Ch10 Test Bank Answers Managing the Employee-Benefits System

Chapter 10

Managing the Employee-Benefits System

  True / False Questions

1. A summary of material modifications might include changes in plan eligibility rules. (Legal Considerations in Benefits Communication)

2. Utilization reviews are used to evaluate the quality of specific health-care services. (Utilization Reviews)

3. To more effectively communicate a benefits package to employees, more companies are having new employees meet one-on-one with benefits counselors. (The “Good Business Sense” of Benefits Communication)

4. Premium-only payment systems refer to payment arrangements between managed care insurers and health care providers. (Types of Flexible Benefit Plan Arrangements)

5. Insurers may conduct concurrent utilization reviews shortly after hospital admission (Utilization Reviews)

6. Satisfying nondiscrimination rules permits plan participants to take tax deductions for qualified benefits. (Cafeteria Plans under Section 125)

7. Employers use case management companies to ensure that all of their employees' medical needs are being met adequately. (Case Management)

8. Under cafeteria plans, employers grant employees the opportunity to accept or reject benefits such as day care benefits. (Employer Choice to Customize Benefits)

9. Flexible premium accounts usually apply to expenses that exceed regular benefits limits. (Types of Flexible Benefit Plan Arrangements)

10. Under the modular plan, employees contribute the cost difference between a more extensive benefits package and the lowest-cost package. (Modular Plans)

11. Waiting periods specify the maximum length of time an employee must remain employed before becoming eligible for benefits coverage. (Waiting Periods)

12. If employees don't choose the maximum benefits limits in a core-plus-option cafeteria plan they lose the difference. (Types of Flexible Benefit Plan Arrangements)

13. Modular plans extend a pre-established set of benefits such as health-care and retirement plans as a program core. (Core-Plus-Option Plans)

14. FSLA requires employers to provide employees with written summaries of the benefits plan's description and of material modifications. (Legal Considerations in Benefits Communication)

15. Employers must supply employees with updated summary plan descriptions after every 4 years. (Legal Considerations in Benefits Communication)

16. Sponsors of utilization reviews hire medical doctors and registered nurses to carry out the review. (Utilization Reviews)

17. After-tax contributions reduce the amount of annual income subject to income tax. (Employee Contributions)

18. Insurers use retrospective utilization reviews to determine that all treatment claims were legitimate. (Utilization Reviews)

19. Benefits are considered "qualified" if the employee may exclude the cost from federal income tax. (Cafeteria Plans under Section 125)

20. Pretax salary reduction plans allow employees reduced taxes on their salary. (Types of Flexible Benefit Plan Arrangements)

21. Mix-and-match plans allow employees to purchase any benefit but at only certain levels. (Types of Flexible Benefit Plan Arrangements)

22. ERISA sets forth legally required disclosure requirements. (Legal Considerations in Benefits Communication)

23. Employers are obligated to distribute summary plan descriptions to employees and DOL within 90 days of the plan becoming subject to ERISA's reporting requirements. (Legal Considerations in Benefits Communication)

24. Group meetings and audiovisual presentations provide the key features of benefits programs, conveying the “big picture” and helping potential employees compare benefits offerings with those offered by other companies they may be considering. (The “Good Business Sense” of Benefits Communication)

25. Pretax contributions do not reduce the amount of annual income subject to income tax. (Employee Contributions)

26. ERISA limits waiting periods before participation in employer-sponsored health-care programs to a maximum of 90 days. (Waiting Periods)

27. Employers have been shifting health related costs to employees partly because of the economic downturn starting in the 2000s. (Employee Education)

28. Case management is conducted by primary care physicians. (Case Management)

29. In most companies, employers choose whether an employee will participate in wellness programs, thus initiating a lifestyle intervention. (Lifestyle Interventions)

30. Longer waiting periods is one way companies try to reduce the cost of benefits. (Waiting Periods)

31. Under mix-and-match plans each flexible credit awarded to purchase benefits equals $10. (Types of Flexible Benefit Plan Arrangements)

32. The top reason companies outsource benefits functions is for the expertise. (Outsourcing the Benefits Function)

33. A cafeteria plan is one example of a one-size-fits-all approach (A Comparison of Traditional Benefits Plans and Flexible Benefits Plans)

34. Employers must follow several guidelines to maintain a Section 125 cafeteria plan, specifically, the plan must be in writing. (Cafeteria Plans under Section 125)

