CEBS GBA Exam 1 Questions And Answers 2024 Broad view of Employee Benefits (Mod 1.1) - correct answer-Considers Employee Benefits to be virtually any form of compensation other than direct wages paid to Employees (Ex: WC, Unemployment, State DI, SS, Vaca

CEBS GBA Exam 1 Questions And Answers 2024 Broad view of Employee Benefits (Mod 1.1) - correct answer-Considers Employee Benefits to be virtually any form of compensation other than direct wages paid to Employees (Ex: WC, Unemployment, State DI, SS, Vacation, Holidays, 401K/Retirement, Employer share of Medical, Severance Pay, Child Care, etc..) Narrow view of Employee Benefits (Mod 1.1) - correct answer-Any type of plan sponsored or initiated by Employees and Employers and engaged in providing benefits that result from the employment relationship and that are not underwritten or paid directly by the government; (Ex: Benefits excluded include those legally mandated - WC, SS). Impact of Labor Unions on Employee Benefits (Mod 1.2) - correct answer-Through Collective Bargaining, Employee Benefit Plans have been impacted. In 1948 ruling states that the duty to bargain in good faith over wages also included insurance and fringes (pension). In WW Cross & Co, NLRB ruled wages included health and accident plan. What is the Taft-Hartley Act? (Mod 1.2) - correct answer-The Labor Management Relations Act of 1947 is a United States federal law that restricts the activities and power of labor unions. This set forth good-faith collective bargaining over wages, hours, terms of employment and benefits. 3 Examples of Tax Advantages of Employee Benefit Plans (Mod 1.2) - correct answer-1: Employer Contributions are Tax Deductible 2: Employer Contributions are not considered income to Employees 3: Certain Retirement Benefits Accumulate Tax-Free until distributed. Examples of Questions that should be addressed when creating benefit objectives (Mod 1.3) - correct answer-Ex: What benefits should be provided? Who should be covered? Should Employees have options? How should plan be financed? How should plan be administered? How should plan be communicated to Employees? What is the Functional Approach to Employee Benefit Planning? (Mod 1.4) - correct answer-Application of a systematic method of analysis to an Employer's Total Employee Benefits Program. It analyzes the organization's EBP as a whole in terms of its ability to meet various employee's needs and to manage loss exposures within the overall compensation goals and parameters. Why is the Functional Approach appropriate when planning, designing and administering Employee Benefits? (Mod 1.4) - correct answer-1: EE Benefits Significant Element of EE Comp and are a Tax-Effective Way to Compensate 2: EE Benefit Represent Large Labor Cost, so ER's should effectively plan/cost-control 3: In the past, EE Benefits were adopted on piece-meal basis; helps to now fill gaps/overlap 4: Systematic Approach to planning helps to keep the EBP current, competitive and in compliance with updated requirements (ACA) 5: Benefits to be integrated properly together Compare Compensation/Service Oriented Benefit Philosophy with the Needs-Oriented (Mod 1.4) - correct answer-Compensation/Service: EBP comprised of primarily compensation, service or both. Level of benefits tied to salary or pay levels/years of service Needs Orientated: Focuses on Needs of EE's and their dependents Identify Steps in Applying Functional Approach (Mod 1.4) - correct answer-1: Classify EE/Dep Needs & Objectives (in logical/functional categories) 2: Classify Categories of EE's to be protected 3: Analyze present benefits in terms of functional categories of needs/objectives, persons to benefit, and regulatory requirements 4: Determine any gaps or overlap in benefits from all sources in terms of functional categories of needs & the persons to be protected 5: Consider recommendations for changes 6: Estimate costs/savings from each recommendation 7: Evaluate alternative methods of financing for those recommended benefits (and existing ben) 8: Consider other cost-saving techniques 9: Decide upon appropriate benefits and methods of financing as a result of analysis 10: Implement Changes 11: Communication Changes to Employees 12: Periodically re-evaluate EBP Define Needs/Exposures covered under EBP (Mod 1.4) - correct answer-1: Medical Expenses (EE/Dep) 2: Losses due to Disability (Short/Long Term) 3: Death (EE/Dep/Retirees) 4: Retirement Needs 5: Capital Accumulation Needs/Goals 6: Needs for Unemployment/Layoff/Termination 7: Needs for Financial/Retirement Counseling 8: Losses from property/liability exposures 9: Needs for Dependent Care Assistance 10: Needs for Educational Assistance (EE/Dep) 11: Needs for Custodial-Care Expenses (LTC) 12: Other Needs/Goals (Stock Purchase Plan) Explain Concept of Replacement Ratio in terms of creating Retirement/Disability Plans (Mod 1.5) - correct answer-A Replacement Ratio is a person's gross income after retirement, divided by his or her gross income before retirement. Should include SS, capital accumulation benefits as well as retirement plans. Define Protection-Oriented Benefits (Mod 1.5) - correct answer-Consist of Medical Expense Benefits, Life/STD/LTD Insurance - protect against serious loss exposures that could spell immediate financial disaster. As such, they have a relatively short probationary period due to the need of immediate coverage. Define Accumulation-Orientated Benefits (Mod 1.5) - correct answer-Consist of Pension Plans, Profit-Sharing, Savings, 401K, etc...which reward an Employee for long service with an Employer. Involve a longer probationary period since viewed as a reward - not a disadvantage for long-term employees. Impact of making a plan Contributory on Employee Participation (Mod 1.5) - correct answer-Impacts group as a whole - not everyone will elect due to cost. If participation is mandatory in a contributory plan, may create employee relations problem. Describe arguments of flexibility in designing employee benefit plans as it relates to functional approach (Mod 1.5) - correct answer-Argument 1: More flexibility EE has, more likely he or she will select a benefit that best meets needs/goals - thus, flexibility in plan design/options facilitates functional approach. Argument 2: Works against functional approach because some EE's may not recognize all their needs and leave some uncovered. Define concept of risk (Mod 2.1) - correct answer-Uncertainty with respect to possible losses. Inability to determine with certainty the actual number and value of claims. Define relationship between peril and hazard (Mod 2.1) - correct answer-Peril: Cause of a loss (fires, floods, theft, death) Hazard: Condition that increases probability that a peril will occur or tends to increase severity of loss when a peril occurs. Define physical hazard, moral hazard, morale hazard (Mod 2.1) - correct answer-Physical: Physical Condition (Defective Wiring, No Fire Extinguisher), increases chance of loss Moral: Dishonesty increases chance of loss (Arson)...b/c of Moral, premiums are higher to all. Attempt to control by careful UW and provisions such as deductibles, waiting periods, exclusions Morale: Carelessness or Indifference by insureds since they have insurance (protected from loss). How does pure risk differ from speculative risk (Mod 2.2) - correct answer-Pure Risk: Situations where two alternatives are possible - risk will happen (no loss) or it will happen and a financial loss takes place. Many EB Coverages fall into this classification. Nothing positive can result from Pure Risk, but many are insured (Fire, Auto, Illness, Disability) Speculative Risk: Involve a possibility (that is not present in pure risk) of a gain. Three potential outcomes: Loss, No Loss, Gain (Ex: Purchase Stock, Gambling) Most Important Type of Pure Risk (Mod 2.2) - correct answer-Personal Risk (Death, Illness, DI, Unemployment) Summarize Methods for Handling Risk (Mod 2.2) - correct answer-1: Avoidance - does not take on risk/gets rid of 2: Control - attempts to prevent or