CEBS GBA 1 Exam – Certified Employee Benefit Specialist (CEBS) Group Benefits Associate – 2026/2027 Edition – 400 Questions with Evidence-Based Verified Answers

CEBS GBA 1 Exam – Certified Employee Benefit Specialist (CEBS) Group Benefits Associate – 2026/2027 Edition – 400 Questions with Evidence-Based Verified Answers Q: A prescription drug rebate occurs when: Answer There is an agreement between a pharmacy benefit manager and a drug manufacturer. Q: The concept designed to make victims of losses whole again reflect the principle of: Answer Indemnification Q: The design of any employee benefit plan should start with deciding: Answer What are the overall objectives of the plan. Q: A peril as the term applies to the insurance mechanism is defined as: Answer The cause of loss Q: A healthcare plan that has no restrictions on a member's choice of provider, no "steerage," and no basic utilization management is known as: Answer Indemnity plan Q: The legislation that plays a fundamentally important role in protecting sensitive patient information gathered during behavioral treatment is: Answer Health Insurance Portability and Accountability Act (HIPAA) Q: A dental plan in which certain procedures are reimbursed on a scheduled basis and others are reimbursed on a nonscheduled basis is called a(n): Answer Combination plan Q: Regarding return on investment (ROI) evaluations and calculations, ROI evaluations usually: Answer Only consider the payback for the investor in terms of the money they get back for the money they put in. Q: A behavioral health care carve-out program usually operates under a separate contract and from a separate company known as: Answer a Managed Behavioral Health Care Organization (MBHO) Q: There can be great variability in employer spending to sponsor a workplace wellness program. The cost of these programs per employee per year typically ranges from: Answer $0-$450 Q: Regarding employee benefit planning, the functional approach is: Answer Compatible with both the compensation/service oriented benefit philosophy and the needs oriented benefit philosophy Q: The landmark "Inland Steel Case" had extreme importance because it: Answer Stated the employer had the duty to bargain in good faith over wages which also included insurance and fringe benefits Q: Money forfeited by employees under the use-it-or-lose-it rule in cafeteria plans is called an experience gain. These experience gains may not be: Returned to the employees who incurred the forfeitures. They may be: Answer - retained by the employer - used to reduce admin expenses - used to reduce employer's required salary reduction amounts - donated to charity Q: Numerous studies have examined the effectiveness of workplace wellness programs in promoting health or preventing disease. How effective are they proven to be based on the studies? Answer These programs have had limited evidence of their effectiveness. Q: Generally in a premium conversion cafeteria plan: Answer There are no employer contributions. Q: The "managed care backlash" of the late 1990s created significant growth in which of the following types of health care organizations? Answer Preferred Provider Organizations (PPOs) Q: For a cafeteria plan to be afforded favorable tax treatment, the plan must allow participants to choose between how many benefits consisting of cash (or a taxable benefit that is treated as cash) and qualified benefits? Answer Two or more Q: The maximum annual contribution that can be made to a health savings account (HSA) is: Answer A flat dollar amount for individuals and a flat dollar amount for families Q: When a participant of a cafeteria plan makes a one-time election on coverage that stays in force from plan year to plan year unless the participant elects to make a change during the applicable election period, it is referred to as a(n): Answer Evergreen election Q: Which risk-handling techniques are being used by a firm that decides to not produce a dangerous chemical, to purchase insurance with a $10,000 deductible on its assets and to install a fire sprinkler system throughout the plant? Answer Avoidance, retention, insurance and control Q: Which of the following statements regarding dental care and the ACA is correct? Answer - Dental care is not an essential benefit for adults in the ACA - The ACA requires dental coverage for all children - Dental coverage is required by the ADA only if health coverage is provided under a self insured/self-administered plan - The ACA requires comprehensive dental care for adults and children - The ACA excludes all dental care benefits Dental care is not an essential benefit for adults in the ACA Q: A mechanism by which one attempts to prevent or reduce the probability of a loss taking place or to reduce the severity of the loss if it does take place is referred to as: Answer Control Q: Benefits for so-called lifestyle drugs are: Answer Typically excluded from employer plans. Q: Which of the following statements regarding workplace wellness programs is correct? Answer - A workplace wellness program should be designed to target the most fitness-conscious employees. - Workplace wellness programs are used almost exclusively by large employers. - The most significant drivers of cost of workplace wellness programs are incentives, equipment and outside service providers. - Health screenings known as health risk assessments (HRAs) are prohibited if used in conjunction with workplace wellness programs - Biometric testing for workplace wellness programs must be conducted by qualified physicians. The most significant drivers of cost of workplace wellness programs are incentives, equipment and outside service providers. Which of the following statements regarding managed behavioral health organizations (MBHOs) and administrative services only (ASO) arrangements is correct? Answer - ASOs are especially effective for small employers - ASOs are sometimes referred to as "fully insured" plans - An ASO transfers the financial risk of health care costs to an insurance company - A key advantage of ASOs is that employers can offer the same benefit to employees working in different states because ERISA exempts ASO plans from compliance with state laws and regulations. - Employers who purchase an ASO contract agree to assume the financial risk for claims payments up to a certain (rather large) amount but claims in excess of the stipulated amount are paid by the MBHO A key advantage of ASOs is that employers can offer the same benefit to employees working in different states because ERISA exempts ASO plans from compliance with state laws and regulations. Dental treatments are placed into ten professional treatment categories. The repair of a natural tooth is included in which of the following categories? Answer Restorative Which of the following statements regarding the functional approach to employee benefit planning is correct? - The functional approach assumes a business firm is interested in providing an industry-wide average level of employee benefits - The functional approach is appropriate only for organizations that are well-established - The functional approach is essentially a planning approach that aligns a total compensation philosophy with a strategic business objectives - The functional approach is based primarily on the needs of employees and their dependents, rather than on the compensation and service of employees - The primary goal of the functional approach is to balance short-term benefits with long-term employee benefits The functional approach is essentially a planning approach that aligns a total compensation philosophy with a strategic business objectives The ACA, in general, defined a full-time employee as one employed on average of at least how many hours per week? 30 The amount of covered medical expenses that a participant must incur before any medical benefits for non-preventative care services or treatment become payable under a plan is known as the: Deductible The Small Business Health Care Relief Act created the qualified small employer HRA (QSEHRA). This act applies to businesses with fewer than how many employees? 