TREX Health & Welfare Benefit Design 2 — Questions and Answers
Question 1: Under the ACA, what is the penalty for employers that offer coverage but fail to meet minimum value standards?
- Section 4980H(a) penalty per all full-time employees
- Section 4980H(b) penalty per employee who receives a subsidy (Correct answer)
- Section 4980H(c) penalty per dependent enrolled in Medicaid
- No penalty applies if any coverage is offered
Correct 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.
Question 2: A Health Reimbursement Arrangement (HRA) differs from an HSA primarily because an HRA:
- Can only be funded by the employee
- Is owned and funded solely by the employer (Correct answer)
- Requires a high-deductible health plan to be paired with it
- Has a statutory annual contribution limit set by the IRS
Correct 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.
Question 3: Which cost-sharing feature specifically requires the insurer to pay 100% of covered in-network expenses once a participant reaches the limit?
- Deductible
- Coinsurance ceiling
- Out-of-pocket maximum (Correct answer)
- Stop-loss attachment point
Correct 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.
Question 4: A self-insured employer purchases stop-loss insurance with a $200,000 specific attachment point. This means:
- The employer pays all claims up to $200,000 per covered individual (Correct answer)
- The insurer pays the first $200,000 for each individual claim
- The employer's aggregate liability is capped at $200,000
- Stop-loss reimburses the employer once total plan claims exceed $200,000
Correct 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.
Question 5: The Mental Health Parity and Addiction Equity Act (MHPAEA) requires that:
- Plans must offer mental health benefits to all enrollees
- Financial and treatment limitations for MH/SUD cannot be more restrictive than those for medical/surgical benefits (Correct answer)
- Copays for mental health visits must equal $0
- Employers with fewer than 50 employees must provide mental health coverage
Correct 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.
Question 6: Which plan design element is MOST effective at encouraging employees to choose generic drugs over brand-name equivalents?
- Formulary tiering with differential copays (Correct answer)
- Mandatory mail-order for 90-day supplies
- Prior authorization requirements for all drugs
- Step therapy for specialty medications only
Correct 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.
Question 7: A fully insured group health plan shifts which risk to the insurance carrier?
- Administrative risk only
- Claims volatility and adverse selection risk (Correct answer)
- Regulatory compliance risk under ERISA
- Investment return risk on plan assets
Correct 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.
TREX Health & Welfare Benefit Design 2
Under the ACA, what is the penalty for employers that offer coverage but fail to meet minimum value standards?