reduce the probability/severity of a loss taking place 3: Retention - risk is assumed and paid for by the person suffering the loss 4: Transfer - one shifts the financial burden of risk to another party 5: Insurance - form of transfer which the financial burden is transferred to insurance company How is insurance a mechanism for EBP's? (Mod 2.3) - correct answer-Insured (EE/ER) pays money (premium) into a fund (insurance company). Upon occurrence of loss, reimbursement is provided to person suffering loss. Thus, risk has been reduced/eliminated and all who paid into the fund share the resulting loss. Compare insurance mechanism to gambling (Mod 2.3) - correct answer-Insurance is a mechanism to handling existing risk - gambling creates risk where one did not previously exist. Risk caused by gambling is 100% speculative, while insurance deals with pure risk. Gambling involves a gain for one party while insurance is a mutual sharing of any losses. The loser in the gambling transaction remains in a negative situation while the insured is financially restored in whole or part to prior condition. Define Indemnification (Mod 2.3) - correct answer-Principle of making the insured whole again after reimbursement for covered loss takes place - similar financial situation than prior to claim. Which risk handling technique is mutually exclusive (Mod 2.3) - correct answer-Avoidance - when you avoid a risk, you have no losses so there is no need for other techniques State advantages/disadvantages of using insurance to fund an EBP (Mod 2.3) - correct answer-Advantages: -Known Premiums (Budgeting) -Outside Administration (Handled by Insurance) -Financial Backing -Cost Management (Design Plans to limit cost) -Economy (Insurance more efficient/lower cost) Disadvantages: -Possible Additional Costs (Admin, Comm, Overhead, Premium Taxes) -Employee Satisfaction (Slow, Claim Denials) Describe characteristics of ideal insurable risk (Mod 2.3) - correct answer-1: Must be large number of similar risks (law of large numbers) 2: Loss should be verifiable and measurable 3: Loss should not be catastrophic in nature 4: Chance of loss subject to calculation (avg frequency/severity) - adequate premium 5: Premium should be economically feasible - insured should afford premium/less than face value or amount of policy coverage 6: Loss should be accidental and unintentional from the insured's standpoint/control (moral) Describe characteristics of group technique that enable life/health to be written as EBP by minimizing adverse selection (Mod 2.5) - correct answer-1: Only certain groups are eligible 2: Steady flow of lives through the group 3: Minimum number of covered lives 4: Minimum portion must participate 5: Eligibility Requirements 6: Maximum Limits Imposed (prevent excess cov) 7: Conservative Guarantee Issue Amounts Describe Indemnity Plans (Mod 3.1) - correct answer-The 1st employment based medical plans covered catastrophic losses (inpatient hospital expenses) - later added outpatient, diagnostic and physician services. Early programs and their successors known as Indemnity Plans (or traditional, fee-for services). They pay a percentage of cost of treatment (100% Emergency/Preventative and 80% all other) and don't require permission to access specialty. Describe Managed Care (Mod 3.1) - correct answer-Insurance carriers have a role in steering health services/care while prepaying some portion of healthcare services. The managed care model (in the form of Health Maintenance Organizations - HMO's) all but replaced traditional indemnity plans. Define common types of Employer Sponsored Health Plans (Mod 3.1) - correct answer-1: HMO (Health Maintenance Organization) 2: PPO (Preferred Provider Organization) 3: POS (Point of Service Plan) 4: HDHP (High Deductible Health Plan) - linked to Tax-Advantaged Savings Account How does an HMO operate? (Mod 3.1) - correct answer-Requires individual to select primary care physician (PCP) from a network of providers. PCP is responsible for managing individual's care and if care is required beyond scope of PCP, they will provide a referral to specialty care. No benefits (except emergency) are available outside the Network. Out of pocket expenses (PCP/Specialty) are routinely a flat dollar amount (copay) - no need to file for reimbursement. How does a PPO operate? (Mod 3.1) - correct answer-52% of Covered Workers Enrolled; Designed in response to HMO criticism, allows limited benefits for care received out of the preferred network and requires no referral to see a specialist. If specialist is in-network, coverage may be similarly structured with copays under HMO. Outside network, cost is significantly higher. How are POS plans part of a hybrid between HMO/PPO plans? (Mod 3.1) - correct answer-Offers in-network (preferred) and out of network (nonpreferred) benefits. Individual may need to select PCP to obtain referrals for in-network specialty care. Out of pocket expenses for in-network providers are copays (similar to HMO cost...slightly higher) - no need to file for reimbursement. For out of network, out of pocket expenses are not a flat dollar amount but a percentage (ex: 40% common) of fees. Contrast PPO's vs POS' (Mod 3.1) - correct answer-Both overlap significantly. Differences do include primary care provider requirement by POS but not PPO; lower copay amounts for preferred care in POS than in PPO; smaller network in a POS than PPO. Describe HDHP's (Mod 3.1) - correct answer-Provides catastrophic insurance. Trades lower premium cost to higher deductible by paying benefits only after insured has incurred significant out of pocket expenses. Developed so individuals have greater financial stake in healthcare decisions - manage expenses, offers possibility of accumulating health care savings in tax-advantaged account (both ER/EE contrib's) What are the 3 types of savings options coupled with HDHP's? (Mod 3.2) - correct answer-1: FSA's (Flexible Spending Accounts) - before plan year, elect a certain amount to be deducted on a pre-tax basis from check (not to exceed IRS limit of $2,650). Available throughout the year for qualified expenses - cannot be refunded for unused amount at end of plan year. 2: HRA's (Health Reimbursement Arrangements) - Employer Funded accounts established to pay health care expenses - not required by law to roll over unused contributions over plan year. 3: HSA's (Health Savings Accounts) - coupled with HDHP's. Owned by the EE and funded with tax-free contributions made by EE, ER or both. Unused contributions can be rolled over year to year. Penalties for money used for nonmedical expenses before Age 65. Contrast between an In-Network (Preferred) vs an Out-of-Network (Non-Preferred) Provider (Mod 3.3) - correct answer-In-Network: Contract with individual's health insurance plan to provide services to the member at a discount (for increased volume). Some plans may have a tiered structure with varying out of pocket costs. Out-of-Network: No contract with insurance plan...when available, costs are considerably higher. Define terms "Allowed Amount" and "usual, customary or reasonable (UCR) fee" as related to Out-of-Network Benefits (Mod 3.3) - correct answer-Terms used by health plans to determine the maximum amount the plan will pay for covered health services. Can also be called negotiated rate, payment allowance, etc. If the provider charges more than the allowed amount by the health plan, the provider can charge the member for the difference. Describe special consideration given to preventative care (Mod 3.3) - correct answer-Treatments that fall under preventative (shots, mammograms, cholesterol, etc) are covered w/o any deductibles, copays or coinsurance when in-network. Now ACA mandates all preventative services are covered under group health with no charge of ded, copay, coins (Mod 3.5) Describe the history of prescription drug coverage (Mod 3.4) - correct answer-In the early days, PDC was a small portion of overall health and such expenses were not covered. When coverage eventually became