50 The ACA aimed to make health insurance more affordable by providing tax credits to individuals ineligible for other affordable coverage and with income between which limits: 100% and 400% of the federal poverty line Which of the following statements regarding primary care physicians (PCPs) is correct? - PCPs are not used in preferred provider organizations - Pediatricians cannot be a PCP. - PCPs are usually a general, family or internal medicine doctor (internist) - OB/GYN doctors cannot be PCPs PCPs are usually a general, family or internal medicine doctor (internist) Insurance can be distinguished from gambling by which of the following factors? (More than one factor is possible) 1. Insurance handles existing risk while gambling creates a new risk 2. Insurance is speculative risk and gambling is pure risk 3. Insurance is based on a mutual sharing of losses that occur while gambling involves a gain for one party at the expense of another. 1 & 3 Insurance handles existing risk while gambling creates a new risk Insurance is based on a mutual sharing of losses that occur while gambling involves a gain for one party at the expense of another. Which of the following is/are primary factors that have contributed to cafeteria plans becoming a standard benefit offering today? 1. The increasing costs of benefits 2. Cafeteria plans allow participants to pay for dependent care expenses through the plan and, at the same time, claim personal tax credits on their personal income tax returns. 3. The diverse workforce with differing benefit needs 1 & 3 The increasing costs of benefits The diverse workforce with differing benefit needs Which of the following statements regarding Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage is/are correct? 1. The cost of coverage under COBRA is limited, by law, to no more than 98% of the full cost of coverage for active employees 2. Employers are required to pay a significant portion of the cost of insurance for employees who continue their COBRA coverage 3. COBRA continuation coverage lasts only for a limited period of time COBRA continuation coverage lasts only for a limited period of time. Which of the following statements regarding self-funding or self-insurance is (are) correct? 1. Self-insurance is sometimes used for property exposures but it cannot be used for employee benefit plans 2. Stop loss insurance utilizes the concept of self-insurance 3. An effective self-insurance program requires a large enough number of exposure units to make losses predictable 2 & 3. Stop loss insurance utilizes the concept of self-insurance An effective self-insurance program requires a large enough number of exposure units to make losses predictable Which of the following statements regarding the effectiveness of workplace wellness programs is (are) correct? 1. Health risk assessments, conducted at the conclusion of the program, can provide a complete diagnosis of a worker's health. 2. Incentives, such as cash, movie tickets, discounts on medical care, have been shown to be very effective in increasing worker participation in wellness programs. 3. Biometric testing for wellness programs is prohibited by Genetic Information Nondiscrimination Act (GINA) Incentives, such as cash, movie tickets, discounts on medical care, have been shown to be very effective in increasing worker participation in wellness programs. An effective behavioral health program should include which of the following? 1. An integrated mental health/chemical dependency benefit. 2. Inpatient and outpatient services 3. An employee assistance program (EAP) 1, 2 & 3 Which of the following is (are) characteristics of modern prescription drug plans? 1. Plan members pay the full cost at the pharmacy and then file a claim for reimbursement 2. These plans are usually carved out from the medical benefit and are typically administered by a pharmacy benefit manager (PBM) or third party administrator (TPA) 3. These plans have not yet used mail service and the Internet but are expected to do so after regulatory permission is obtained. 1 & 2 Plan members pay the full cost at the pharmacy and then file a claim for reimbursement These plans are usually carved out from the medical benefit and are typically administered by a pharmacy benefit manager (PBM) or third party administrator (TPA) Which of the following is (are) features that are generally associated with consumer-directed health plans (CDHPs)? 1. Relatively low deductible 2. A personal spending account 3. Availability of information tools for enrollees 2 & 3 A personal spending account Availability of information tools for enrollees Which of the following is (are) major requirements of the ACA for employers who sponsor group health plans? 1. The Act eliminated the use of the "essential health benefits" list. 2. The Act eliminated lifetime maximum limitations. 3. The Act expanded coverage for preventative services. 2. The Act eliminated lifetime maximum limitations. 3. The Act expanded coverage for preventative services. A typical behavioral health speciality network might include which of the following health professionals? 1. Individual practitioners and multispecialty group practices 2. Medical doctors that specialize in addictionology 3. Developmental behavioral pediatricians All. 1. Individual practitioners and multispecialty group practices 2. Medical doctors that specialize in addictionology 3. Developmental behavioral pediatricians Which of the following is (are) descriptive of the functional approach to employee to benefit plan design? 1. It involves the evaluation of each benefit plan on a product-oriented basis 2. Using Social Security integration concepts is inconsistent with this approach 3. It is an organized system for classifying and analyzing the risks and needs of various categories of persons into logical categories of exposure to loss and employee needs 3. It is an organized system for classifying and analyzing the risks and needs of various categories of persons into logical categories of exposure to loss and employee needs In addition to medical flexible spending accounts (FSAs), the law permits which of the following other types of FSAs? 1. Dependent care FSAs that allow participants to set aside funds on a pretax basis to pay for certain dependent care expenses 2. FSAs to pay for parking and transit reimbursement 3. FSAs to pay for adoption assistance. 1. Dependent care FSAs that allow participants to set aside funds on a pretax basis to pay for certain dependent care expenses 2. FSAs to pay for parking and transit reimbursement 3. FSAs to pay for adoption assistance. Which of the following statements regarding the distinctions between health reimbursement accounts (HRAs) and health savings accounts (HSAs) is/are correct? 1. There is no federal limit on contributions to HSAs, but HRAs are subject to a rather low federal limit 2. An HRA must be funded solely by the employee, but HSAs are funded only by employers. 3. Nonmedical use is not allowed with HRAs, but such withdrawals are permitted with HSAs, subject to income tax and penalties if the participant is under age 65. 3. Nonmedical use is not allowed with HRAs, but such withdrawals are permitted with HSAs, subject to income tax and penalties if the participant is under age 65. Managed behavioral healthcare organizations have the potential to offer significant savings because of which of the following? 1. They allow large, self-funded employers to offer the same behavioral health benefits across all health plans offered. 2. They are usually managed by firms that specialize in behavioral health treatment. 