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CER practice questions

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Question 1Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Under a traditional indemnity (fee-for-service) group health plan, how is the provider typically paid?

  1. A negotiated fee for each service rendered, with the plan paying after the fact Correct answer.
  2. A fixed per-member monthly amount regardless of services rendered
  3. A retainer paid before care is delivered
  4. A shared savings percentage of the plan's annual surplus

Explanation

Indemnity plans are retrospective: the provider bills a fee for each service, and the insurer or member pays the claim afterward. Because the provider is paid for volume, indemnity designs give the weakest incentive to control utilization and are the baseline against which managed care is described.

Question 2Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which characteristic distinguishes an HMO from a PPO in most group health plan designs?

  1. HMO members generally must use in-network providers and obtain referrals, while PPO members can use out-of-network providers at higher cost Correct answer.
  2. HMO plans exclude preventive care, while PPO plans must cover it
  3. HMO plans are self-funded, while PPO plans are always fully insured
  4. HMO members pay no premiums, while PPO members pay monthly premiums

Explanation

The core structural difference is network discipline: an HMO generally requires members to receive care within the network (often with a gatekeeper referral), whereas a PPO lets members go outside the network at a higher cost share. Both types commonly charge premiums and cover preventive care.

Question 3Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan specifies a $1,500 deductible, then 80% plan payment and 20% member payment until the member reaches an out-of-pocket maximum. What is the member's 20% share called?

  1. Premium
  2. Copayment
  3. Capitation
  4. Coinsurance Correct answer.

Explanation

Coinsurance is the percentage of covered costs the member pays after the deductible is satisfied. It differs from a copayment, which is a fixed dollar amount per service, and from the premium, which is the cost of enrollment itself.

Question 4Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which statement best describes the financing difference between a fully insured and a self-funded group health plan?

  1. The employer bears claim risk in both arrangements but purchases state-regulated policies
  2. The insurer bears claim risk in a fully insured plan, while the employer bears claim risk in a self-funded plan Correct answer.
  3. The employer retains claim risk in a fully insured plan, while the insurer bears it in a self-funded plan
  4. Both arrangements transfer claim risk to the stop-loss carrier

Explanation

In a fully insured arrangement the carrier accepts the risk in exchange for premiums. In a self-funded plan the employer pays claims from its own funds and therefore bears the risk, often buying stop-loss coverage to cap catastrophic exposure.

Question 5Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

For a group health plan subject to ERISA, which document must be furnished to participants and describes plan terms, eligibility, and claims procedures?

  1. The summary annual report
  2. The certificate of creditable coverage
  3. The Form 5500 filing
  4. The summary plan description Correct answer.

Explanation

ERISA requires the plan administrator to furnish a summary plan description that explains plan terms in plain language, including eligibility and claims procedures. The summary annual report is a shorter financial summary, and the Form 5500 is an annual return filed with the government.

Question 6Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which federal law first imposed portability, nondiscrimination in eligibility, and guaranteed renewability rules on group health plans?

  1. The Affordable Care Act
  2. The Employee Retirement Income Security Act
  3. The Consolidated Omnibus Budget Reconciliation Act
  4. The Health Insurance Portability and Accountability Act Correct answer.

Explanation

HIPAA's group market provisions limited preexisting-condition exclusions, restricted discrimination based on health status, and guaranteed renewability. COBRA addresses continuation coverage and ERISA governs fiduciary and reporting duties.

Question 7Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A self-funded employer plan wants protection against a single catastrophic claimant. Which product is designed for that purpose?

  1. A minimum premium arrangement
  2. Aggregate stop-loss coverage
  3. A participating (experience-rated) contract
  4. Specific stop-loss coverage Correct answer.

Explanation

Specific stop-loss attaches to claims for any one individual above a stated threshold, protecting the plan against a single catastrophic claim. Aggregate stop-loss instead protects against total claims exceeding a projected level for the whole group.

Question 8Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

In a group health plan, what is the purpose of an out-of-pocket maximum?

  1. It sets the highest premium the insurer may charge the employer
  2. It limits the member's cost sharing for covered in-network essential benefits during the plan year Correct answer.
  3. It caps the total amount of claims a provider may submit
  4. It defines the largest benefit the plan will ever pay for a single procedure

Explanation

The out-of-pocket maximum limits how much a member pays in cost sharing for covered in-network essential health benefits in a plan year. Once it is reached, the plan generally pays 100% of covered benefits for the rest of the year.