available, it was originally subject to same deductibles/coinsurance as office visits, lab work and other outpatient services. Today, it is traditionally carved out and administered by Pharmacy Benefit Managers (PBM's), these are TPA's contracted to process claims and reimburse pharmacies for dispensing drugs, as well as cost containment/disease management. Impact of parity legislation of MH/SA (Mod 3.4) - correct answer-Until recently, MH/SA had limited coverage compared with medical and surgical care in the form of lower reimbursement rates (ex: 50% for these services vs 80-100% for non MH/SA), fewer allotted visits, lower lifetime/annual dollar out of pocket maximums. This has been aided by ACA and MHPA. Describe (MBHO's) managed behavioral health care organizations (Mod 3.4) - correct answer-In the 1980's, behavioral health was carved out by many insurance plans and contracted out to MBHOs. These are independent organizations - key objective of separation was to control costs through oversight of expenses (case management and early intervention). Future is uncertain given ACA's support of integrated/coordinated care rather than carveout. List the insurance reforms enacted by (ACA) the Affordable Care Act (Mod 3.5) - correct answer-1: Expansion of eligibility of medical benefits under the federal gov't for low income individuals 2: Prohibition of denial of insurance benefits for physical or mental illness present before coverage began (pre-existing conditions) 3: Restrictions on variations in premium rates by insurers and tax credits/subsidies for low-income individuals purchasing individual coverage 4: Establishment of marketplace exchanges to standardize health care plans 5: Group health insurance mandates having direct/indirect impact on employer-sponsored. Summarize impact of group health plans due to ACA (Mod 3.5) - correct answer-1: Play or pay rules requiring medium/large ER's to offer health insurance to ACA-defined FT EE's or pay a penalty (must be affordable**) 2: Establishment of a list of essential health benefits 3: Elimination of lifetime maximums and the capping of out of pocket maximums. 4: Expansion of coverage for preventative services 5: Temporary tax subsidies to small employers who offer group health 6: New administrative/reporting requirements How do payment methods affect delivery of healthcare? (Mod 3.6) - correct answer-Affect whether, how and how much care is provided. Ex: Hospital Length of Stay, diagnostic imaging in phys offices, home health care visits, coordination among phys/hosp, etc. Discuss the eight basic payment structures for all healthcare providers (Mod 3.6) - correct answer-1: Per Time Period (Budget/Salary) - Salaried Physicians and Government Hospitals 2: Per Beneficiary (Capitation) - Managed Care Org payment non-EE physician 3: Per Recipient (Contract Capitation) - physician specialist services 4: Per Episode (Case Rates, Payment Per Stay, Bundled Payments) - Medicare's diagnosis related groups (DRGs) & resource based relative value scale (RBRVS) 5: Per Day (Per Diem, Per Visit) - payments for nursing facilities 6: Per Service (Fee for Service) - payments for physician services, dentists, medical equipment. Separate payments are often made for multiple services per day. 7: Per Dollar of Cost (Cost Reimbursement) - payments for critical access hospitals, gov't owned providers and nursing facilities. Payers typically pay a percentage of cost. 8: Per Dollar of Charges (Percentage of Charges) - method can be used by any provider type. Based on billed charges. -All correspond to division of financial risk b/w payer and provider. Financial risk gradually shifts from primarily being on providers when payment is per time period to primarily on payers when payment is per dollar of charges. Explain how changes in payment methods can have sweeping effects using examples from Medicare reform (Mod 3.6) - correct answer-In the early 1980s, Medicare payment method was changed from paying according to hospital costs to pay for diagnosis related groups (DRG's). Payment to DRG's led to decreased hospital costs, shorter lengths of stay, reduced growth in medicare payment and even increases in hospital margins (also accelerated growth in outpatient/post-acute care). In the early 1990s, Medicare moved physician payment from per dollar of charges to per service - this change insulated Medicare from charge inflation but did not protect it from growth in service volume (over 8 years, grew more than twice as fast as spending for other services and was driven entirely by growth in volume). Name three features associated with a (CDHP) Consumer Driven Health Plan (Mod 4.1) - correct answer--High Deductible -Personal Spending Account -Availability of information tools for enrollees Goal is to encourage enrollees to be wise consumers of health care services by exposing to financial consequences of their choices. They emerged as backlash against managed care plans - intended to control costs and promote greater value in health care spending by shifting responsibility from insurers to consumers. Also they are a way to accommodate diverse consumer preferences. Describe concerns made by critics of CDHPs (Mod 4.1) - correct answer-1: Consumers uneducated - unable to differentiate effectively between care 2: Potential for greater risk segmentation if CDHPs attract disproportionally favorable risks due to their lower premiums/higher cost sharing 3: Doubts exist whether CDHPs will actually reduce healthcare spending What aspects of cost sharing are relevant to CDHPs (Mod 4.1) - correct answer-1: Annual Deductible is the amount paid out of pocket before services are covered by plan 2: After deductible is met, services are subject to plan's cost-sharing requirements (typ 20%) 3: Most plans have an Out of Pocket Maximum - max amount an enrollee must pay for covered services during a plan year before plan kicks in 100%. Distinguish b/w HRAs and HSAs with regard to the account funder (Mod 4.1) - correct answer-HRAs may be funded only by the employer; HSAs may be funded by the ER, EE or both Distinguish between HRAs and HSAs with regard to the annual contribution limit (Mod 4.1) - correct answer-HRAs have no federal limit on contributions HSAs have a maximum allowable annual contribution limit Distinguish between HRAs and HSAs with regard to the rollover provisions (Mod 4.1) - correct answer-HRAs - ER's may choose whether to allow funds to accumulate year to year; can also choose to withdraw any unused funds after employment is terminated HSAs - regardless of ER/EE contributions, accumulate over time year over year Distinguish between HRAs and HSAs with regard to the nonmedical use (Mod 4.1) - correct answer-HRAs - nonmedical use not allowed HSAs - nonmedical use allowed, but penalized before age 65 Evaluate the impact of ACA on CDHPs (Mod 4.1) - correct answer-ACA created uncertainty on CDHPs because of concern they would not meet minimum actuarial requirements of the act (package of min essential benefits w/act value of 60%) - 1/2 enrolled didn't meet min benefits. ACA also made regulatory changes - penalty HSA risen from 10 to 20% & over the counter meds cannot be used for reimbursement on flexible spending accounts. CDHPs still remain strong in post-ACA. Enrollment trends in HDHPs with HSAs vs HDHPs with HRAs (Mod 4.2) - correct answer-Many more firms offer HSAs (20%) than HRAs (7%). HRAs still remain attractive as they offer greater flexibility in product design due to less strict regulations (HSA linked to "qualified" HDHP) - accounts also act as savings account if EE switches plans/terminates. Effect of firm size on CDHP / Enrollment trends on group/individual market (Mod 4.2) - correct answer-Large firms more likely to offer CDHP than small/medium - enrollment has increased in both individual and group, but more rapidly in group. How do CDHP premiums compare to those of other plans? (Mod 4.2) - correct answer-CDHP premiums generally lower due to 3 main factors: 1: Extent to which services are financed by