3. The ACA strongly encourages the practice of carving out behavioral health benefits rather than covering them in more comprehensive health plans. 1. They allow large, self-funded employers to offer the same behavioral health benefits across all health plans offered. 2. They are usually managed by firms that specialize in behavioral health treatment. Which of the following is (are) basic differences between medicine and dentistry? 1. Medical care is rarely cosmetic; dental care often is. 2. Dental expenses generally are lower, more predictable and budgetable with the average medical claim being much higher than the average dental claim 3. There is greater emphasis on prevention in medicine than in dentistry. 1. Medical care is rarely cosmetic; dental care often is. 2. Dental expenses generally are lower, more predictable and budgetable with the average medical claim being much higher than the average dental claim Which of the following statements concerning maximum allowable cost (MAC) for drug benefits is (are) correct? 1. MAC programs reimburse up to a certain threshold on selected common generics. 2. Maximum allowable cost (MAC) is synonymous with average wholesale price (AWP). 3. The concept of MAC is only used by Medicaid. 1. MAC programs reimburse up to a certain threshold on selected common generics. Which of the following statements regarding workplace wellness programs is (are) correct? 1. Many large employers that sponsor workplace wellness programs ask employees to disclose personal health information via a questionnaire, known as health risk assessments (HRA) 2. Most large employers who sponsor workplace wellness programs say that financial incentives to participate in the plan are extremely effective. 3. Most employers require employees to submit to biometric testing (such as physical examination or lab test) as a requirement for participation in the employer's workplace wellness program. 1. Many large employers that sponsor workplace wellness programs ask employees to disclose personal health information via a questionnaire, known as health risk assessments (HRA) Which of the following entities are eligible to participate in a cafeteria plan? 1. Sole proprietors 2. Partners in a partnership 3. 2% or greater shareholders in an S-Corporation None When planning retirement income, the replacement ratio includes which of the following sources of income? 1. Social security 2. Captial accumulation plans 3. Pension benefits 1. Social security 2. Captial accumulation plans 3. Pension benefits Which of the following policy provisions have historically been used by insurers to control adverse selection? 1. Pre-existing conditions clauses 2. Suicide clauses 3. Open enrollment period restrictions 1, 2 & 3 1. Pre-existing conditions clauses 2. Suicide clauses 3. Open enrollment period restrictions Which of the following factors affect(s) the cost of an employer-sponsored dental plan? 1. Design of the plan 2. Characteristics of the covered group 3. Employer's approach to plan implementation 1, 2 & 3 1. Design of the plan 2. Characteristics of the covered group 3. Employer's approach to plan implementation Which of the following is (are) taxable benefits in a cafeteria plan? 1. Whole life insurance premiums 2. Group term life insurance premiums for coverage greater than $50,000 3. Long-term care insurance premiums 2. Group term life insurance premiums for coverage greater than $50,000 Which of the following statements regarding the types of formularies is (are) correct? 1. Preferred formularies encourage patients to use the preferred or formulary drugs in return for a reduced copayment. 2. Open formularies allow plan enrollees any covered prescription drug prescribed for them. 3. Closed formularies allow changes in the list of preferred drugs only once per year; otherwise the list is static. 1. Preferred formularies encourage patients to use the preferred or formulary drugs in return for a reduced copayment. 2. Open formularies allow plan enrollees any covered prescription drug prescribed for them. Which of the following are common ways pharmacy benefit managers (PBMs) typically generate profits? 1. Charging payers an administrative fee per transaction based on the number of prescriptions or employees 2. Filling mail-service prescriptions from their wholly owned mail-order pharmacies 3. Requiring pharmacies to remit them the difference when a plan member pays a copay that exceeds the actual cost of a drug. 1. Charging payers an administrative fee per transaction based on the number of prescriptions or employees 2. Filling mail-service prescriptions from their wholly owned mail-order pharmacies Under the Genetic Information Nondiscrimination Act (GINA), which of the following statements is (are) correct? 1. Group health plans are permitted to establish premium contribution differentials on the basis of genetic information as long as they do not exceed 30% 2. GINA prohibits employment discrimination based on genetic information 3. GINA forbids employers from asking about individuals' genetic information but there is an exception for inquiries through voluntary wellness programs 2. GINA prohibits employment discrimination based on genetic information 3. GINA forbids employers from asking about individuals' genetic information but there is an exception for inquiries through voluntary wellness programs Which of the following statements regarding flexible spending accounts is (are) correct? 1. FSAs allow individuals, before the start of the plan year, to elect a certain amount to be deducted on a pretax basis from their paycheck to pay for IRS-qualified medical expenses 2. Individuals cannot enroll in FSAs if they are covered by any other health plan 3. Employers are not allowed to contribute to FSAs 1. FSAs allow individuals, before the start of the plan year, to elect a certain amount to be deducted on a pretax basis from their paycheck to pay for IRS-qualified medical expenses Which of the following statements regarding the market acceptance of consumer directed health plans (CDHPs) is/are correct? 1. Generally, less than 25% of employers offer a CDHP as their only health plan, but a more typical scenario is for employers to offer a CDHP as a choice within a menu of plan offerings. 2. Among the largest employers, it is increasingly rare to find an employer that does not make CDHP choice available to its employees. 3. All health care expenditures are now "shoppable" because of the transparency CDHPs have brought to the healthcare market. 1. Generally, less than 25% of employers offer a CDHP as their only health plan, but a more typical scenario is for employers to offer a CDHP as a choice within a menu of plan offerings. 2. Among the largest employers, it is increasingly rare to find an employer that does not make CDHP choice available to its employees. 3. All health care expenditures are now "shoppable" because of the transparency CDHPs have brought to the healthcare market. Which of the following statements regarding health savings accounts (HSAs) is/are correct? 1. Contributions to these plans cannot be rolled over from year to year; unused amounts must be forfeited 2. There are penalties for money used for nonmedical expenses before age 65 3. HSAs are coupled with high-deductible health plans 2. There are penalties for money used for nonmedical expenses before age 65 3. HSAs are coupled with high-deductible health plans Which of the following accurately reflect(s) major federal tax advantages associated with employee benefit plans? 1. Most contributions to employee benefit plans result in tax credits for the employer 2. Most contributions to employee benefit plans are only deductible by the employer when considered income for the employee. 