Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Health InsuranceMedium
A Florida business owner with 30 employees is considering offering a group health plan. They are exploring options where the employer pays a portion of the premium, and employees pay the remainder. Which of the following best describes this type of group health insurance funding arrangement?
- ASelf-funded plan
- BNon-contributory plan
- CFully insured plan
- DContributory plan
Show answer & explanationAnswer & explanation
Correct answer: D. Contributory plan
A contributory group health plan is one where both the employer and employees share in the cost of the premiums. A non-contributory plan is funded solely by the employer.
Why the other options are wrong
- A. A self-funded plan means the employer bears the financial risk for claims, which is also a different aspect than who pays the premiums.
- B. A non-contributory plan means the employer pays 100% of the premiums, which is not the scenario described.
- C. A fully insured plan refers to the funding mechanism where an insurance company bears the risk, which is a different aspect than who pays the premiums.
Contributory Group Plan
A type of group insurance plan where both the employer and the employees share the cost of the premiums. A certain percentage of eligible employees must participate for the plan to be effective.
- Both employer and employee pay part of the premium.
- Requires a minimum percentage (e.g., 75%) of eligible employees to participate.
- More common than non-contributory plans due to cost sharing.
Memory trick: Contributory means you contribute, too!