out of pocket payments 2: Differences in health status among enrollees 3: Prices of services used by enrollees, conditional on health status. Compare premiums, contributions and deductibles of HDHP/HRAs vs HDHP/HSAs (Mod 4.2) - correct answer-HDHP/HSAs tend to have lower premiums, lower employee contributions and higher deductibles than HDHP/HRAs. EE's own control of HSA, while ER controls HRA. Describe concern of CDHP risk segmentation and summarize two ways in which it may occur (Mod 4.3) - correct answer-Concern is development of CDHP's will generate greater risk selection since this product is more attractive to low-risk (healthier) enrollees - early experience did reflect this. Two ways it may occur: (Asymmetric info b/w insurer & enrollees) - insurers have incentives to design policies that will cause consumers to self-select into coverage based on their risk. (Low and High Risk Participants have different preferences for coverage). Is risk selection among employer groups an issue for large or small employers? (Mod 4.3) - correct answer-More an issue for large employers with multiple plans. Small employer likely to offer CDHP on a full-replacement basis. Describe how CDHPs impact spending and describe the resulting reductions (Mod 4.4) - correct answer-CDHPs reduce healthcare spending substantially beyond the first year - primarily in low and medium risks (healthier enrollees). This is primarily driven by reductions in pharmaceutical and outpatient expenditures. In drug utilization, concentrated on drugs with asymptomatic (carrier, no symptoms) conditions - hypertension, high cholesterol - only modest reductions w/chronic conditions. Outpatient utilization declined in med to high risks. Identify the affects CDHPs have on preventative and healthcare services (Mod 4.4) - correct answer-CDHPs generate few/no reductions when use of preventative services are not subject to the deductible (Ex: Colonoscopy subj to ded, alternative option used). Reduce use of less clinically appropriate care - RAND's Health Insurance Experiment (HIE) conducted btw '71-'82 (analyzed effects of cost sharing on service us/quality of care/health), one study shows CDHP enrollment led to reductions in physician visits for acute and chronic conditions and high/low priority. What is impact of healthcare use dependent on employer contributions in the form of HSA/HRAs (Mod 4.4) - correct answer-Plans w/higher deductible and less generous HRAs generate large reductions in spending. Cost savings = higher deductibles Long Term Reductions in CDHPs associated with smaller contributions to spending accounts and for plans with higher deductibles offering HSAs as opposed to HRAs. To what extent have tools been provided to CDHP enrollees? (Mod 4.5) - correct answer-CDHPs intended to control costs by shifting responsibility of health decisions to consumer. Most disappointing area of movement, tools have been lacking. Few allow enrollees to compare cost and quality across hospitals - even less with physicians. Costs are based on averages and estimates are procedure based rather than episode based. Enrollees with chronic illness more likely to use tools. How well do CDHP enrollees understand their plan features as well as control costs? (Mod 4.5) - correct answer-Limited understanding, especially between salaried and hourly EE's. Faced barriers in costs, especially when seeking care of urgent problems, reluctance to discuss cost with doctors and inaccurate knowledge about what was covered. After meeting doc, felt had no ability to control costs. Describe differences between medicine and dentistry (Mod 5.1) - correct answer-1: Physicians practice in groups while dentists are solo. 2: Dental care is preventative and routine (2+ times a year); many people don't visit doctor for years (only when symptoms present). 3: Dental treatment is elective and is sometimes is postponed. 4: Dental treatment never life threatening, charges can be discussed in advance. 5: Dental care often cosmetic. 6: Dentistry often offers variety of alternative treatments that are equally effective but vary in cost. 7: Dental expenses generally lower, budgetable 8: Greater emphasis on prevention in dentistry than in general medicine. Under ACA, dentist coverage is not essential benefit for adults. Who covers dental? (Mod 5.1) - correct answer-1: Insurance Companies (MetLife 12%) 2: BlueCross/BlueShield (11%) 3: Others, like State Dental Associations (Delta Dental: 31%), Self-Admin, etc Discuss how dental plans resemble medical plans (Mod 5.1) - correct answer-Three basic approaches: 1: Fee for service indemnity 2: PPO (Preferred Provider) 3: Dental Health Maintenance Org -PPO prevailing (fee for service disappearing) Identify the ten professional treatment categories (Mod 5.1) - correct answer-1: Diagnostic (Routine Oral Exams/X-Rays) 2: Preventative (Cleanings) 3: Restorative (Filings) 4: Endodontics (Root Canal) 5: Periodontics (Gums) 6: Oral Surgery (Wisdom Teeth Extraction) 7: Prosthodontics (Crowns, Bridges, Dentures) 8: Orthodontics (Braces) 9: Pedodontics (Children w/o all perm teeth) 10: Impantology (Impants) -In addition, typical plan includes provisions for palliative treatment (minimize pain w/anesthesia), emergency care, consultation Identify groupings of the ten dental procedures (Mod 5.1) - correct answer-1: Preventative & Diagnostic 2: Minor restorative 3: Often combined with (2), includes major restorative work (prosthodontics), endodontics, periodontics and oral surgery 4: Orthodontic 5: Impantantology (typically excluded) -Pedodontic is in first two groupings How does scheduled dental plan operate? (Mod 5.2) - correct answer-Pays fixed allowance for each procedure ($50 for cleaning); may include deductibles (small, maybe lifetime) -Advantages: Cost Control, Uniform Pay, Ease in understanding, employee relations -Disadvantages: Levels must examined routinely, plan reimbursement will vary in different locations according to cost in area, dentists may increase cost if scheduled benefits are set near maximum of reasonable. How does non-scheduled dental plan operate? (Mod 5.2) - correct answer-Most common, cover percentage of usual (reasonable) charges in the community. Set between 75%-90%, trend towards lower number. Typically include deductible during a plan year, reimburse at different levels - preventative/diagnostic at 100%, then scaled down based on plan for others. -Advantage: Uniform percentage of total cost; built-in adjustment for inflation -Disadvantage: Cost control, opportunities for modest benefit improvements limited, rarely clear in advance what payment of service is. Define a combination dental plan (Mod 5.2) - correct answer-Certain procedures on a scheduled basis while some are on a non-scheduled basis. Define an incentive dental plan (Mod 5.2) - correct answer-Program that incentivizes sound dental hygiene through increasing reimbursement levels - only applies to preventative and maintenance. When deductibles apply, only on lifetime basis. Describe orthodontics plan benefits (Mod 5.3) - correct answer-Never written standalone. Properly treated, unlikely to reoccur, so written with lifetime maximums. No deductible - little consequence. Common coinsurance level is 50% - likely to be same level as major restorative. Paid in installments. Identify 3 factors that affect cost of dental plan and issues to be addressed in design (Mod 5.4) - correct answer-Plan design, characteristics of covered group, employer's approach to implementation At design = type of plan, deductibles, max benefit, coinsurance, pre-x, ortho What are advantages/disadvantages to lifetime deductibles in dental care (Mod 5.4) - correct answer-Advantages: Avoiding the cost to the plan of accumulated dental neglect; must invest in own dental health as a condition of adequate coverage Disadvantages: Promotes early overutilization; once satisfied, no further value; introduces employee turnover as cost consideration; may result in adverse reaction if costs/premiums rise Summarize plan design dental care