California Life-Only & Accident and Health AgentAccident and Health InsuranceEasy
A small business with 8 employees wants to provide health insurance. The owner is concerned about the administrative burden and wants a plan that simplifies enrollment and premium collection. Which type of group health plan would most effectively address these concerns?
- AContributory Plan
- BNon-Contributory Plan
- CCommunity-Rated Plan
- DExperience-Rated Plan
Show answer & explanationAnswer & explanation
Correct answer: B. Non-Contributory Plan
A non-contributory plan requires 100% employee participation, which simplifies administration by ensuring all eligible employees are covered and streamlines premium collection.
Why the other options are wrong
- A. Contributory plans require employees to pay a portion of the premium, potentially complicating enrollment and collection.
- C. Community-rated plans relate to how premiums are calculated based on the broader community, not administrative burden.
- D. Experience-rated plans relate to how premiums are calculated based on group claims history, not administrative burden.
Non-Contributory Group Plan
A group health insurance plan where the employer pays 100% of the premiums for eligible employees, requiring 100% employee participation.
- Employer pays entire premium.
- Requires 100% employee participation.
- Simplifies administration and reduces adverse selection.
Memory trick: Group plans simplify for the employer, especially if contributions are clear.