California Property & Casualty Broker-AgentHealth InsuranceMedium
A small business owner with 8 employees is exploring group health insurance options. They are concerned about ensuring high participation rates among their employees to maintain favorable premium rates. Which type of group health insurance plan typically requires a higher percentage of eligible employees to enroll?
- APartially contributory plan
- BNoncontributory plan
- CVoluntary contributory plan
- DIndividual mandate plan
Show answer & explanationAnswer & explanation
Correct answer: C. Voluntary contributory plan
Voluntary contributory plans require employees to contribute to the premium, and because participation is not mandatory, insurers often require a higher percentage of eligible employees (e.g., 75%) to enroll to prevent adverse selection.
Why the other options are wrong
- A. Partially contributory is not a standard, distinct category often used in this context; 'contributory' already implies partial payment.
- B. Noncontributory plans typically require 100% participation because the employer pays the entire premium, making them attractive to all eligible employees.
- D. Individual mandate plans refer to a legal requirement for individuals to have health insurance, not a type of group plan.
Group Health - Participation Requirements
The minimum percentage of eligible employees that must enroll in a group health plan for the policy to be issued and maintained.
- Designed to prevent adverse selection.
- Higher for contributory plans (employees pay part).
- Often 100% for noncontributory plans (employer pays all).
Memory trick: Contributory plans need more 'voluntary' participants, or the insurer won't play.