Question 9Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer with 120 full-time employees offers a group health plan and wants to avoid state-mandated benefit laws. Which funding approach generally achieves this under ERISA?

  1. Offering coverage through a state-run exchange
  2. Purchasing a fully insured policy from a licensed carrier
  3. Establishing a self-funded plan that pays claims from employer assets Correct answer.
  4. Joining a multiple employer welfare arrangement that is fully insured

Explanation

ERISA preemption generally allows self-funded plans to avoid state insurance mandates because the plan is not deemed to be insurance. Fully insured arrangements remain subject to state insurance law, including mandated benefits.

Question 10Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A plan uses a tiered pharmacy benefit with a $10 generic, $40 preferred brand, and $90 nonpreferred brand copayment. Which design objective does the nonpreferred tier primarily serve?

  1. Guaranteeing that all brand drugs cost the plan the same amount
  2. Removing the plan's obligation to cover any brand drug
  3. Eliminating the need for a drug formulary
  4. Increasing member cost sharing to steer utilization toward lower-cost alternatives Correct answer.

Explanation

Tiered copayments place higher member cost sharing on less preferred drugs to encourage members to choose generics or preferred brands. This steering mechanism works alongside a formulary and does not remove coverage for the higher tier.

Question 11Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Under COBRA, which event generally gives a qualified beneficiary the right to elect continuation coverage?

  1. The employer changes the plan's claims administrator
  2. The employee requests a different network option during open enrollment
  3. An employee's dependent turns 26 and becomes ineligible under the plan Correct answer.
  4. The employer voluntarily reduces the plan's benefit levels for active employees

Explanation

Loss of dependent status, such as a child aging out of eligibility, is a qualifying event that triggers COBRA election rights. Plan design changes and administrative vendor changes do not create continuation rights for participants.

Question 12Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan imposes a 12-month preexisting-condition exclusion on a newly hired employee. Which fact is most relevant to whether that exclusion can be enforced?

  1. Whether the employer has more than 50 employees in total
  2. Whether the plan is experience-rated or community-rated
  3. Whether the employee is paid on an hourly or salaried basis
  4. Whether the employee had prior creditable coverage with no significant break Correct answer.

Explanation

HIPAA requires that prior creditable coverage reduce or eliminate a preexisting-condition exclusion, provided the individual did not have a significant break in coverage. Pay basis, employer size, and rating method do not determine whether the exclusion applies.

Question 13Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer wants level, predictable monthly payments and no responsibility for paying individual claims. Which arrangement fits that description?

  1. A minimum premium plan in which the employer pays claims from a bank account
  2. A self-funded plan with specific stop-loss
  3. A fully insured arrangement with a fixed premium Correct answer.
  4. A level-funded plan with a claims fund owned by the employer

Explanation

A fully insured arrangement shifts claim liability to the carrier in exchange for a fixed premium, giving the employer predictable monthly cost. Self-funded, level-funded, and minimum premium designs all involve the employer funding claims to some degree.

Question 14Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A plan's summary of benefits lists a $250 emergency room copayment that is waived if the member is admitted. What design feature does the waiver represent?

  1. A coinsurance requirement that replaces the copayment after admission
  2. A deductible that applies only to inpatient care
  3. A cost-sharing incentive to discourage inappropriate emergency use while protecting genuinely admitted patients Correct answer.
  4. A benefit maximum that limits total emergency spending

Explanation

The waiver is a utilization-management incentive: members face a charge for emergency use but avoid it when admission confirms the visit was necessary. It is not a deductible, coinsurance, or benefit maximum.

Question 15Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which statement accurately describes a health reimbursement arrangement (HRA) offered alongside a group health plan?

  1. It is employer-funded and reimburses eligible medical expenses up to a defined allowance Correct answer.
  2. It must be offered only to highly compensated employees
  3. It can be used to pay premiums for individual market coverage without restriction
  4. It is funded solely by employee salary reductions

Explanation

An HRA is an employer-funded account that reimburses eligible medical expenses up to a set amount. It is not funded by employee salary reductions, which describes a health flexible spending arrangement.

