Which option best describes one-sided risk?

• A. Provider is penalized if costs are more but not rewarded if costs are less
• B. Provider benefits if costs are less but NOT penalized if costs are more
• C. Provider benefits if costs are more
• D. No penalties and no rewards

Answer: (B)

One-sided risk means you can gain a reward if performance is favorable, but there’s no penalty if performance is unfavorable. In this context, the provider would benefit when costs are kept below the target, yet there is no penalty if costs go above the target. That setup creates upside potential without downside penalties, which is exactly what one-sided risk describes. The other descriptions either introduce penalties for higher costs, no incentives at all, or incentives tied to worse performance, none of which capture the idea of a reward with no downside in this arrangement.