MHR 416 CH 10 TEST WITH
COMPLETE SOLUTION
Two Types of Fee-For-Service Plans - Answer Indemnity Plan and Self funded plan
Indemnity plan - Answer Based on contract between employers and insurance
companies Insurance benefits paid from insurance company's financial reserves from
premiums
Self-Funded Plan - Answer Company pays benefits from own assets Generally used
when company's financial burden is less than the cost to subscribe to an insurance
company coverage
Fee-For-Services Plans Cost-Control Stipulations - Answer Deductible Coinsurance
Out-of-pocket maximum Preexisting condition clauses Preadmission certification of
medical necessity Second surgical options Maximum benefit limits
Supplemental Plans - Answer Used as a supplement to hospitalization, surgical, and
physician expenses Acts as a backup to basic insurance covering expenses that exceed
maximum benefit limits Extends coverage to services excluded from the regular plan
Comprehensive - Answer Replace traditional fee-for service plans by extending
coverage to a broader array of services Applies a single deductible for all services
Managed Care Plans - Answer emphasize cost control by limiting employees choice of
doctors and hospitals Health Maintenance Organizations (HMOs) Preferred Provider
Organizations (PPOs) Point-of-Service Plans (POSs)
Savings Accounts - Answer FSA, HRA, HSA
Flexible spending accounts (FSAs) - Answer Employee contributes pre-tax
Health reimbursement accounts (HRAs) - Answer Employer contributes Can be carried
over
Health saving accounts (HSAs) - Answer Both employee and employer contribute
Specialized Insurance Benefits - Answer Also called carve-out plans because they are
separate insurance from medical benefit plans
Specialized insurance benefits Includes: - Answer Dental coverage (Exhibit 5.9) Vision
coverage Prescription drug coverage Mental health and substance abuse Maternity
care
Types of Disability Insurance - Answer short or long term
Short-Term - Answer Less than 6 months Inability to perform any of occupation's duties
, Long-Term - Answer 6 months to life Inability to perform work qualified for (training,
education, experience)
Paid Time-Off Practices - Answer Holidays Vacation Sick leave Personal days Integrated
paid time-off policies Bereavement or funeral leave Sabbatical leave Volunteerism Jury
duty and witness duty leaves Military leave Nonproduction time On-call time
Traditional and Flexible Benefits Plans - Answer contain the same set of benefits for
each employee Creates administrative ease and represents a one-size-fits-all approach
Increasingly, companies are replacing fixed benefits plans with cafeteria benefits plans,
which give employees a choice of benefits
One-Size-Fits-All Approach - Answer Predetermined set and level of benefits Based
largely on cost considerations. Differences in employee needs and preferences strongly
influence the adequacy of benefits plan Increasingly, more employers use cafeteria plan
designs to help insure that employees' needs and preferences are being met Employer
is likely to maximize the value of its benefits expenditures by not spending money on
unwanted benefits
Cafeteria Plans - Answer enable employees in a company to choose from among a set of
benefits and different levels of these benefits Under the plan, employees can accept or
reject benefits Increased diversity of the workforce Demographic diversity Both
associated with greater differences in needs and preferences
Internal Revenue Code (IRC) Section 125 - Answer offers tax benefits to companies that
permit employee choice.