Question 16Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A member receives care from an out-of-network provider in a PPO. How does the plan typically determine its payment?

  1. It pays the provider's full billed charge with no member cost sharing
  2. It pays a percentage of an allowed amount based on out-of-network rates, and the member may owe balance billing Correct answer.
  3. It pays nothing under any circumstances
  4. It pays the same as in-network and prohibits the provider from billing the difference

Explanation

PPO out-of-network benefits usually reimburse a percentage of an allowed amount set by the plan, leaving the member responsible for balance billing above that amount. In-network protections against balance billing do not generally extend to out-of-network providers.

Question 17Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which rule applies to a group health plan's lifetime dollar limit on essential health benefits for non-grandfathered plans?

  1. Lifetime dollar limits apply only to self-funded plans
  2. Lifetime dollar limits are prohibited on essential health benefits Correct answer.
  3. Lifetime dollar limits are permitted if disclosed in the summary plan description
  4. Lifetime dollar limits are permitted up to $1 million

Explanation

Non-grandfathered group health plans may not impose lifetime dollar limits on essential health benefits. Annual dollar limits on those benefits are also restricted, with permitted annual limits tied to the definition of essential health benefits.

Question 18Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer is considering a level-funded arrangement. Which combination of features best describes it?

  1. A multiple employer welfare arrangement limited to unions
  2. A fully insured policy with no possibility of refund
  3. Pure self-funding with no insurance component and no claim reserves
  4. Fixed monthly payments to a carrier, a portion held in a claims fund, and stop-loss protection with possible surplus refunds Correct answer.

Explanation

Level-funded plans combine a fixed monthly payment with a claims fund and stop-loss coverage, and they may return surplus to the employer at year-end. This blends the predictability of insured funding with some self-funded economics.

Question 19Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A plan administrator denies a claim and must follow ERISA claims procedure rules. Which requirement applies to the adverse benefit determination notice?

  1. It must be approved by the Department of Labor before issuance
  2. It must be delivered only after the member files a lawsuit
  3. It must state the specific reason for the denial and describe the appeal process Correct answer.
  4. It may omit the plan provisions relied upon if the denial is based on medical necessity

Explanation

ERISA claims procedure rules require an adverse benefit determination to explain the specific reason for denial and describe the review process available to the claimant. The notice must also reference the plan provisions on which the decision was based.

Question 20Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which design element most directly addresses adverse selection when an employer adds a high-cost plan option alongside a leaner option?

  1. Eliminating all cost sharing in the leaner option
  2. Applying the same employee premium to both options regardless of actuarial value
  3. Allowing employees to switch options at any time during the year
  4. Setting the contribution strategy so the richer option carries a proportionally higher employee premium Correct answer.

Explanation

Contribution strategy influences enrollment sorting; pricing the richer option higher discourages members who expect high costs from clustering in it. Equal pricing or free movement between options tends to worsen risk pooling.

Question 21Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which statement best explains why a small employer may face higher per-employee premium volatility than a large employer?

  1. Small groups cannot use experience rating under any circumstances
  2. A single large claim represents a larger share of total expected claims in a smaller group Correct answer.
  3. Small groups are exempt from state insurance regulation
  4. Small groups are barred from purchasing stop-loss coverage

Explanation

Credibility increases with group size, so a single catastrophic claim has a much larger effect on a small group's experience. This volatility is why small-group rating rules and pooling mechanisms exist.

Question 22Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A grandfathered group health plan retains that status. Which statement about its regulatory treatment is accurate?

  1. It is exempt from ERISA reporting and disclosure obligations
  2. It is exempt from certain ACA market reforms but remains subject to other federal mandates such as HIPAA and COBRA Correct answer.
  3. It may reinstate lifetime dollar limits on all benefits without restriction
  4. It is exempt from all federal group health plan requirements

Explanation

Grandfathered status preserves certain ACA market reform exemptions, but the plan remains subject to longstanding federal requirements such as HIPAA portability rules and COBRA continuation rights. It is not exempt from ERISA or all federal mandates.

Question 23Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer with 60 employees maintains a self-funded plan. A state enacts a law requiring coverage of a specific therapy. Which outcome is most likely under ERISA preemption?

