 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ 1.4 What does the ACA require in terms of MLR(medical loss ratio) for
small groups up to 100 workers, nongroup plans and what is its mandate for
fully insured large groups?.
Answer: MLR for small groups and for individual plans can be no less than
80%. For large fully insured, MLR can be no less than 85%. If insurer has a
threshold below the limit it must refund a share of its premiums back to
purchaser. Does not apply to self-insured.
◍ FAS 112 requirements.
Answer: Annually estimate the accrued liability for salary continuation
program, put aside (reserve) funds for it and report it on their annual
financial statements.
◍ Nonguaranteed cash surrender values.
Answer: No minimum guaranteed cash values. The risk of excessive
mortality and expenses is borne by the insurer, the investment risk is
retained entirely by the policyholder.
◍ ACA Provision to Reduce Costs.
Answer: Insurers must charge same premium to all applicants of the same
age and geographic location, regardless of preexisting conditions or sex.
Insurers must spend at least 80% to 85% of premium dollars on health costs
and claims, not administrative costs and profits. Lifetime limits on most
benefits are prohibited for all new health insurance plans.
◍ What is the waiting period for Social Security Disability In come (SSDI)
benefits
, A. One month
B. Three consecutive months
C. Five consecutive months
D. Six consecutive months
E. Twelve consecutive months.
Answer: C. Five consecutive months
◍ A safety culture.
Answer: The biggest challenge to moving toward a safer health system is
changing the culture from one of blaming individuals for errors to one in
which errors are treated not as personal failures, but as opportunities to
improve the system and prevent harm.
◍ Provider Incentives Under Charge Based Reimbursement.
Answer: Providers have incentives to set high charge rates, which lead to
high revenues. Charge-based reimbursement creates incentives for providers
to contain costs because 1. the spread between charges and costs represents
profits, and the more the better, and 2. lower costs can lead to lower charges,
which can increase volume.
◍ Independent agents (brokers).
Answer: Represent any number of insurance companies through contractual
agreements with each insurer
◍ 4.1 How did ERISA (1974) impact retrospective experience-rated health
plans?.
Answer: When ERISA was enacted, the legislation allowed plans that were
self-insured under the terms of the legislation to be exempt from state regs.
Although many retrospective experience-rated health plans were
substantively self-insured, employers had to switch to being truly
self-insured to avoid the premium taxes and other regulations that the states
could impose.
◍ Affordable Care Act (ACA) subsidies.
Answer: The vast majority of people with coverage through ACA exchanges
receive a subsidy.
,◍ Selective contracting.
Answer: When a managed care organization contracts with an exclusive set
of providers based on quality or cost-effectiveness.
◍ 3.1 Is community rating relevant in today's market?.
Answer: Community rating was used by Blue Cross and Blue Shield in the
early year of HMO'sand well into the 1970's. It has some relevance in
today's market because it is advocated by proponents of universal health
insurance plans. It is also the basis of some modern rating systems.
◍ 6.3 What stipulation does the ACA make regarding the relationship in health
insurance premium between and aged insured and younger insured?.
Answer: The ACA requires premiums for the oldest insured to be no more
than three times that of the youngest insured.
◍ 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.
◍ 2.3 Describe the purpose of underwriting using the concept of reliable risk
pools..
Answer: To establish risk classes, with each having expected losses
significantly different from the others, a small dispersion of possible
outcomes and a large number of covered lives. Differences can include
gender, age, geographic location, occupation or industry.
◍ Per Diagnosis.
Answer: Provider payment rate depends on the patient's diagnosis.
Diagnoses with higher resource utilization and are more costly to treat have
higher reimbursement rates. Medicare pioneered this basis of payment in its
diagnosis-related group (DRG) system, first used for hospital inpatient
reimbursement in 1983.
◍ Medical errors.
, Answer: Third leading cause of death, after heart disease and cancer.
Estimated that 206,201 avoidable deaths occur in hospitals annually.
◍ Disadvantages of group term life insurance.
Answer: Policies can be terminated by employer. Rarely portable. Provides
pure protection only, no cash value.
◍ System of Profound Knowledge (Deming).
Answer: Knowledge of the system, knowledge of psychology, the theory of
knowledge, and knowledge of variation.
◍ 4.3 What is the approx percentage of workers in partially or completely
self-insured health plans?.
Answer: approximately 60%
◍ 6.1 Explain the consequences of combining groups with significantly
different claims experience into the same risk pool?.
Answer: produces lower premiums and more coverage for high-risk groups
but higher premiums and less coverage for low risk groups.
◍ Limitations of term life insurance.
Answer: Premiums increase with age at an increasing rate and eventually
reach prohibitive levels. Is inappropriate if you wish to save money since
there is no buildup of policy cash value.
◍ Fee-for-service (FFS).
Answer: Many variations exist. The greater the amount of services provided,
the higher the amount of reimbursement.
◍ 2.1 What is a care-out coverage?.
Answer: Coverage that may have been provided as part of a particular plan
but is now provided separately is care-out coverage. Prescription drug and
mental health benefits are often cared out.
◍ 3.4 What is credibility factor?.
Answer: Credibility refers to the extent the insurer can rely on the loss data
when using experience rating. The loss data of a small group for a short