3. In certain types of capital accumulation plans, benefits accumulate tax-free to the employee until distributed 3. In certain types of capital accumulation plans, benefits accumulate tax-free to the employee until distributed Which of the following statements regarding the impact of GINA on wellness programs and health risk assessments is/are correct? 1. Wellness programs that avoid implementing a health risk assessment which solicits genetic information are in general GINA-compliant 2. GINA allows exceptions for inquiries through voluntary wellness programs 3. GINA imposes limits on participatory wellness programs only if such programs are offered outside a group health plan 1. Wellness programs that avoid implementing a health risk assessment which solicits genetic information are in general GINA-compliant 2. GINA allows exceptions for inquiries through voluntary wellness programs Which of the following statements describe(s) reforms enacted by the ACA? 1. The Act precluded insurance companies from denying coverage due to a pre-exisiting condition. 2. In general, the Act prohibited group health plans from offering coverage with any lifetime or annual limits on the dollar value of essential benefits. 3. Imposing coverage requirements on applicable large employers (ALEs) defined as those with more than 20 full-time employees (including full-time equivalent employees) 1. The Act precluded insurance companies from denying coverage due to a pre-exisiting condition. 2. In general, the Act prohibited group health plans from offering coverage with any lifetime or annual limits on the dollar value of essential benefits. How many employees does an employer need to have in order to be an applicable large employer (ALE) under ACA. 50 full-time employees or full-time equivalents All of the following are requirements an employer must meet to offer an Excepted Benefits - Health Reimbursement Account (ER-HRA) except: 1. Employees must be covered in the employer's general health plan (GHP) in order to be eligible for the EB-HRA 2. The amount made available through the EB-HRA cannot exceed a legally set level 3. An EB-HRA must be made available to all "similarly situated individuals" under the same terms regardless of any adverse health factors 4. Employers with more than 100 participants must file a 5500 if such information is not provided in another fashion. 5. There is no specific exception from the nondiscrimination rules for an EB-HRA 1. Employees must be covered in the employer's general health plan (GHP) in order to be eligible for the EB-HRA All of the following statements regarding behavioral health care benefits are correct EXCEPT: 1. The majority of behavioral health care benefits sold in the United States today are purchased by large groups that buy comprehensive health care benefits 2. Behavioral benefits are sold through multiple channels, including large brokerage and consulting firms, large managed behavioral health care organization (MBHO) sales forces and health carrier sales forces. 3. Under the ACA, MBHOs can only be funded through fully insured arrangements 4. The vast majority of employer sponsored plans cover inpatient and outpatient mental health treatment services 5. Coverage for behavioral benefits include intermediate mental health treatment services such as residential treatment and partial (or day) hospitalization as well as intensive outpatient services. 3. Under the ACA, MBHOs can only be funded through fully insured arrangements A broad view of employee benefits includes all of the following types of benefits except: 1. Employer's payment for direct wages 2. Employer's payment for vacation pay 3. Employer's share of Social Security taxes 4. Employer's share of medical-related payments 5. Employer's share of retirement and savings plan payments 1. Employer's payment for direct wages All of the following are common key characteristics of the group insurance technique used in employee benefit plans except: 1. A minimum number of individuals eligible 2. A waiting period applied before benefits commence 3. A steady flow of new entrants 4. A disallowance of any commission payments 5. An automatic determination of benefits 4. A disallowance of any commission payments All of the following are common basic features of a health maintenance organization (HMO) except: 1. An HMO plan requires an individual to select a primary care physician (PCP) from a network of providers 2. Reduced benefits are available for care received outside of the HMO network of providers 3. An individual's out-of-pocket expense is routinely a flat dollar amount called a copay 4. The PCP is empowered to authorize, via referrals, access to additional or specialty care 5. With rare exceptions, individuals have no need to file claims for reimbursement. 6. Generally, premiums are lower premiums compared to other models due to the level of managed care from the PCP system 2. Reduced benefits are available for care received outside of the HMO network of providers An HMO is a closed network of providers - no out-of-network care is covered All of the following are requirements for an ideal insurable risk except: 1. There must be a large number of heterogeneous exposure units that have different loss characteristics being insured against. 2. The insurer must be able to determine if the loss is covered under the policy, and if it is, how much the insurer will pay. 3. The premium must be subject to calculation 4. The premium must be reasonable or economically feasible. 5. The loss should be accidental and unintentional from the standpoint of the insured. 1. There must be a large number of heterogeneous exposure units that have different loss characteristics being insured against. All of the following statements regarding the ADA are true except: 1. The act in general forbids workers from inquiring about another worker's health status. 2. The act makes exceptions for certain medical inquiries. 3. A wellness program is deemed a voluntary one under the act as long as an employer neither requires participation nor penalizes employees who do not participate 4. In case of violations of the act's privacy rules, employees' recourse is to file a complaint with their state's enforcement authority 5. The act is applicable to employers with 15 or more workers 4. In case of violations of the act's privacy rules, employees' recourse is to file a complaint with their state's enforcement authority All of the following are key factors of the covered group that are usually considered in the cost of a dental plan except: 1. Gender distribution 2. Length of service 3. Geographic location and presence of fluoridation 4. Income levels 5. Occupations 2. Length of service All of the following are correct statements concerning the Taft-Hartley Act except: 1. It is also called the Labor Management Relations Act (LMRA) 2. It sets forth the framework for good-faith collective bargaining over wages, hours, conditions and terms of employment 3. The Act includes the rules for the collective bargaining for employee benefits 4. It relies on the Fair Labor Standards Act (FLSA) to establish the distinction between retirement and welfare benefits 5. It is the legislative basis on which jointly trusteed benefit plan are founded. 4. It relies on the Fair Labor Standards Act (FLSA) to establish the distinction between retirement and welfare benefits All of the following statements describe common characteristics of a pharmacy benefit manager (PBM) except: 1. It is considered a licensed insurance carrier 2. It is designed to control costs associated with the delivery of pharmaceutical care 3. It aims to streamline and improve the prescribing and dispensing process through online and real-time claims adjudication 4. It may maintain a retail network of pharmacies 5. It offers limited drug utilization review at the point of sale or dispensing 1. It is considered a licensed insurance carrier All of the following types of benefits may be included in a cafeteria plan except: 1. Individually-owned health insurance 2. 