  1. The plan must comply because the employer has more than 50 employees
  2. The plan must comply only if the therapy is provided in-network
  3. The plan must comply because the state law regulates health benefits
  4. The plan is generally not bound by the state benefit mandate because it is self-funded Correct answer.

Explanation

ERISA preemption generally shields self-funded plans from state insurance benefit mandates, since the plan is not considered insurance. Network status and employer size do not create an obligation to follow the state mandate.

Question 24Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A plan offers a health savings account (HSA) paired with a high-deductible health plan. Which combination is required for HSA eligibility?

  1. Enrollment in a low-deductible PPO and an employer-funded HRA
  2. Enrollment in a health FSA that reimburses general medical expenses
  3. Enrollment in a qualified high-deductible health plan, no disqualifying other coverage, and not being claimed as a dependent Correct answer.
  4. Enrollment in Medicare Part A and a high-deductible plan

Explanation

HSA eligibility requires coverage under a qualifying high-deductible health plan, no disqualifying coverage, and status as an eligible individual who is not claimed as a dependent. General-purpose health FSAs and Medicare generally disqualify contributions.

Question 25Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan uses a network with a per-case negotiated rate and a primary care gatekeeper. Which combination best describes this model's utilization control?

  1. A PPO with out-of-network benefits and no referral requirement
  2. Open access with indemnity reimbursement and no provider network
  3. Closed-panel HMO features combining provider risk sharing with referral management Correct answer.
  4. A consumer-directed plan with an HSA and no network restrictions

Explanation

A gatekeeper referral requirement and negotiated per-case rates are hallmarks of HMO-style managed care, often with closed or narrow networks and provider risk sharing. These features control utilization by managing access and aligning provider incentives.

Question 26Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan pays a fixed percentage of covered expenses after the deductible and the member pays the remainder until a set dollar amount is reached. What does the member's share during this phase represent?

  1. Coinsurance Correct answer.
  2. Premium
  3. Deductible
  4. Copayment

Explanation

Coinsurance is the percentage of covered expenses the member pays after satisfying the deductible, continuing until the out-of-pocket maximum is reached. A copayment is a flat dollar amount, a premium is the amount paid to maintain coverage, and a deductible is the amount paid before the plan begins sharing costs.

Question 27Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer wants a plan that generally requires members to select a primary care physician who coordinates care and issues referrals to specialists, with care outside the network generally not covered. Which plan type fits this description?

  1. Preferred provider organization (PPO)
  2. Exclusive provider organization (EPO)
  3. Health maintenance organization (HMO) Correct answer.
  4. Point-of-service (POS) plan

Explanation

An HMO typically requires members to choose a primary care physician who acts as a gatekeeper and coordinates referrals, and it generally does not cover nonemergency care outside the network. A POS plan also uses a gatekeeper but permits out-of-network care with reduced benefits, which distinguishes it from this description.

Question 28Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer's plan requires a member to pay the first $1,500 of covered medical expenses each year before the plan begins paying for most services. What is this $1,500 amount called?

  1. The stop-loss attachment point
  2. The coinsurance rate
  3. The deductible Correct answer.
  4. The out-of-pocket maximum

Explanation

The deductible is the amount a member must pay for covered services before the plan begins to pay its share. The out-of-pocket maximum caps total member spending, coinsurance is a percentage split, and a stop-loss attachment point is a risk-transfer threshold for the plan sponsor.

Question 29Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which statement correctly describes the relationship between a health savings account (HSA) and the high-deductible health plan (HDHP) that accompanies it?

  1. The HSA is owned by the employer and forfeited when the employee leaves
  2. The HSA is individually owned and portable, while the HDHP provides the qualifying coverage that permits HSA contributions Correct answer.
  3. The HDHP pays all expenses below the deductible while the HSA covers amounts above it
  4. The HSA may be funded only by the employer and never by the employee

Explanation

An HSA is a tax-advantaged account owned by the individual and remains with the account holder even after employment ends, provided the individual has qualifying HDHP coverage. Both employer and employee may contribute, subject to annual limits.

Question 30Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan is fully insured. Which party bears the financial risk for paying claims that exceed the premium collected?

  1. The covered employees through assessments
  2. The plan's third-party administrator
  3. The employer sponsoring the plan
  4. The insurance carrier Correct answer.

