Health & Welfare Benefit Design Flashcards

Under the ACA, what is the penalty for employers that offer coverage but fail to meet minimum value standards?

Answer: Section 4980H(b) penalty per employee who receives a subsidy

The 4980H(b) 'B penalty' applies per full-time employee who obtains subsidized Marketplace coverage when the offered plan fails minimum value or affordability.

A Health Reimbursement Arrangement (HRA) differs from an HSA primarily because an HRA:

Answer: Is owned and funded solely by the employer

HRAs are employer-funded accounts; employees cannot contribute, and unused balances may be forfeited per plan design.

Which cost-sharing feature specifically requires the insurer to pay 100% of covered in-network expenses once a participant reaches the limit?

Answer: Out-of-pocket maximum

The ACA-mandated out-of-pocket maximum caps total member cost-sharing so the insurer bears all remaining in-network costs for the year.

A self-insured employer purchases stop-loss insurance with a $200,000 specific attachment point. This means:

Answer: The employer pays all claims up to $200,000 per covered individual

Specific (individual) stop-loss protects the plan from catastrophic single-claimant costs by reimbursing claims above the stated per-person threshold.

The Mental Health Parity and Addiction Equity Act (MHPAEA) requires that:

Answer: Financial and treatment limitations for MH/SUD cannot be more restrictive than those for medical/surgical benefits

MHPAEA prohibits applying more restrictive quantitative or non-quantitative treatment limitations to mental health/substance use disorder benefits than to analogous medical/surgical benefits.

Which plan design element is MOST effective at encouraging employees to choose generic drugs over brand-name equivalents?

Answer: Formulary tiering with differential copays

Tiered formularies create meaningful cost differences between generic and brand tiers, directly incentivizing generic selection through member cost-sharing.

A fully insured group health plan shifts which risk to the insurance carrier?

Answer: Claims volatility and adverse selection risk

In a fully insured arrangement, the carrier accepts the risk that actual claims will exceed expected claims in exchange for a fixed premium.