401(k) plan 3. Contributions to a health savings account (HSA) 4. Employer-provided dependent-care assistance 5. Employer-provided adoption assistance 1. Individually-owned health insurance All the following are characteristics of mail service programs (MSPs) for prescription drug programs except: 1. These programs typically allow a more generous quantity amount to be filled (a 90-day supply compared to a 30-day supply) 2. MSPs are typically used for chronic conditions that require maintenance medications for long periods of time 3. These programs essentially eliminate the possibility of waste 4. MSPs are typically underused because enrollees are not familiar with a plan's mail service benefit or are not sure how to access the service 5. MSPs offer a lower cost of dispensing and allow quality control through automation that is uncommon in retail pharmacy 3. These programs essentially eliminate the possibility of waste All the following statements regarding vision care plans are correct except: 1. Generally these plans use frequency limits on the number of times a participant can receive benefits during a period 2. A schedule-of-benefits plan sets maximum dollar amounts on the amount that will be paid toward a specific benefit 3. Preferred provider networks for vision benefits are similar to those for medical care 4. Vision benefits cannot be included in a flexible benefit health plan 5. Adult vision benefits are not covered under the ACA 4. Vision benefits cannot be included in a flexible benefit health plan All the following are advantages to employers and employees of cafeteria plans except: 1. Contributions to cafeteria plans are exempt from federal income tax 2. Contributions to cafeteria plans are exempt from Social Security (FICA-Federal Insurance Contributions Act) taxes 3. Contributions to cafeteria plans are exempt from unemployment Federal Unemployment Tact Act (FUTA) taxes 4. Deferral amounts usually has the effect of increasing a worker's social security benefits 5. Deferral amounts are not considered wages for purposes of determining workers' compensation premiums and other payroll-related expenses 4. Deferral amounts usually has the effect of increasing a worker's social security benefits All of the following are factors contributing to high prescription drug costs except: 1. Rigorous standards for pharmacy and therapeutics (P&T) committees' deliberations 2. Not all prescription discount, rebates and other savings are passed along to plan sponsors 3. Direct-to-consumer marketing 4. Aging of the population 5. Growth of biotechnology drugs 1. Rigorous standards for pharmacy and therapeutics (P&T) committees' deliberations All of the following are advantages to using insurance to fund an employee benefit plan except: 1. The presence of a known premium is set in advance by the insurance company 2. The use of an outside administrator distances the employer from disputes with employees involving plan coverage 3. The use of an insurance company provides the financial backing of the Federal Surety Insurance Corporation (FSIC) 4. Insurance companies often are leaders in the area of loss control and can implement systems established to limit employee benefit costs for an employer 5. It may be more economical for an employer to use an insurance than other funding alternatives. 3. The use of an insurance company provides the financial backing of the Federal Surety Insurance Corporation (FSIC) All of the following statements concerning formularies are correct except: 1. A formulary is a list of drugs preferred by a health plan or pharmacy benefit manager (PBM) 2. Formulary development typically centers on generic drugs rather than brand products 3. A pharmacy and therapeutics committee involved in the development of a formulary may be composed of physicians, pharmacists, nurses and others 4. A formulary selects drugs within the category that are most cost-effective 5. The use of formularies is common because they are very effective at moving patients to lower cost drugs. 2. Formulary development typically centers on generic drugs rather than brand products All of the following questions concerning dependent-care assistance plans are correct except: 1. Dependent care assistance plans can be offered either on a standalone basis or part of a cafeteria plan 2. The benefits provided by these plans are taxable income to those who receive the benefits 3. A dependent care assistance plan must be in writing 4. To obtain benefits under these plans, the participant's spouse also must be employed, a full time student, or physically or mentally incapable of self-care 5. Benefits cannot be provided for care provided by a person for whom a personal tax exemption is taken on the participant's tax return 2. The benefits provided by these plans are taxable income to those who receive the benefits All of the following are care management and cost-containment practices of managed behavioral healthcare organizations (MBHO) except: 1. Predictive modeling and risk assessment 2. Minimum coverage for high-risk, potentially high-cost members 3. Preauthorization to access treatment 4. Performance measurement 5. Outcomes management 2. Minimum coverage for high-risk, potentially high-cost members The ACA designated all of the following as essential health benefits (EHBs) to be included in covered individual and group health plans except: 1. Emergency services 2. Hospitalization 3. Mental health and substance use disorder services 4. Adult oral and vision care 5. Pregnancy, maternity and newborn child care 4. Adult oral and vision care All of the following benefits are considered protection-orientated except: 1. Life insurance 2. Profit-sharing 3. Long-term disability 4. Medical expense 5. Short-term disability 2. Profit-sharing All of the following statements are seen as potential concerns regarding consumer directed health plans (CDHPs) except: 1. Doubts exist as to the extent that CDHPs reduce health care spending 2. CDHPs reduce the potential for greater risk segmentation in health insurance markets 3. CDHPs can disproportionately attract favorable risks 4. CDHPs shift health care risks from insurers to consumers 5. Consumers may not effectively differentiate between more and less valuable care 2. CDHPs reduce the potential for greater risk segmentation in health insurance markets All of the following statements regarding orthodontic benefits are correct except: 1. Orthodontic benefits are almost never written without other dental coverage 2. Maximum benefits typically are expressed on a lifetime basis 3. Many of these plans limit coverage to persons under a specific age 4. These plans normally have a high deductible 5. A common coinsurance level for orthodontia expenses is 50%, but this varies widely among plans 4. These plans normally have a high deductible A sound employee benefit plan generally includes all of the following factors except: 1. An appropriate funding mechanism 2. A means of effectively communicating plan provisions 3. An acceptable administrative system 4. An appropriate level of social adequacy of benefits 5. A clearly defined description of participant eligibility 4. An appropriate level of social adequacy of benefits To offer employees an individual medical insurance-health reimbursement account (IMC-HRA), all the following rules apply except: 1. The employer must require participants to enroll in individual medical insurance coverage complying with the Public Health Service Act (PHSA) 2. The plan must require balances in an IMC-HRA account to be forfeited if the employee loses his/her individual coverage 3. Participants in the plan must specifically reject any Consolidated Omnibus Budget Reconciliation Act (COBRA) protection 4. An employer cannot offer both