Explanation

In a fully insured arrangement, the carrier assumes the risk of claims in exchange for the premium and is responsible for paying covered claims regardless of their size. The employer's cost is limited to premium, and a third-party administrator does not bear claims risk.

Question 31Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which federal law sets minimum standards for group health plans and group health insurance, including rules on preexisting condition exclusions, lifetime and annual limits, and dependent coverage to age 26?

  1. The Health Insurance Portability and Accountability Act (HIPAA)
  2. The Affordable Care Act (ACA) Correct answer.
  3. The Employee Retirement Income Security Act (ERISA)
  4. The Consolidated Omnibus Budget Reconciliation Act (COBRA)

Explanation

The ACA established market reforms for group health plans, including restrictions on preexisting condition exclusions, prohibition of lifetime limits on essential health benefits, and extended dependent coverage to age 26. ERISA governs fiduciary and reporting duties, COBRA governs continuation coverage, and HIPAA governs portability and privacy.

Question 32Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A member enrolled in a group health plan uses an in-network primary care physician for a routine visit and pays a fixed $25 charge at the time of service. What is this charge called?

  1. A deductible
  2. A premium
  3. Coinsurance
  4. A copayment Correct answer.

Explanation

A copayment is a fixed dollar amount the member pays for a specified service, often collected at the point of care. Coinsurance is a percentage share, a deductible is a threshold paid before benefits begin, and a premium is the cost of maintaining coverage.

Question 33Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

Which entity typically administers claims, maintains the provider network, and applies utilization management for a self-funded group health plan while the employer retains financial responsibility for claims?

  1. The plan's trustee bank
  2. The state department of insurance
  3. The stop-loss carrier
  4. The third-party administrator (TPA) Correct answer.

Explanation

A TPA performs administrative functions such as claims adjudication, network access, and utilization management for a self-funded plan, but the employer remains financially responsible for claims. A stop-loss carrier reimburses catastrophic claims but does not administer the plan.

Question 34Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer with 45 employees maintains a self-funded group health plan. A state mandates that all health plans cover a particular treatment. Under ERISA preemption principles, how does this mandate generally apply to the employer's plan?

  1. It applies because all group health plans must follow state benefit mandates
  2. It generally does not apply because the self-funded plan is not an insurer subject to state insurance laws Correct answer.
  3. It applies only if the employer has employees in more than one state
  4. It applies only if the plan purchases stop-loss coverage

Explanation

ERISA generally preempts state laws that relate to employee benefit plans, and self-funded plans are not treated as insurers for state insurance law purposes, so state benefit mandates generally do not bind them. The preemption analysis does not turn on multi-state presence or the purchase of stop-loss coverage.

Question 35Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan covers a brand-name drug at 30% coinsurance after a $75 drug deductible, while a therapeutically equivalent generic is covered at a $10 copayment. Which design feature does this arrangement most directly create?

  1. A guarantee that the plan's drug spending will decrease
  2. An exclusion of all brand-name drugs from coverage
  3. A requirement that members use mail-order pharmacies
  4. A financial incentive for members to choose lower-cost generic drugs Correct answer.

Explanation

Tiered cost sharing places a higher member cost on brand drugs than on generics, creating an incentive to select the lower-cost alternative. It does not guarantee lower plan spending, since utilization and prices can change, and it does not exclude brand drugs or require mail order.

Question 36Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A self-funded employer wants to limit its exposure to claims above a specified dollar amount for each individual claimant during the plan year. Which arrangement addresses this need?

  1. A fully insured experience-rated policy
  2. A minimum premium arrangement
  3. Aggregate stop-loss insurance
  4. Specific stop-loss insurance Correct answer.

Explanation

Specific stop-loss coverage reimburses the employer for claims paid on any one individual above an attachment point. Aggregate stop-loss instead protects against total claims exceeding a projected level for the whole group, which is a different exposure.

Question 37Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A plan's summary of benefits shows that inpatient hospital care requires precertification and that failure to obtain it reduces payment by 50%. Which plan function does this requirement illustrate?

  1. Coordination of benefits
  2. Subrogation
  3. Credentialing
  4. Utilization management Correct answer.

Explanation

Utilization management uses prospective review such as precertification to assess medical necessity and control costs before services are delivered. Credentialing verifies provider qualifications, subrogation pursues third-party recovery, and coordination of benefits determines payment order among multiple plans.