costs (Mod 5.4) - correct answer-Change in deductible has the most significant impact on cost - as much as a 12% reduction can be had by increasing deductible from $50 to $100. Change in coinsurance has an affect as well, especially to restoration, replacement and orthodontic (represents 80-85% of claim cost). Inclusion of ortho is expensive as well. Describe pre-determination of dental benefits (Mod 5.5) - correct answer-Dentist prepares treatment plan that shows work and cost before services begin. Typically for non-emergency care that is over a specified level ($300). Carrier processes info to determine how much they will pay. How does dental technology affect plan design? (Mod 5.5) - correct answer-Constantly evolving; Once new techniques officially recognized by the American Dental Association (ADA), generally are covered as any other service under the plan. New procedures are not so fast - must be accepted by ADA and have a proven track record of success - then are approved or tabled for further study. If approved, separate decision applies if procedure will be covered routinely. Vision care plans include what benefits (Mod 5.6) - correct answer-Routine eye exams, certain ocular tests (coordination of eye movements, tonometry, depth perception for children, refraction testing for distance/near vision). Plans also cover lenses, frames, contacts - frequency is every 12 to 24 months. Vision plans may use PPO. Plan pays lesser of charged amount of max dollar limit per benefit (i.e $50 for an exam, $140 for lenses) Adult vision/hearing not covered under ACA however pediatric is essential hb. Explain whether hearing care is typically covered by medical policies and describe benefits (Mod 5.6) - correct answer-Surgical procedures affecting the ear are standardly covered under medical policies and are generally included in HMO coverage. Some even include hearing aids. Common package includes 80% reimbursement for services up to a max benefit every 36 months. -Otologic Exams (doctor), audiometric exams (audiologist), hearing instruments -PPO results in discounted cost. Describe the difference between "prior generation" prescription drug plan (PDP) within a group policy and the today's "carved-out" plan (Mod 6.1) - correct answer-PDP used to be within major medical or sold as a rider to medical policy. Members submitted receipts to a claims administrator/insurance co and were reimbursed for prescription drugs in the same manner as for medical expenses, often subject to annual deductible and 20% coninsurance - EE paid full cost at pharmacy and then filed a claim. Today, carved out and administered by PBMs or TPAs. Offers discounts off pharmacy charges, claims admin and utilization reports. Also reduces costs through mail service and rebates for volume purchases. Define AWP, WAC and MAC (Mod 6.1) - correct answer-AWP = Average Wholesale Price - assigned by drug manufacturer, reference price for all discounts paid to pharmacies and PBMs. WAC = Wholesale acquisition cost (average manufacturers price) - price at which wholesalers buy pharmaceuticals from manufacturers. MAC = Maximum Allowable Cost - of generic places a ceiling on reimbursement for generic medicine. Concept of Medicaid/Medicare by Centers for Medicaid/Medicare Services (CMS). PBMs and TPAs developed their own MAC to cover all generics - due to variety, may be average cost of all manufacturers AWPs, lowest AWP, or some derived formula. What design options available for pharmacy plans? (Mod 6.1) - correct answer--Manage the benefit and adjudicate claims internally -Outsource benefit management to a health plan, PBM or TPA -Contract directly with pharmacies and adjudicate claims interally. In general, ER's with less than 15,000 members to not retain in house. What are some examples of medications excluded by prescription drug plan? (Mod 6.2) - correct answer-Smoking Cessation, Hair Loss, Obesity and Cosmetic Conditions, Lifestyle Drugs (do not cure illness but can improve daily life by boosting psych attitudes - sexual enhancements), OTC Medicines. Biotechnology drugs are included due to nature (administered by HC professional) Included are: Federal Legend, State-Restricted, Compounds of either, Injectible Insulin What are the factors contributing to rising cost of PDP? (Mod 6.2) - correct answer-10-25% of ER's overall health costs -Increased Volume, mix and availability of products, cost increases by pharm industry. Direct to consumer advertising has increased the demand. -Demographics are aging -Targeting "Young old" for prevention -Substitute for other forms of healthcare Note: Biotechnology drug spending expected to account for 50% of future growth in drug prices (inflammatory, mult. sclerosis, cancer) - drugs made from living cells that treat disease Describe features of three-tier drug plan (Mod 6.2) - correct answer-Lowest = Generics Middle = Preferred Highest = Non-Preferred/Non-Formulary Explain the prior authorization program and quantity limits provisions in a drug plan (Mod 6.3) - correct answer-Prior authorization (PA) = restricts coverage under the plan for certain drugs based on patient's condition. Phys calls PBM to answer questions about condition to determine if covered. Quantity Limits (QLs) = Predefined max quantities for specific medications - restrict number of drugs that can be dispensed in a 30, 60, 90 day window - for abuse/overuse. Goal is to obtain higher dose, less frequently Reasons why standalone prescription drug plan is popular (Mod 6.3) - correct answer-1 = Under traditional medical plan, no discounts for prescription drugs - could pay as much as 10% above AWP - more expensive 2 = Detailed receipts not required for prescriptions - could not review condition effectively as done with PBMs 3 = Limited data for trend analysis prior 4 = No rebates or cost-savings programs What factors influence cost for prescription drug benefits? (Mod 6.3) - correct answer-1 = Demographics (Disease mix based on age/gender), 2 = Benefits, Copays, Formulary Design influence what is covered 3 = Drug cost/mix of branded coverage 4 = Utilization 5 = Costs charged by PBM 6 = Fraud 7 = Ability to manage costs Drug Mix = factor of preferred drug list; rebates may mitigate some cost if 100% of rebates returned to plan Preferred drugs initially may cost more, but should net out less than nonpreferred due to rebates and incentives Formulary = List of generic/brand drugs for optimum value What are advantages of mail service program (MSP) that allows a more generous supply (Mod 6.3) - correct answer-Typically used for chronic conditions that require long duration dosages. MSP saves time and money (10%) MSP offers lower cost of dispensing and allow control through automation. High level of patient satisfaction. Disadvantage = possibility of waste, EE stocking up on medication prior to termination Common techniques to control pharmacy costs (Mod 6.3) - correct answer-1 = Review design of benefits to see if they fit overall medical program (flat copays/no incr) 2 = Analyze experience to identify areas that need better management 3 = Reduce pharmacy network to smallest size w/o compromising access 4 = Offer mail service 5 = Promote generics 6 = Use/develop cost effective formulary 7 = Practice utilization management 8 = Physician profiling 9 = Educate and communicate to members the plan 10 = Anticipate financial impact of new drugs What are 3 types of (DUR) drug utilization review programs? (Mod 6.3) - correct answer-Concurrent = Occurs at Point of Service (Pharmacy); flags overuse based on clinical monitoring criteria programmed into PBM - too soon refills, duplicate claims Retrospective = Pharmacy Case Management - pharmacists review patient profile to determine compliance - can suggest alternative cost-effective therapies - therapeutic switching Prospective = Educating Physicians and patients on drugs/therapy What is a Formulary? (Mod 6.3) - correct answer-List of preferred drugs by a health plan or PBM. Developed by Pharmacy and Therapeutics Committee (P&T) to treat