an IMC-HRA and a traditional general health plan to the same class of employees 5. The same terms of coverage must apply for all employees within the covered class or classes 3. Participants in the plan must specifically reject any Consolidated Omnibus Budget Reconciliation Act (COBRA) protection All of the following are characteristics of typical dental plan designs except: 1. Most plans have a calendar-year maximum for non-orthodontic expenses, and sometimes a separate lifetime maximum 2. Orthodontic and implantology expenses generally are subject to separate lifetime maximums 3. Restorations, and in some cases replacements, often are fully reimbursed 4. Most plans are being designed either through construction of a schedule or the use of coinsurance so that the patient pays a portion of the cost for all but preventative and diagnostic services 5. Preventative and diagnostic expenses generally are reimbursed at 80% to 100% of the usual and customary charges, and full reimbursement is quite common 3. Restorations, and in some cases replacements, often are fully reimbursed The Employee Retirement Income Security Act (ERISA) regulates health plans by requiring all health plans to meet certain minimum standards with respect to all of the following except: 1. Provisions that provide participants with plan information about plan features and funding 2. Provisions requiring group health plan contributions to a federal fund guaranteeing limited benefits for participants of terminated health plans 3. Provisions for exercising fiduciary responsibilities while administering a plan and managing plan assets 4. Provisions that establish a grievance and appeal process for participants. 5. Provisions that allow participants the right to sue for benefits. 2. Provisions requiring group health plan contributions to a federal fund guaranteeing limited benefits for participants of terminated health plans All of the following statements regarding Health Insurance Portability and Accountability Act (HIPAA) and possible applications to wellness programs are correct except: 1. Federal privacy protections under HIPAA apply to some workplace wellness programs 2. HIPAA privacy rules do not apply to wellness programs that are offered directly by employers outside of a group health plan 3. A group health plan is permitted to disclose protected health information to the employer without authorization under certain circumstances 4. In case of a suspected violation of HIPAA privacy rules, the US Department of Health and Human Services (HHS) would pursue legal remedies under HIPAA and sue the employer on behalf of the employee. 5. Covered entities under HIPAA include most health care providers, health care clearinghouses and health plans, including group health plans sponsored by employers, but employers are not covered entities 4. In case of a suspected violation of HIPAA privacy rules, the US Department of Health and Human Services (HHS) would pursue legal remedies under HIPAA and sue the employer on behalf of the employee. All the following statements regarding the interaction of ACA and Mental Health Parity and Addiction Act (MHPAEA) are correct except: 1. Plans may not impose financial requirements or treatment limitations on mental health and substance use disorder (MH/SUD) benefits that are more restrictive than the "predominant" financial requirements that are applied to substantially all medical/surgical benefits 2. Under ACA, mental health and substance use disorder benefits are considered essential benefits 3. Deductibles that apply to MH/SUD benefits may be different from the deductibles that apply to medical/surgical benefits 4. Annual limits may not be imposed on MH/SUD benefits 5. The ACA requires non-grandfathered group health plans to provide certain preventative services, without cost-sharing, including alcohol misuse screening and counseling, depression counseling and tobacco use screening 3. Deductibles that apply to MH/SUD benefits may be different from the deductibles that apply to medical/surgical benefits All of the following statements regarding the basic features of indemnity health plans are correct except: 1. These plans are also known as "traditional" and "fee for service" 2. Originally these plans primarily covered only inpatient hospital expenses but later added outpatient, diagnostic and physician services coverage 3. They pay a percentage of the cost of treatment (as much as 100% for emergency/preventative care and 80% for most other services) 4. They almost always require insureds to obtain permission from their physician to access specialty or diagnostic services 5. Managed care models have all but replaced traditional indemnity plans 6. Deductibles were generally under $500 4. They almost always require insureds to obtain permission from their physician to access specialty or diagnostic services. Physician permission for diagnostic tests NOT required All of the following statements regarding information tools used in the consumer-directed health plan (CDHP) movement are correct except: 1. POS plans offer members the choice of network or out-of-network providers 2. These plans typically do not have co-pays for in-network providers, but normally have sizeable deductibles 3. The individual may need to select a primary care physician to obtain referrals for in-network specialty care 4. There is no need to file a claim for reimbursement of in-network services 5. The out-of-pocket expenses for out-of-network providers is not a flat dollar amount but rather a percentage of the insurer's designated prevailing fees. 2. These plans typically do not have co-pays for in-network providers, but normally have sizeable deductibles Which act established the Health Savings Acccounts (HSAs)? The Medicare Prescription Drug Improvement and Modernization Act of 2003 created HSAs to address the lack of portability of HRA What are indemnity plans? Early health plans that provided "protection from loss". Also called traditional, fee-for-service, or conventional plans. ACA grandfathered plans may require cost sharing for preventative services. True or False? True. Capitation Paying a fixed amount per patient Contact Capitation Reimbursement paid to a specialist and based on when the patient is seen Premiums for a PPO are higher than an HMO due to the out-of-network option. True or false? True. PPO allow for limited care for out-of-network services since HMO do not allow it whatsoever. PPOs are designed to combat the managed care backlash of the 90s. Point-of-service (POS) A hybrid of the HMO and PPO. Offers both in-network and out-of-network benefits. May require the selection of a PCP for in-network specialty care referrals and have out-of-pocket expenses in the form of copays. Out-of-network services priced as percentage of cost instead of a flat copay. Lower copays and smaller network of providers than PPO. Prescription drug coverage is usually what percentage of health care budget? About 21%. Prescription drug benefits are generally carved out and managed by a PBM Describe scheduled dental plans. Charge for services according to a list of fixed dollar amounts by dental procedure offered. May include deductibles (usually small and could be lifetime basis) and coinsurance (rare) What are the advantages of scheduled dental plans? Cost control. Benefit levels are fixed and less susceptible to inflation. Uniform payments provide the same benefit, despite regional cost differences. It's easier for members and dentists to understand and good for employee relations. Any form of compensation other than direct wages that results from the employment relationship that is not underwritten or paid by the government Narrow view of employee benefits Broad view of benefits Any compensation or benefits beyond base pay/salary, including government-mandated benefits and PTO/holidays/sick