Massachusetts Health & Accident Insurance Practice Exam

Which of the following best describes an essential component of the contributory plan structure?

1. Participation is 100% mandatory

2. It guarantees full coverage regardless of participation

3. Employees share a portion of the premium

4. Only employers are responsible for costs

The correct answer is: Employees share a portion of the premium

An essential component of the contributory plan structure is that employees share a portion of the premium. This means that both the employer and the employees contribute financially to the insurance costs, helping to make the coverage accessible while also aligning the interests of both parties. This shared responsibility often leads to higher participation rates in the plan, as employees have a vested interest in maintaining their health coverage. In contributory plans, the requirement for employee contributions often improves the overall commitment from members, as employees are more likely to value and use a plan in which they have personally invested. The balance of contributions helps manage overall costs for the employer and can lead to more stable funding for the insurance plan. In contrast, full mandatory participation is not a component of contributory plans, as they allow for voluntary employee participation provided that a minimum level of employee contribution is met. Guaranteeing full coverage regardless of participation is more characteristic of non-contributory plans, where the employer bears the entire premium cost. Finally, the component where only employers are responsible for costs contradicts the fundamentals of a contributory plan, making it clear that shared responsibility is a defining characteristic.