TREX Health & Welfare Benefit Design 3 — Questions and Answers
Question 1: Under COBRA, what is the maximum premium an employer may charge a qualified beneficiary for continuation coverage?
- 100% of the applicable cost
- 102% of the applicable cost (Correct answer)
- 110% of the applicable cost
- The same amount the active employee pays
Correct answer: 102% of the applicable cost
COBRA allows employers to charge up to 102% of the cost of coverage (100% premium + 2% administrative fee) to the qualified beneficiary.
Question 2: An Exclusive Provider Organization (EPO) differs from a PPO in that an EPO:
- Has no network of providers
- Requires a primary care physician referral for specialists
- Does not cover out-of-network care except emergencies (Correct answer)
- Charges higher premiums than a PPO for the same coverage
Correct answer: Does not cover out-of-network care except emergencies
EPOs restrict coverage to in-network providers (with limited emergency exceptions) but, unlike HMOs, typically do not require PCP referrals.
Question 3: What is the primary purpose of a wellness program's outcomes-based incentive structure?
- Reward employees simply for participating in health screenings
- Tie rewards to achieving specific biometric or health outcome targets (Correct answer)
- Provide equal incentives regardless of health status
- Eliminate the need for employer premium contributions
Correct answer: Tie rewards to achieving specific biometric or health outcome targets
Outcomes-based wellness programs link incentive rewards (or penalties) to achieving measurable health targets such as BMI, blood pressure, or tobacco-free status.
Question 4: Under the ACA's preventive care mandate, which of the following must be covered at no cost-sharing in non-grandfathered plans?
- All FDA-approved prescription drugs
- USPSTF grade A and B preventive services (Correct answer)
- Any service a primary care physician recommends
- Elective surgeries rated preventive by the insurer
Correct answer: USPSTF grade A and B preventive services
Non-grandfathered plans must cover USPSTF grade A and B preventive services, ACIP-recommended immunizations, and HRSA guidelines without cost-sharing.
Question 5: Which funding vehicle allows employees to pay their share of group health insurance premiums on a pre-tax basis?
- Health Savings Account (HSA)
- Section 125 Cafeteria Plan (Correct answer)
- Flexible Spending Account (FSA) medical
- Health Reimbursement Arrangement (HRA)
Correct answer: Section 125 Cafeteria Plan
A Section 125 cafeteria plan is the IRS vehicle that permits employees to elect to pay group health premiums with pre-tax dollars.
Question 6: A limited-scope dental FSA that is NOT integrated with major medical coverage is considered HSA-compatible because:
- Dental expenses are not considered qualified medical expenses
- It covers only dental/vision, not 'significant benefits' under IRS rules (Correct answer)
- The dental plan has its own separate deductible over $1,000
- Employees can roll unused dental FSA balances into their HSA
Correct answer: It covers only dental/vision, not 'significant benefits' under IRS rules
IRS guidance permits a limited-scope dental or vision FSA to coexist with HSA eligibility because such plans provide only 'excepted benefits,' not significant medical coverage.
Question 7: When evaluating a vendor for a disease management program, which metric BEST measures the program's return on investment?
- Number of enrolled participants
- Reduction in medical claims costs among participants vs. a control group (Correct answer)
- Employee satisfaction scores with the program
- Number of educational materials distributed
Correct answer: Reduction in medical claims costs among participants vs. a control group
Comparing medical claims costs between program participants and a matched control group provides the most rigorous ROI evidence for disease management programs.
TREX Health & Welfare Benefit Design 3
Under COBRA, what is the maximum premium an employer may charge a qualified beneficiary for continuation coverage?