time/parental leave/retirement/worker's comp Federal agency with oversight of employee rights to organize into unions and collectively bargain over wages, hours, and working conditions National Labor Relations Board (NLRB) Required good faith bargaining between employers and unions on issues of wages, hours and working conditions Labor Management Relations Act (LMRA)/Taft-Hartley Act (1947) Three main influences in the evolution of employee benefits: - The government - Unions - The market Established the distinction between retirement benefits and welfare benefits (i.e., life and health insurance) LMRA conjoins with the Internal Revenue Code (IRC) Inland Steel Co. v. NLRB (1948) Stipulated the duty to bargain in good faith over wages; also included insurance and fringe benefits such as pensions W.W. Cross & Co. v. NLRB (1949) The NLRB ruled that the good-faith bargaining includes group health and accident plans 5 Reasons for Growth in Employee Benefits Plans 1. Business Reasons (attraction/retention) 2. Collective Bargaining (unions) 3. Favorable Tax Legislation 4. Efficiency of the Employee Benefits Approach 5. Other Factors Total Rewards package Total rewards are comprised of: • Compensation (base salary) • Variable/performance-based pay (i.e., bonus) • Retirement (i.e., pension, 401(k), etc.) • Development opportunities (i.e., training, mentoring, etc.) • Benefits A systemic method used to analyze a total employee benefits program - An organized system used to classify and analyze risks - Organizes participants into risk exposure and benefit need categories - Assesses the employer program holistically in terms of needs, loss exposures, and aligning the program with strategic goals Provides a means to keep current, competitive, and compliant with tax laws, regulation changes, and planning of a benefits package. Functional Approach Disability, death, and property damage insurance can all be provided to employees to prevent what? Serious loss exposures The formula used to determine the level of retirement or disability pay an employee may receive expressed as a percentage Replacement ratio The definition of the limited view of employee benefits includes all the following except: A. Mental health counseling B. Company-sponsored health insurance C. Vacation time D. Insurance for work-related injuries E. Short-term disability for the birth of a child or cancer treatment. D. Insurance for work-related injuries Means 'uncertainty' when thinking in terms of 'loss' Risk Examples include: -Illness -Death -Disability -Unemployment -Cost of medical care Cause of the loss Peril -With property can be fire, floods, earthquakes, thefts, burglaries -Personal losses can be illness, bodily injury, and death Policies covering perils: life and health insurance Something that increases probability of a peril Hazard Physical hazards - presence of flammable materials in absence of extinguishers; machines without safety mechanisms; faulty heating/air conditioning units Moral hazards include dishonest, unethical, and immoral people - those who steal/damage company property; file fraudulent medical claims, abuse sick time; falsify pay records or expenses Morale hazards are those the arise through a person acting carelessly. This can also include the act of not securing areas or items of value; failing to notify employees of hazards, etc. Pure Risk It will happen - leading to financial loss It will not happen - no financial loss Speculative Risk 3 possibilities - there will be a loss, there will be no loss, or there could be a gain Examples: - Purchase of common stock - Acquiring a new business venture - Gambling - Retirement investments 5 Methods of Handling Risk 1. Avoidance 2. Control 3. Retention 4. Transfer 5. Insurance The attempt to prevent or reduce potential loss from taking place or to reduce severity of a loss. Control (often combined with insurance) - Smoke detectors - Fire-resistant building materials - Seat belts/airbags - Non-smoking office buildings - Annual physical exams - Proper diet - Exercise Risk assumed and paid for by the person/entity suffering the loss Retention (assumption) - must be balanced with insurance Insurance versus gambling - Both have a relationship to risk - Insurance handles an existing risk - Gambling creates a risk where one did not exist - Insurance deals with pure risk - Gambling deals with speculative risk - Insurance is based on a shared risk pool (all those in the plan) - Gambling involves one party's gain/loss - With insurance, the one suffering a loss is partially or wholly returned to their original financial situation - With gambling, the loser suffers a negative situation Disadvantages of insurance Additional costs (admin expenses, home office costs, licensing, commissions, taxes, loss adjustment, processing time) can add 2-25% of cost to premium. 6 Characteristics of an Insurable 1. Large number of homogenous risks 2. Loss should be verifiable and measurable 3. Loss should not be catastrophic in nature 4. Chance of loss should be subject to calculation 5. Premium should be reasonable or economically feasible 6. Loss should be accidental from the standpoint of the insured All of the following are advantages of using insurance for funding employee benefits plans EXCEPT: A. Knowing the amount of the premium B. Employee satisfaction C. The employer doesn't have to administrate the plan D. The ability to control losses, leading to improved costs E. Efficiency in operating the plan. B. Employee satisfaction (is a disadvantage of using insurance) Law of large numbers an insurance underwriting term that refers to the analysis of a potential risk over a large-scale population. A risk handling technique where the risk is not assumed and is mutually exclusive from other risk handling techniques Avoidance Behavior such as failure to replace the machine guards on manufacturing equipment is this type of hazard Physical hazard A risk handling technique that involves an action or mechanism to reduce the probability or severity of a loss Control A risk handing technique where risk is assumed and paid for by the person suffering the loss Retention Administrative overhead costs such as office costs, commission, taxes, licensing taxes, and load adjustments Loading costs Insurable risk With a large number of homogenous units, losses can be verified and measured. Losses should not be catastrophic. A technique in employee benefits that will mitigate the impact of adverse selection if participants were allowed to enroll as individuals Group insurance technique Early health plans that provided 'protection from loss'. Also called traditional, fee-for-service, or conventional plans. Indemnity plans A hybrid of HMO and PPO Offers in-network and out-of-network benefits May require PCP for referrals Out-of-pocket expenses in the form of copays Smaller network of providers Out-of-network services are priced as percentage of cost rather than flat copay Point of Service (POS) Play or pay mandate Requires medium and large employer to offer health insurance to the newly defined full-time worker (30 hours per week) or face paying a penalty. Per time period payment Common Term: Budget and Salary. For example, physicians are paid salary salaried and government hospitals are paid by budget. Per beneficiary payment Common term: Capitation. For example, a managed care organization pays a physician that is not their employee. Per recipient payment Common term: Contact capitation. For example, a physician is paid for specialist services. Per episode payment Common term: Case rates, payment per stay, and bundled payments. For example, the plan pays for a hospital stay or various services such as a resource-based provider like a surgeon according to DRGs. Per day payment Common term: Per diem and per visit. For example, the plan pays for a stay in a nursing facility, outpatient