conditions indigenous with insured population; designed to be cost effective - centers around brand. Effective to move patients to lower cost drugs and maximum rebate potentials. Drawback = constant communication b/w physicians and patients Define Open, Closed and Preferred Formularies (Mod 6.3) - correct answer-Open = Allow plan enrollees any covered prescription drug; most phys familiar with drugs they use most often, gives best chance to make better informed choices. List of preferred drugs distributed for informational use only. Preferred = Popular; incentivizes use of preferred or formulary drugs in return for reduced copay. Closed = plan does not cover non-formulary drugs (met with resistance from EE's); typically found in hospital settings and tightly managed HMOs - ERs do not use this type. Describe two main types of DSM programs (disease state management) and their criticisms (Mod 6.4) - correct answer-Medical Model = Call Centers staffed by nurses to triage patients to appropriate levels of care Therapy Directed Model = Administered by PBMs, pharm manuf, health plans and disease management co's - improve compliance with medication therapy, education and testing -Critics say neither model has method to judge success and ROI - argue thinly veiled advertisements from drug manufacturers. Also say targeted diseases are easy to improve What is (EBM) evidence based medicine? (Mod 6.4) - correct answer-Approach to medical decision making that emphasizes scientific evidence and statistical methods for evaluating outcomes/risk of treatments. Response to arrive at objective decisions in the face of advertising/promotions to drugs. How does a network system in a PDP operate? (Mod 6.4) - correct answer-EEs must fill at network pharmacies. In an emergency, some plan sponsors will pay outside of network but may require reimbursement for resulting cost in network. Pharmacies join networks and provide discounts based on increased volume. PBM designs networks. What is a PBM? (Mod 6.5) - correct answer-Pharmacy Benefit Management -Entity that administers managed pharm programs -Streamlines/improves process of prescribing/dispensing through online/real time claims adjudication -Maintain network of pharm/mail order options to reduce cost/offer discounts/track experience -Offering limited DUR online at point of sale -Providing data and reporting -Controlling cost of prescriptions (formulary) Methodology for PBM Prices (Mod 6.4) - correct answer-Prices can vary based on region, age, industry, size, etc... Ex: Retail brand network = 12-16% off AWP, plus $1-3 dispensing fee Retail generic network = MAC plus $0-3 fee Mail order brand = 20-25% off AWP plus $0-1 fee Mail order generic = 50-65% off AWP or MAC plus a $0-1 fee How does a PBM generate profits? (Mod 6.4) - correct answer-Typical stream through claim admin fees, mail service and rebates: -Admin fee based on # of EE's or claims -Rebate admin fees w/manufacturers -Filling mail order from owned pharmacies -Disease management, education -Securing discounts through pharm network -Retaining pharmacy spread -Retaining spread in MAC payments for generics greater than paid to pharm -Reducing payments to pharm based on size How does a drug rebate work? (Mod 6.4) - correct answer-Agreement between PBM and drug manufacturer to secure significant reductions in cost of prescription drugs. Some savings can be passed to Employer. Over years, have grown from 1-2% to 6-9% of total. Growth has paralleled rise of benefit inflation. Describe the conditions to review before selecting PBM (Mod 6.4) - correct answer--Options/Pricing? -Own Mail Order Program? -Price Guarantees backed by Audit? -Service/PGs? -Reporting? -DUR Edits? Routinely? -Work with Physicians? -Educational Programs? -Disease Management? -Ancillary Services? -Preferred Drug List? Changes? Define most severe mental illnesses (Mod 7.1) - correct answer-Schizophrenia, Bipolar, Major Depressive Disorder - biologically based List the categories of mental disorders (Mod 7.1) - correct answer--Adjustment (Situational Stress) -Anxiety (Panic) -Childhood (Autism) -Eating (Anorexia) -Mood (Major Depression) -Cognitive (Dementia) -Personality (Antisocial) -Psychotic (Schizophrenia) -Substance Related (Alcohol/Drug) After WWII, why did insurers place limits on outpatient medical care? (Mod 7.1) - correct answer-Treatment continued for indefinite periods of time, much subjectivity regarding treatment. What were typical MH benefits of Health Maintenance Organizations like in the 1980s? (Mod 7.1) - correct answer-Extremely limited & differed from non-mental health coverage. Hospital coverage restricted to 30-45 days per mental illness or 30-60/yr. For medical illness, coverage unlimited. Same for outpatient coverage - put a max dollar limit of $1,000/yr and a max reimbursement of $25 to $40 per visit. Coinsurance rates varied dramatically as well. What is a behavioral health carve-out plan? Why do employers choose it? (Mod 7.2) - correct answer-Carves out MH/SA from medical plan and provides them under a separate contract managed by a Managed Behavior HealthCare Organization (MBHO) -potential to produce savings since it is managed by firms that specialize in behavioral health treatment; allows large, self-funded ER's to offer same behavioral health benefits across all health plans; allows plan to minimize adverse selection Less common practice given ACA promotes integration, coordinated care What are psychotropic medications and what challenge do they present MBHOs? (Mod 7.2) - correct answer-Drugs that affect psychic function, behavior or experience; part of medical benefit and are administered by PBMs. Account for significant part of overall cost of healthcare because of chronic nature of Mental Illness - fractionalized system exists that prevents optimum management Since MBHOs do not manage prescription drug benefit but bear responsibility for managing behavioral health, they are unaware if psychotropic meds have been given or if they are the right dosage/types or interventions What is the (MPHA) Mental Health Parity Act of 1996 and why did it fail to accomplish its objective? (Mod 7.3) - correct answer-Establish parity (equality) between MH and other health benefits - prevented group plans (not individual), insurance co and HMOs from placing lower annual or lifetime dollar limits on MH benefits than other medical/surgical beenfits offered. The law did allow for limits on inpatient days, prescription drugs, outpatient visits and raising deductibles, which actually had the effect of subjecting MHB to dollar limits. Applied to groups that offered MH and had 50+ EE's. Didn't require groups to offer MH if they didn't already; also didn't apply to substance abuse. How did (MHPAEA) Mental Health Parity and Addiction Equality Act of 2008 expand on MHPA? (Mod 7.3) - correct answer-MHPAEA continues MHPA rules and extends them to substance abuse, also states that financial requirements/treatment limitations applicable to MH/SA are no more restrictive than med/surgery MHPAEA retains small employer exception and does not require MH/SA be added to existing plan - this exception only applies to grandfathered plans since ACA considers MH/SA as one of the 10 essential benefits. Discuss the provisions of MHPAEA and how they interact with ACA (Mod 7.3) - correct answer--Plans may not impose financial requirements (deductibles/coinsurance) or treatment limitations on MH/SA that are more restrictive than med/surg. Parity required for both quantitative (freq of treatment, number of visits) and non-quantitative (formulary design) treatment limitations. -Parity applies separately to Inpatient In-Network, Inpatient Out of Network, OutPatient In-Network, OutPatient Out of Network, Emergency Care, Prescription Drugs -Separate cost sharing requirements for MH/SA are not allowed even if they are equal to med/surg: can't have combined deductible -2 Disclosure requirements - plans must make available criteria for determining medical necessity of MH/SA and reasons for