Risk sharing involves...

• A. Assuming part of the risk and transferring part of the risk
• B. Entirely transferring risk to insurer
• C. Avoiding risk altogether
• D. Reducing risk exposure without sharing

Answer: (A)

Risk sharing means both sides share the financial impact of a loss. In health insurance, you transfer part of the risk to the insurer by paying a premium, and the insurer agrees to cover eligible expenses. At the same time, you retain part of the risk through features like deductibles and coinsurance, which require you to pay a portion of costs up to limits like an out-of-pocket maximum. The insurer may also reinsure some of its risk to spread it further. This blended approach—you taking on some costs and the insurer taking on the rest—is what constitutes risk sharing. Options that imply transferring all risk, avoiding risk entirely, or reducing exposure without sharing don’t reflect how risk sharing works in a typical health plan.