services, etc. Per service payment Common term: Fee-for-service. For example, payments are made for each service rendered in a day i.e., doctor, anesthesiologist, etc. Per dollar cost payment Common term: Cost reimbursement. For example, a percentage of the cost allowed by payer is allowed to critical access hospitable, nursing facilities, etc. The per dollar cost method simply charges the patient a predetermined percentage of the cost of the care to the provider. Per dollar of charges Common term: Per dollar of charges. For example, a payment is used for any type of provider and is determined by the charges billed by the provider. They are generally comprised of physicians and hospitals that get paid by fee-for-service or by physician care or inpatient care episode. ACOs- Accountable Care Organizations They may be paid using traditional payment methods such as by capitation or episode, but under performance standards. Medical homes This is also known as the allowed amount, eligible expense, payment allowance, or negotiated rate. It is generally the basic cost of a service in a geographic area. Usual, customary, or reasonable (UCR) fee Employment-based medical plans that cover a percentage of losses for hospital, diagnostic, and physician services expenses Indemnity plans (traditional plans, fee-for-service) This type of plan focuses more on catastrophic insurance and typically has a lower premium cost and a higher deductible. HDHP What are the characteristics of CDHP? - Designed to encourage better cost-conscious treatment decisions on the part of the consumer - Controls for morale hazard on the part of the consumer compared to those who are fully insured - Reduces the risk protection generally provided by insurance - Has a corresponding personal spending account - Has information and tools for enrollees to self-manage their care more effectively - Promotes greater value in health care spending What are the cons of CDHP? - Consumers may use less medical care due to high deductibles, but may actually receive less valuable care ▪ Greater cost- sharing can lead to a burden on low-income and/or less healthy enrollees - Potential for greater risk segmentation as mainly favorable risks (more healthy enrollees) based on these plans having lower premiums and higher cost-sharing What is an Account-Based Health Plan? A plan that includes an account where the participant can pay for certain medical expenses for themselves and their covered dependents. Examples: HDHP plus HRA, HSA, or FSA Used when an employer offers a CDHP with an HRA or an HSA for expenses related to dental and vision claims Limited FSA Describe the characteristics of an HRA? - Only employers can contribute to account (employee contributions are not permitted) and their contributions are exempt from FICA and employment taxes - Reimbursements are tax free to employees - Employer can set contribution limit (but there is no limit per IRS) - Employer manages funds in the account - Employee must be enrolled in employer-sponsored health plan (unless the HRA is limited to vision and dental expenses) - DOES NOT NEED TO HDHP - Earnings do not accrue and the employer can decide whether to roll over the money from year to year - Remaining balances are forfeited upon termination (unless the employee enrolls in COBRA) - Insurance premiums paid through cafeteria plan and long-term care insurance premium may be covered expenses in HRA (long-term care SERVICE is NOT covered) - Depending on the plan design, reimbursements can start as early as beginning of year - No catch up contributions for 55+ What are the characteristics of an HSA? - Employee contributions made through a cafeteria plan are tax-free. An employee may make contributions outside of the cafeteria plan and receive positive tax treatment. - Employer contributions are exempt from FICA & employment taxes - Employee can adjust or discontinue contributions throughout the year (no qualified event required) - A qualified financial institution or mutual fund maintains the funds for employee use - Must be enrolled in a qualified HDHP - Contributions, interest and investment gains are tax free - Funds roll over from year to year and are portable - Cannot be used to pay for premiums except - (COBRA, Long-term care insurance, coverage while unemployed, premiums for Medicare A or B, premiums after age 65) - Only available funds can cover reimbursements - No catch-up contributions for 55-65 yr olds - No payment proof required (subject to IRS audit) - At age 65, money can be withdrawn as taxable income with no penalty for nonmedical use What are the recent changes to HRA? - Small business health care relief act (2016) created the Qualified Small Employer HRA (QSEHRA) allowed employers with less than 50 employees to reimburse employees for purchased health insurance - Presidential Executive Order 13813 (2019) allowed HRAs to covered excepted benefits and reimburse IMC premiums beyond QSEHRA What is IMC-HRA? - allows for reimbursements through HRA funds for IMC - an employer must require employees to enroll in IMC compliant with PHSA (Public Health Service Act) - Balance is forfeited if employee loses coverage - IMC-HRA is subject to COBRA - An employer CANNOT offer traditional insurance AND IMC-HRA - Employer must identify class/classes of employees who can participate in the IMC-HRA before plan year begins - All coverage must be the same for all employees (regardless of class) - Employees must have the annual option to opt out/waive it - IMC-HRA programs are subject to annual substantiation and verification procedures - Employee must be given a 90-day written notice before plan year begins - There is a MAXIMUM DOLLAR AMOUNT for REIMBURSEMENT - Required to provide description of IMC - Participants must know how it will affect eligibility for ACA premium tax credit (PTC) - Employees need to prove they are enrolled in IMC What is an Excepted Benefits HRA (EB-HRA)? - covers employees who choose to be covered by short-term medical insurance, those seeking reimbursement for copays, deductibles, limited scope dental/vision expenses, long-term care, nursing home care, home health care, community based care and any other benefits not covered by the health plan. - employer must provide another health plan that meets PHSA standards for those eligible for EB-HRA - employees must have a choice to solely enroll in EB-HRA without medical coverage - funds cannot exceed legally set amount - employer with more than 100 EB-HRA participants must file 5500 if not including this group in form for medical plan - must provide SPD - must follow non-discrimination rules (cannot offer better benefits to senior employees) Which of the following are concerns with the use of CDHPs? -Consumers may fail to differentiate the value of care compared to when using other plans -CDHPs may enhance segmentation/imbalance in the market by attracting more favorable risks -There are doubts about CDHPs reducing health care spending -None of the above -All of the above -All of the above In relation to CDHPs, risk selection is of the most concern to which group: A. Large employers B. Small employers C. Administrators D. Taxpayers E. Employees A. This concerns large employers the most since they're more likely to offer other plans. A type of health plan with a high deductible and a personal spending account that puts more risk on the participant CDHP A type of savings plan funded only by the employer, with no federal limit on contributions and the option to allow accumulation from year-to-year HRA How insurers design plan policies results in low and high-risk participants having different preferences for coverage Risk selection When CDHPs generate greater risk selection because products are attractive to low-risk enrollees who expect to use less care Risk segmentation Written to charge for services ac