denials. Under ACA, MH/SA are essential benefits and as such, annual/lifetime limits may not be imposed. Also under ACA, nongrandfathered groups must provide preventative services without cost sharing however not required to provide full range. Under MHPAEA, what restrictions are imposed on a plan with multitier networks? (Mod 7.3) - correct answer-If there are an uneven number of tiers, the plan must treat the least restrictive financial requirement or quantitative treatment limitation applying to substantially all MH/SA benefits across all provider tiers. Discuss the cost increase provision as it applies to MHPAEA (Mod 7.3) - correct answer-If compliance requires changes that increase plan costs by at least 2% in the 1st year or at least 1% in any subsequent year, law exempts the plan from MHPAEA for following plan year; lasts for one year and applies for alternating years. Describe plan features of behavioral health plan (Mod 7.4) - correct answer-Cover inpatient and outpatient mental health treatment services - residual treatment and partial or day hospitalizations and intensive outpatient (psych rehab, case management) What are the basic types of funding arrangements of a MBHO? (Mod 7.4) - correct answer--Fully Insured (Avg 3-6% of Med Plan Prem) -Shared Risk (Prem based on Proj Claims Cost; if claims exceed certain amount, MBHO picks up; can refund prem if below) -Administrative Services Only (For a fee, MBHO handles claim management - larger ER's) How have EAPs formed? (Mod 7.4) - correct answer-Originally focused on substance abuse problems but today take a comprehensive approach to support members with many issues - prevention/health & wellness/HR support What is involved in provided an effective behavioral health program? (Mod 7.5) - correct answer-Should include integrated health/chemical dependency benefit that includes inpatient/outpatient as well as EAP. -EE and ER awareness of services/value -Appropriate use of benefits -How well vendor/network prevent and manage costly claims/disorders Who makes up behavioral health network? (Mod 7.5) - correct answer-Individual and multispecialty: clinical psych, social workers, therapists, psych nurses Compare differences of behavioral health treatments: inpatient, partial (day), outpatient (Mod 7.5) - correct answer--Acute inpatient: most severe, unable to care for themselves: suicidal, homicidal -Partial hospital: offer intensive day treatment but patient returns home overnight -Intensive Outpatient: patient needs more intensive than weekly, but fewer hours each day than partial facilities Describe cost containment practices of MBHO (Mod 7.5) - correct answer--Care Access (Patient calls call center for referral - intake asks q's) -Predictive Modeling/Risk Assessment -Performance Management -Case Management -Utilization Review/Management -Outcomes Management -Coordination of Care -Depression Disease Management -Substance Abuse Relapse Program What is highest level of accreditation granted by MBHOs by the National Committee for Quality Assurance? (Mod 7.5) - correct answer-Full - effective for 3 years. What are the 3 key benefits of comprehensive workplace wellness program? (Mod 8.1) - correct answer--Fewer absences -Improved productivity -Worker satisfaction/retention What is normal cost PEPY for an employer? Primary cost drivers? (Mod 8.1) - correct answer-Great variability - typical ranges from $0 to $450 PEPY; most significant drivers are incentives, equipment, consultants, counselors and gyms. -Form budget; cost share w/EE's What is primary goal of workplace wellness? (Mod 8.1) - correct answer-Transform workplace culture into healthy living. Should be designed for those struggling with health. Name six key ingredients that compromise an effective workplace wellness program (Mod 8.1) - correct answer--Health screenings (HRA - health risk assessment, biometric testing) -Educational/self-help tools -Organized activities -Individual follow-up/treatment -Incentives -A supportive environment Summarize three laws that directly deal with workplace wellness to prohibit discrimination (Mod 8.2) - correct answer--ERISA (Employee Retirement Income Security Act) - prohibits discrim in group health plans based on an individual's health status....makes exceptions for wellness to offer premium/cost sharing discounts -ADA (Americans with Disabilities Act) - forbids employers from inquiring about workers' health status but makes an exception for med inquiries as part of a voluntary wellness program -GINA (Genetic Information Nondiscrimination Act) - prohibits ER discrim based on genetic information, like family history; allows exception for voluntary wellness inquiries. Which law deals with standards for protective privacy of personal health? (Mod 8.2) - correct answer-HIPAA - Health Insurance Portability and Accountability Act ADA standards for Wellness programs (Mod 8.2) - correct answer-(2000) The program is considered voluntary so long as the employer does not require participation and does not penalize employees who do not participate. (2014) Employer groups urge that financial incentives should be permitted for wellness participation. (2016) EEOC issues rule allowing the use of financial incentive for programs that include medical inquiries with a maximum of 30% of the total cost of employee only coverage. Why was the RAND Study on Wellness Programs commissioned and what were its findings on workplace wellness programs? (Mod 8.3) - correct answer-Fed Gov't commissioned - review workplace wellness programs for experience in achieving cost savings/health improvement. -Screening to identify health risks -Lifestyle management services to reduce risks by encouraging healthy behavior -Disease management services to support those with chronic conditions. 50% of all programs are limited in extent/nature of provided services Only 13% were characterized as comprehensive Describe the investment of "total well-being" as it relates to wellness programs (Mod 8.4) - correct answer-Addresses financial fitness, stress reduction and emotional resiliency What is most popular emotional well being program offered by large employers? (Mod 8.4) - correct answer-Stress management by far (54%) - next highest is resiliency training (27%) How are incentives changing in workplace as they are expanding to include emotional well being? (Mod 8.4) - correct answer-Moving away from outcomes based incentives in favor of awards for program participation. Expected to drop in half in 2016. Double the amount of millennial workers want ER to help address financial concerns...double baby boomers. What are two primary factors that contribute to popularity of cafeteria plans or flex plans? (Mod 9.1) - correct answer--Ever increasing cost in benefits -Diverse workforce with vastly differing needs Cafeteria plan assures ER maximizes value of its benefit dollars and avoids spending money on duplicated/unwanted benefits. Flex Benefit Plan allows EEs to contribute on a tax-favored basis as certain programs have been more costly and they are being asked to share costs with ER. Describe tax doctrine of constructive receipt within the context of cafeteria plans (Mod 9.1) - correct answer-Cafeteria plans operate as an exception to tax doctrine of constructive receipt; when an individual has control over how much money is spent, it becomes taxable. However provided a cafe plan is designed in accordance with tax laws, a participant can avoid taxation and receive tax free benefits. Describe concept of cafeteria plan and how it operates in connection with other EBPs (Mod 9.1) - correct answer-Cafe plan is an umbrella plan under which tax favored EE benefits are offered. IRC Section 125 governs cafe plan arrangements while other IRC sections apply to the underlying benefits funded within. 