Question 38Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employee covered by a group health plan also is covered as a dependent under a spouse's plan. Both plans contain coordination of benefits provisions. What is the primary purpose of these provisions?

  1. To require the member to drop one of the two coverages
  2. To allow the member to collect benefits from both plans up to the full billed charge
  3. To shift all costs to the plan with the lower deductible
  4. To prevent duplicate payment for the same expenses by determining which plan pays first Correct answer.

Explanation

Coordination of benefits provisions establish the order of payment when a person is covered by more than one plan, preventing duplicate payment beyond the actual expense. They do not require dropping coverage or allocate costs based on deductibles.

Question 39Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan uses a network of providers who agree to negotiated discounts, and members may see non-network providers but pay higher cost sharing and may be balance billed. Which plan type is described?

  1. Medicare Advantage special needs plan
  2. Health maintenance organization (HMO)
  3. Exclusive provider organization (EPO)
  4. Preferred provider organization (PPO) Correct answer.

Explanation

A PPO contracts with a network for discounted rates while still permitting out-of-network care at higher member cost, often with balance billing. An HMO generally does not cover nonemergency out-of-network care, and an EPO typically provides no out-of-network benefits except emergencies.

Question 40Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer with 80 employees is fully insured and wants to offer coverage that varies premiums based on the group's own claims experience. Which underwriting approach is the insurer most likely to use?

  1. Experience rating Correct answer.
  2. Retrospective-only rating with no prospectively set premium
  3. Guaranteed issue with no rating variation
  4. Community rating

Explanation

Experience rating sets premium based in part on the group's own claims history and is common for larger employer groups. Community rating sets premium based on the broader pool rather than the group's experience, and guaranteed issue addresses eligibility rather than rating method.

Question 41Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer sponsors a group health plan subject to ERISA and wants to confirm which fiduciary duties apply to the plan administrator. Which standard requires the administrator to act solely in the interest of participants and beneficiaries?

  1. The duty of loyalty Correct answer.
  2. The duty of diversification
  3. The duty to guarantee benefits
  4. The duty to minimize premiums

Explanation

ERISA imposes a duty of loyalty requiring fiduciaries to act solely in the interest of participants and beneficiaries for the exclusive purpose of providing benefits and defraying reasonable expenses. The duty of diversification applies to plan investments, and fiduciaries are not required to guarantee benefits or minimize premiums.

Question 42Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan provides a $50 copayment for specialist visits and a $30 copayment for primary care visits, with no deductible. Which statement best explains the purpose of this differential cost sharing?

  1. It encourages members to use primary care as the entry point and reduces spending on more costly specialist care Correct answer.
  2. It guarantees that specialists will accept the plan's reimbursement rate
  3. It eliminates the need for utilization management
  4. It shifts all risk for specialist costs to the member

Explanation

Lower cost sharing for primary care encourages members to use that setting first, which can reduce unnecessary specialist use and overall plan costs. It does not guarantee provider participation, replace utilization management, or transfer all specialist risk to members.

Question 43Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer maintains a self-funded plan and wants to offer employees a tax-advantaged account that is funded solely by the employer, permits unused funds to roll over, and reimburses qualified medical expenses. Which arrangement fits?

  1. A health reimbursement arrangement (HRA) Correct answer.
  2. A medical savings account under a grandfathered program
  3. A health savings account (HSA)
  4. A flexible spending account (FSA)

Explanation

An HRA is employer-funded, tax-advantaged, and may allow balances to carry over, and it reimburses qualified medical expenses. An HSA requires qualifying high-deductible coverage and may be employee-funded, and a health FSA is generally funded through employee salary reductions with limited carryover.

Question 44Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A member's group health plan has a $3,000 individual deductible and a $7,000 out-of-pocket maximum for individual coverage. After the member pays $3,000 in covered expenses, the plan pays 80% of the next covered expenses. At what point does the member's cost sharing for covered in-network services stop for the year?

  1. When the plan has paid $7,000 in claims
  2. When the member has paid $4,000 in coinsurance
  3. When the member has paid the $3,000 deductible
  4. When the member has paid $7,000 in total out-of-pocket costs for covered in-network services Correct answer.

