Prof Questions for Topic 8 and 9 Risk

Question 1

Why do firms offer employee benefits?

Answer 1

• Attract and retain capable employees
• Tax advantages
• Productivity and better employee relationships
• ER can take advantage of group insurance

Question 2

What are the 3 ways that benefit plans are paid for/financed?

Answer 2

1) Non-contributory
2) Contributory
3) Voluntary

Question 3

Explain the Married with Children dilemma.

Answer 3

Married people with children should be paying more for their benefit plan

Question 4

What are the ways adverse selection is controlled in group insurance?

Answer 4

1) Waiting periods
2) Pre-existing condition exclusives (PCE)
3) Minimum participation requirements
4) A minimum group size
5) Steady flow of persons through the group
6) The group should exist for reasons other than the purchase of insurance (Exs. ER/EE groups, professional associations, alumni associations, veterans groups)

Question 5

What is the key advantage/point of a Flexible Spending account?

Answer 5

Lowers your taxable income and saves you money on taxes throughout the year
- In short: Pay less in taxes

Question 6

What are the types of medical plans?

Answer 6

1) PPO
2) HMO
3) Indemnity
4) CDHP

Question 7

What is an HMO?

Answer 7

A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won’t cover out-of-network care except in an emergency

Question 8

What is a PPO?

Answer 8

PPO stands for preferred provider organization. Just like an HMO, or health maintenance organization, a PPO plan offers a network of healthcare providers you can use for your medical care. These providers have agreed to provide care to the plan members at a certain rate.

*With a PPO you can see ANY doctor

Question 9

What is CDHP?

Answer 9

A healthcare financing model where consumers have an economic incentive to manage their care.

Question 10

What is an indemnity plan?

Answer 10

Covers the cost of the room, surgeon fees, and follow-up visits

Question 11

What are the changes that PPACA/Obama Care made?

Answer 11

• Dependents are covered until age 26
• Lifetime limits are banned
• No charging higher rates for those with pre-existing conditions and coverage of those conditions may not be excluded or reduced
• All preventative care and checkups are free