35. It is possible to have a qualified Section 125 cafeteria plan for managers only. (Cafeteria Plans under Section 125)

36. Summary plan descriptions are generally short and only present the “big picture” of a benefit plan. (Legal Considerations in Benefits Communication)

37. Some companies have adopted high-deductible workers’ compensation plans, substantially lowering their premiums. (High-Deductible Plans)

38. Outsourcing benefits administration can be very expensive in the short fun because most or all contract fees are due up front. (Outsourcing the Benefits Function)

39. Fee-for-service plans establish provider payment systems to control the costs of health care. (Provider Payment Systems)

40. Pertaining to case management, serious health problems arising from injuries or illnesses may be acute (ongoing) or chronic (possibly life threatening). (Case Management)

Multiple Choice Questions
 

41. These are the 4 most common types of cafeteria plans. (Types of Flexible Benefit Plan Arrangements)
A. Premium-only, mix-and-match, core-plus-option, salary reduction
B. Salary reduction, modular, core-plus-option, mix-and-match
C. Material modification, mix-and-match, core-plus-option, modular
D. Mix-and-match, material modification, premium-only, salary reduction

42. Which of the following compares the nontaxable benefits provided to key employees to the nontaxable benefits provided to all employees? (Cafeteria Plans under Section 125)  A. Eligibility
B. Concentration
C. Concurrent reviews
D. Prospective reviews

43. If all employees are offered health insurance and retirement benefits, but then get to select the rest of their benefits package, then they're being offered what type of cafeteria plan? (Types of Flexible Benefit Plan Arrangements)
A. Core-plus-option
B. Mix-and-match
C. Modular
D. Flexible spending

44. These are the three types of utilization reviews. (Utilization Reviews)
A. Qualified, modified, nondiscriminatory
B. Prospective, concurrent, retrospective
C. Flexible, core-plus, mix-and-match
D. Precertification, prospective, retrospective

45. ERISA requires that employees receive a summary plan description within how many days of becoming a plan participant? (Legal Considerations in Benefits Communication)
A. 120 days
B. 60 days
C. 90 days
D. 30 days

46. This type of utilization review judges whether additional inpatient hospitalization is medically necessary. (Utilization Reviews)
A. Prospective
B. Certification
C. Concurrent
D. Retrospective

47. Under this provider payment system, primary care physicians are paid a fixed dollar amount for each patient. (Provider Payment Systems)
A. Capped-fee schedule
B. Semi-capitation
C. Full capitation
D. Partial capitation

48. This cafeteria plan allows a single-mother employee to select a benefits package designed to meet the particular needs of single-mothers. (Types of Flexible Benefit Plan Arrangements)
A. Core-plus-option
B. Flexible spending account
C. Mix-and-match
D. Modular

49. Under provider payment systems, agreements may include one or more cost saving features. Which of the following is not one of these cost saving features? (Provider Payment Systems)
A. Percentage discounts
B. Capped fee schedules
C. Partial capitation
D. Whole capitation

50. This cafeteria plan allows employees to exclude allocated income from federal income tax to pay for the benefits. (Types of Flexible Benefit Plan Arrangements)
A. Core-plus-option plans
B. Modular plans
C. Pretax salary reduction plans
D. Mix-and-match plans

51. Which of ? (Outsourcing the Benefits Function)
A. Outsourcing agreements are on a monthly basis.
B. Outsourcing refers to an employer transferring responsibility to a third-party provider to manage one or more benefits.
C. Outsourcing some or all benefits administration is decreasing.
D. Companies outsource roughly one-tenth of all their benefits functions. following statements is true of outsourcing benefits functions

52. Changes in benefits plans must be described and distributed to employees using one of these. (Legal Considerations in Benefits Communication)
A. Summary plan modifications
B. Summary plan changes
C. Summary of benefit changes
D. Summary of material modifications

53. Under this provider payment system, managed care plans hold primary care physicians accountable for the cost of services rendered to each assigned patient. (Provider Payment Systems)
A. Full capitation
B. Full capitation plus
C. Partial capitation
D. Semi capitation

54. This Section of the IRC permits an employer to offer employees the choice between taxable income or to allocate some of their income to purchase qualified benefits through a cafeteria plan. (Cafeteria Plans under Section 125)
A. 125
B. 152
C. 127
D. 172