Explanation

The out-of-pocket maximum caps the member's total cost sharing, including deductible and coinsurance, for covered in-network services. Once the member reaches $7,000, the plan generally pays 100% of covered in-network costs for the remainder of the year.

Question 45Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer with 500 employees considers moving from fully insured to self-funded coverage. Which factor most accurately describes a financial consideration of that change?

  1. The employer eliminates all administrative costs by self-funding
  2. The employer becomes exempt from ERISA reporting requirements
  3. The employer's state insurance mandates expand automatically
  4. The employer assumes claims risk but may retain the difference between projected claims and actual claims Correct answer.

Explanation

Self-funding transfers claims risk to the employer, which may keep the margin between expected and actual claims but also bears losses if claims are higher than projected. Self-funding does not eliminate administrative costs, does not exempt the plan from ERISA, and generally reduces exposure to state mandates rather than expanding it.

Question 46Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan applies a preexisting condition exclusion to a newly enrolled employee. Under the ACA, which statement is accurate for a non-grandfathered group health plan?

  1. The plan may impose an exclusion only on enrollees over age 19
  2. The plan may not impose a preexisting condition exclusion on any enrollee regardless of age Correct answer.
  3. The plan may impose an exclusion only if the enrollee had a gap in coverage exceeding 63 days
  4. The plan may impose a 12-month exclusion for all new enrollees

Explanation

For non-grandfathered group health plans, the ACA prohibits preexisting condition exclusions for all enrollees, and the prohibition is not limited by age or coverage gaps. The older HIPAA portability rules on creditable coverage and gaps applied before the ACA prohibition took effect.

Question 47Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

An employer with 30 employees offers a group health plan. The insurer wants to vary the premium based on the group's health status. Under ACA market rules for the small group market, which statement is accurate?

  1. The insurer may set rates based on the group's claims experience
  2. The insurer may vary rates only by permitted factors such as age, geographic area, family size, and tobacco use Correct answer.
  3. The insurer may decline to renew coverage if claims are high
  4. The insurer may charge a higher rate to employees with chronic conditions

Explanation

In the small group market, the ACA permits rate variation only by specified factors such as age, geographic rating area, family size, and tobacco use, and prohibits health-status-based rating. Guaranteed renewability also limits the insurer's ability to terminate coverage because of claims.

Question 48Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A plan offers two medical options: a low-premium, high-deductible plan and a higher-premium, low-deductible plan. Which outcome is most consistent with adverse selection if employees may choose freely at open enrollment?

  1. The employer's total premium is unaffected by employee choice
  2. Both options experience identical risk pools because employees choose randomly
  3. Higher-risk employees disproportionately enroll in the richer, low-deductible option, raising its costs Correct answer.
  4. Lower-risk employees disproportionately enroll in the richer, low-deductible option, lowering its costs

Explanation

Adverse selection occurs when individuals with greater expected health needs gravitate toward more generous coverage, which can raise the cost of that option relative to its premium. This dynamic can destabilize the richer plan's pricing unless the employer adjusts contributions or designs to balance risk.

Question 49Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A self-funded group health plan with 200 participants wants to add a wellness program that includes a health risk assessment and a premium differential for participation. Which legal consideration is most directly implicated?

  1. The plan's summary annual report deadline
  2. The plan's network adequacy certification
  3. Nondiscrimination and wellness program rules under HIPAA and the ACA Correct answer.
  4. The plan's stop-loss attachment point

Explanation

Wellness programs that reward participation or outcomes must satisfy nondiscrimination and wellness rules, including limits on incentives and reasonable alternative standards. Stop-loss attachment points, network adequacy, and reporting deadlines are distinct issues not specific to wellness incentives.

Question 50Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)

A group health plan uses a reference-based pricing approach for certain procedures, paying a fixed amount tied to a benchmark rather than a provider's billed charge. Which consequence is most likely for members who use providers charging above the benchmark?

  1. The member may be responsible for the difference between the billed charge and the plan's payment Correct answer.
  2. The provider must accept the benchmark amount as payment in full
  3. The member's cost sharing is eliminated
  4. The plan must pay the full billed charge under the ACA

Explanation

With reference-based pricing, the plan pays a benchmark amount, and providers that do not accept it as payment in full may bill members for the balance, exposing members to additional costs. Providers are not obligated to accept the benchmark, and the ACA does not require payment of the full billed charge.