Exam 3 Part C

Question 1

Cafeteria/Flexible Benefits Plan

Answer 1

• Any kind of EE benefit plan that allows EEs to choose

Question 2

Core Plus Plan

Answer 2

• Every EE receives a basic core of benefits; minimum coverage for a single person
• May also receive flex credits of flex $
  1. Buy coverage not included in core
  2. Turn into cash

Question 3

Flexible Spending Accounts 3 Types

Answer 3

1. Healthcare FSA
2. Childcare (dependent care) FSA
3. Transportation Spending Account
   4

Question 4

Flexible Spending Accounts

Answer 4

• Any EE agrees to reduce their salary pre-tax by a certain amount and money is deposited into a FSA
• Any unused funds at the end of the plan year remaining in a FSA are forfeited to the ER
• Unused funds are used to fund administrative costs of FSA
• “Use it or Lose It” rule

Question 5

Dependent Care

Answer 5

• Childcare expenses

- Eldercare expenses

Question 6

Medical Care FSA

Answer 6

• Items not covered by medical plan
• Co payments
• IRS Does not set limits

Question 7

Transportation Account

Answer 7

• Pay for train, bus, or parking
• Recognized expenses
• Main advantage is savings on taxes

Question 8

Why is an ER at risk for a Medical FSA?

Answer 8

• The total amount is deposited in the account before the EE begins to make monthly deposits.
• ER usually choices a maximum to limit exposure; usually $5,000

Question 9

Two Big Issues with Healthcare Benefits

Answer 9

1. High Cost

2. High % of uninsured or underinsured persons

Question 10

High Cost of Inflation (Healthcare)

Answer 10

• High rate of inflation compared to overall rate of inflation
• High premiums for ERs
• High costs for government

Question 11

High % of Uninsured/Underinsured Persons

Answer 11

• Access problem

- 45 million uninsured

Question 12

High Degree of 3rd payment for healthcare

Answer 12

• Insurance Companies; CIGNA, Aetna, and Blue Cross
• Government
• Employeres

Question 13

Letha Combination

Answer 13

• Third Party Payment: can create moral hazard

- Fee for service reimbursement of providers

Question 14

Indemnity Plan (Old School)

Answer 14

• Room cost of hospital
• Surgeon’s fees
• Follow up visits from the hospital stay
• Gaps in Coverage

Question 15

Gaps in Indemnity Plan

Answer 15

• Non Hospital based expenditures not covered
• Low limits; not good coverage for catastrophic event
• Balance billing - owe hospital amounts not covered by insurance (charge - reimbursement = balance)

Question 16

Major Medical

Answer 16

• Pays for routine, non hospital based expenses not covered by basic indemnity plan
• High limits - good catastrophic protection
• Broad coverage - fewer exclusions
• Features Cost Sharing: deductibles, coinsurance

Question 17

Roles of Insurers in Indemnity Plans

Answer 17

• Indemnify insured’s for covered losses
• Manage or coordinate care? NO
• Freedom of choice of providers