Qualified benefits - Answer refer to any employer-sponsored benefits for which an
employee may exclude the cost from federal income tax calculation
Cafeteria Plans Under IRC 125 Allowable - Answer Employer-provided accident or
health plan Group term life insurance Contributions to 401K Dependent care assistance
Adoption assistance
Cafeteria Plans Under IRC 125 Prohibited - Answer Medical Savings Accounts
Scholarships Educational assistance programs Fringe benefits such as transportation
support
Guidelines to Maintain a Section 125 Cafeteria Plan - Answer Must be in writing Choice
between 2 or more benefits, at least one taxable and one non-taxable benefits For
current and former employees Employees yearly choice unless life circumstances
require mid-term change May not defer receipt of compensation from year to year Must
meet non-discrimination rules/tests Prohibit preferential treatment to highly
compensated participants and key employees
Three possible violations or tests: - Answer Eligibility: Test requiring companies to have
at least some none-key employees in the plan Benefits: All employees should receive the
same: The same amount of employer contributions The same eligibility rules should be
COMPLETE SOLUTION
Two Types of Fee-For-Service Plans - Answer Indemnity Plan and Self funded plan
Indemnity plan - Answer Based on contract between employers and insurance
companies Insurance benefits paid from insurance company's financial reserves from
premiums
Self-Funded Plan - Answer Company pays benefits from own assets Generally used
when company's financial burden is less than the cost to subscribe to an insurance
company coverage
Fee-For-Services Plans Cost-Control Stipulations - Answer Deductible Coinsurance
Out-of-pocket maximum Preexisting condition clauses Preadmission certification of
medical necessity Second surgical options Maximum benefit limits
Supplemental Plans - Answer Used as a supplement to hospitalization, surgical, and
physician expenses Acts as a backup to basic insurance covering expenses that exceed
maximum benefit limits Extends coverage to services excluded from the regular plan
Comprehensive - Answer Replace traditional fee-for service plans by extending
coverage to a broader array of services Applies a single deductible for all services
Managed Care Plans - Answer emphasize cost control by limiting employees choice of
doctors and hospitals Health Maintenance Organizations (HMOs) Preferred Provider
Organizations (PPOs) Point-of-Service Plans (POSs)
Savings Accounts - Answer FSA, HRA, HSA
Flexible spending accounts (FSAs) - Answer Employee contributes pre-tax
Health reimbursement accounts (HRAs) - Answer Employer contributes Can be carried
over
Health saving accounts (HSAs) - Answer Both employee and employer contribute
Specialized Insurance Benefits - Answer Also called carve-out plans because they are
separate insurance from medical benefit plans
Specialized insurance benefits Includes: - Answer Dental coverage (Exhibit 5.9) Vision
coverage Prescription drug coverage Mental health and substance abuse Maternity
care
Types of Disability Insurance - Answer short or long term
Short-Term - Answer Less than 6 months Inability to perform any of occupation's duties
, Long-Term - Answer 6 months to life Inability to perform work qualified for (training,
education, experience)
Paid Time-Off Practices - Answer Holidays Vacation Sick leave Personal days Integrated
paid time-off policies Bereavement or funeral leave Sabbatical leave Volunteerism Jury
duty and witness duty leaves Military leave Nonproduction time On-call time
Traditional and Flexible Benefits Plans - Answer contain the same set of benefits for
each employee Creates administrative ease and represents a one-size-fits-all approach
Increasingly, companies are replacing fixed benefits plans with cafeteria benefits plans,
which give employees a choice of benefits
One-Size-Fits-All Approach - Answer Predetermined set and level of benefits Based
largely on cost considerations. Differences in employee needs and preferences strongly
influence the adequacy of benefits plan Increasingly, more employers use cafeteria plan
designs to help insure that employees' needs and preferences are being met Employer
is likely to maximize the value of its benefits expenditures by not spending money on
unwanted benefits
Cafeteria Plans - Answer enable employees in a company to choose from among a set of
benefits and different levels of these benefits Under the plan, employees can accept or
reject benefits Increased diversity of the workforce Demographic diversity Both
associated with greater differences in needs and preferences
Internal Revenue Code (IRC) Section 125 - Answer offers tax benefits to companies that
permit employee choice.
Qualified benefits - Answer refer to any employer-sponsored benefits for which an
employee may exclude the cost from federal income tax calculation
Cafeteria Plans Under IRC 125 Allowable - Answer Employer-provided accident or
health plan Group term life insurance Contributions to 401K Dependent care assistance
Adoption assistance
Cafeteria Plans Under IRC 125 Prohibited - Answer Medical Savings Accounts
Scholarships Educational assistance programs Fringe benefits such as transportation
support
Guidelines to Maintain a Section 125 Cafeteria Plan - Answer Must be in writing Choice
between 2 or more benefits, at least one taxable and one non-taxable benefits For
current and former employees Employees yearly choice unless life circumstances
require mid-term change May not defer receipt of compensation from year to year Must
meet non-discrimination rules/tests Prohibit preferential treatment to highly
compensated participants and key employees
Three possible violations or tests: - Answer Eligibility: Test requiring companies to have
at least some none-key employees in the plan Benefits: All employees should receive the
same: The same amount of employer contributions The same eligibility rules should be