125 was added to IRC in 1978 - prior the tax treatment was much different. If a participant had a choice in benefits, the tax doctrine required the EE be taxed on if they had elected the max available. Rationale was since they could elect these amounts in case, they should be taxed as such - even the case if EE elected benefits (paid by ER), could be offered on tax-free basis. Define a Cafeteria Plan (Mod 9.1) - correct answer-A plan under which all participants are employees (not owners or shareholders) and all participants may choose from a combination of options- qualified benefits or cash. Benefits can't be offered: Whole Life Insurance and Long-Term Care Insurance. What are primary advantages to EE in Cafe plan? (Mod 9.2) - correct answer-Most notable is preferential tax treatment. Contributions are exempt from Fed Income Tax, FICA (SS) and FUTA (Unemployment). Most state/local tax laws followed federal treatment. What are primary disadvantages to EE in Cafe plan? (Mod 9.2) - correct answer--Primary disadvantage is elections must be made prior to beginning of plan year and election is irrevocable. -FSA use it or lose it rule, which forfeits unused dollars at end of plan year -Worse off financially paying for Dep Care Expenses through Cafe Spending Acct rather than taking credit on Tax Return -Since no FICA SS Tax, EE may see slight reduction in SS Benefits What are primary advantages to ER in Cafe Plan? (Mod 9.2) - correct answer--Financial incentives: payroll costs since the ER does not pay FICA or FUTA taxes on amounts contributed; deferral amounts are not considered wages to EE's Workers Comp -Cafe plans create greater EE awareness to value of benefits -Control escalating costs, limiting ER contributions and prevent wasting benefit dollars on unneeded benefits What are primary disadvantages to ER in Cafe Plan? (Mod 9.2) - correct answer--Ongoing cost/maintenance of plan (compliance, tax laws) -If FSA offered, full amount of benefit elected must be available during entire plan year regardless of how much an EE has contributed to date. Cash flow risk if claims exceed EE contributions early in plan year; same with terminating EE's claims -Adverse selection opting in and out of various plans -Cafe plans subject to complex coverage and nondiscrimination testing to comply with federal tax law - difficult to pass List the different types of Cafeteria Plans (Mod 9.3) - correct answer-1) Premium Conversion Plan/ Premium Only Plans (POP). 2) Flexible Spending Accounts (FSAs) including healthcare and dependent care Discuss characteristics of Premium Conversion Plan (Mod 9.3) - correct answer-Allows employees to pay for insurance costs on a tax favored basis. If the employer is going to allow EE to opt out of ER paid coverage, must occur through a cash option (if not desired) which must pay taxes on. What benefits are offered in Premium Conversion Plan? (Mod 9.3) - correct answer--Medical Insurance (Dental, Vision, etc) -Group Term Life (up to $50,000) -Disability Insurance (mostly purchased with after tax dollars since benefit would be tax free) Describe a cafe plan that includes FSAs (Mod 9.3) - correct answer-When funded by salary deferrals, participant is choosing between 2 (or more) benefits consisting of cash and qualified benefits - funded on pre-tax basis through salary reduction. FSA can be used on health related expenses as well as dependent care/adoption assistance. Through the plan year, EE incurs expenses and submits for reimbursement. Coverage period 12 months with up to 2 1/2 months grace. Instead of grace period, ERs can allow up to $500 of unused funds to next year. What is meant by a full-flex plan? (Mod 9.3) - correct answer-Sometimes called full choice. EEs can select among wide range of benefits. ER determines a dollar value for benefits in total compensation...this is in addition to any salary reductions EEs choose. Once chosen, cash is contributed to cafe plan or credit system used. Discuss methods used to value credits used by plan participants (Mod 9.4) - correct answer--Number of credits a participant is given -Acceptable level of EE contribution -Number of participants expected to select -Number of credits expected to be paid as cash -Purchase price of benefit options -Hidden employer subsidies -Total premium cost Why do ERs develop credit values in flexible benefit plans than use actual dollar values? (Mod 9.4) - correct answer-Such a system can smooth out benefit inequities - makes it possible for the ER to offer a cash option that is not a dollar for dollar value Benefits more valuable than cash - providing cash value is too appealing...leads to underinsured What is a core benefit within a flexible benefit plan? (Mod 9.4) - correct answer-Establishes some minimum level of benefit coverage below which a company will not allow an EE to go. Sometimes can cash out core if proof of alternative coverage is shown. Supplies basic level so EE's not underinsured. Note: Under ACA, large ER's (over 50 lives) must offer minimum value and affordable health coverage to EEs and children under 26. Affordability test applies to lowest cost option that meets ACA min value; non-tax deductible penalties are imposed. Describe elements of Cafe Plan that appeals to various demographics of EE's (Mod 9.4) - correct answer-Higher paid EE's value reduction in taxes, dollar max limiting contributions to reimbursement accts Lower paid EE's value increasing tax home pay; if you have lower paid company, a full flex plan with a generous cash option will lead to underinsurance. Discuss how ERISA affects a Cafe Plan (Mod 9.5) - correct answer-Cafe plan itself not governed by ERISA because it is not classified as welfare benefit plan under ERISA Sec 3. However some underlying benefits may be subject bc they are considered welfare. Vacation, Daycare, etc considered welfare. Cafe Plans are subject to what other laws (Mod 9.5) - correct answer--COBRA -FMLA -HIPAA -MHPA -MHPAEA -NMHPA -WHCRA -MMA -WFTRA -HEART -Michelle's Law -GINA -PPACA What general requirements must a Cafe Plan satisfy before being awarded favorable tax treatment? (Mod 9.5) - correct answer--Allow participants to choose between 2 or more benefits consisting of cash (or a taxable benefit treated like cash) and qualified benefits -Plan cannot be designed to offer only a choice among qualified benefits without cash component; w/o cash, no cafe plan For a Cafe plan to be considered qualified, what provisions must it include? (Mod 9.5) - correct answer--Specific description of each benefit -Rules on eligibility and participation -Procedures for elections (when/often/irrevocability) -Manner contributions can be made -Max ER contributions available -The plan year -If plan has welfare benefits -If plan includes HRA, use it or lose it language -If needs amendment, must be in writing and after the original effective date. What qualified benefits can be included in a Cafe plan? (Mod 10.1) - correct answer--Accident/Health -Prescription Drugs -OTC Drugs -Dental -Vision -Life ADD (below 50K) - most common taxable benefit w/Paid Time Off is cash -Cancer -Business Travel/Hospital -Dependent Care/Adoption Asst -401K -HSA Contributions List some examples of total compensation that are not eligible to be included in Cafe plans (Mod 10.1) - correct answer-Qualified LTC, Scholarships, Educational Assistance, Fringe Benefits, Dependent Life, EE Discounts, Lodging, Meals, Moving Expenses, Parking/Travel, College Savings Acct, Legal/Financial Assistance, HRAs, etc What types of legal entities can sponsor Cafe plans? (Mod 10.2) - correct answer-Any legal entity w/EE's subject to taxation. Self Employed 401(c), Sole Propr, Partners and 2% greater shareholders in S Cor are ineligible but may sponsor Cafe Plan for EEs. Discuss EE's who would qualify as participants in a Cafe Plan (Mod 10.2) - correct answer-Includes former and present employees (includes Common Law EEs - likely an EE if ER has control over what work is to be done and how it is done); while former can participate, such a plan cannot be established solely to benefit former EEs. Spouses and Dependents cannot participate but they can receive benefits via family coverage. DOMA (Defense of Marriage Act) ruled same-sex domestic spouse benefits receive same favorable tax t