55. ERISA requires that material modification summaries must be sent to the Department of Labor within how many days after the end of the plan year in which the change occurred. (Legal Considerations in Benefits Communication)
A. 210
B. 180
C. 90
D. 120

56. ERISA requires employers to distribute new summary plan descriptions to the Department of Labor within how many days. (Legal Considerations in Benefits Communication)
A. 210
B. 90
C. 180
D. 120

57. Flexible spending accounts and premium-only plans are versions of which cafeteria plan? (Types of Flexible Benefit Plan Arrangements)
A. Modular
B. Pretax salary reduction
C. Core-plus-option
D. Mix-and-match

58. Which of the following is not a feature of prospective reviews or precertification reviews? (Utilization Reviews)
A. Verifying a patient's coverage
B. Determining whether the health plan covers the treatment
C. Judging whether the proposed treatment is medically appropriate
D. Proceeding without a second surgical opinion

59. Which of the following statements concerning provider payment systems is NOT true?

A. Fee-for-service plans generally contain this feature to control the costs of health care.

B. Provider payment systems negotiate acceptable payment amounts to participating doctors, hospitals, and pharmacies for the duration of the contract.

C. A percentage discount reduces the amount of a health-care providers’ usual charge.

D. A partial capitation system applies to primary care physicians.

60. Which of the following is not an ERISA requirement pertaining to employer-sponsored benefits plans? (Legal Considerations in Benefits Communication)

A. Written notices must be written for the “average” participant to understand.

B. The waiting period before participation in employer-sponsored health-care programs is limited to a maximum of 90 days.

C. Employers are obligated to distribute summary plan descriptions to employees within 120 days of the plan becoming subject to reporting and disclosure requirements.

D. Employees must receive a summary plan description within 90 days of becoming a plan participant.

 Essay Questions
 

61. Compare one-size-fits-all benefits with employee choice. (A One-Size-Fits-All Approach, Employer Choice to Customize Benefits)

Main Points
● One-Size Fits All Approach

• Predetermined set and level of benefits
• Based largely on cost considerations
• Differences in employee needs and preferences strongly influence the adequacy of this company-sponsored benefit
• Initiated in response to increased demographic diversity of workforce
• Flexible benefits or cafeteria plans allow employees choices of benefits
• Internal Revenue Code Section 125 created tax benefits to companies that permitted employee choice
• Flexible benefits, or cafeteria plans, enable employees in a company to choose from among a set of benefits and different levels of these benefits
• Under these plans, employers grant employees the opportunity to accept or reject benefits
• Limited evidence suggests positive reactions to flexible plans, including benefits satisfaction, overall job satisfaction, pay satisfaction and understanding of benefits, which increases after the implementation of a flexible benefits plan
• Employees tend to inadvertently overuse benefits for two reasons.
• First, since the 1940s and 1950s, most medium- and large-scale employers have offered health-care coverage to employees.
• Offering health-care coverage provided companies with lucrative tax breaks and most employees viewed health-care coverage as a standard benefit.
• Second, fee-for-service plans were quite common decades ago, allowing individuals substantial freedom to go directly to doctors of their choice, oftentimes to an expensive specialists even when unnecessary.
• Even as costs rose, employers absorbed the costs until competitive pressures forced companies to carefully audit their costs and employers began shifting more costs to employees by having them pay a greater share for their benefits.
• Educating employees about health-care costs and the reasons for rising costs should promote cost containment, particularly when coupled with higher required employee contributions.
• Educating employees about the costs of health care, as well as the benefits of preventative wellness programs, should help employers get better control of their costs.
• Outsourcing of benefits functions refers to a contractual agreement by which an employer transfers responsibility to a third-party provider to manage one or more benefits.
• In the case of benefits, third-party providers are independent companies with expertise in benefits design and administration.
• Outsourcing agreements remain in effect form a few months to a few years.
• The top reason companies outsource benefits functions is for expertise.
• Other less-common reasons for outsourcing include technology, costs, and risk.
• Outsourcing some or all benefits administration can be very expensive in the short run because most or all contract fees are due up front.
• Over time, efficient arrangements can be less costly than providing the same services in-house.
• To create an awareness of and appreciation for the way current benefits improve the financial security as well as the physical and mental well-being of employees
• To provide a high level of understanding about available benefits
• To encourage the wise use of benefits
• Printed brochures that show the “big picture”
• Initial group meeting
• Audiovisual presentations
• Benefits counseling
• Intranet
• Social media