Tennessee Insurance Practice Exam

If an employee contributes to the premium of a group health plan provided by their employer, under what type of plan are they covered?

1. Non-Contributory

2. Fully Funded

3. Contributory

4. Self-Funded

The correct answer is: Contributory

When an employee contributes to the premium of a group health plan provided by their employer, they are participating in a contributory plan. In a contributory plan, both the employer and the employees share the cost of the premiums, which distinguishes it from a non-contributory plan where the employer bears the entire cost. This shared financial responsibility aligns with the definition of a contributory health plan, where employee contributions are essential for coverage. As a result, employees are typically required to enroll in the plan in order to benefit from the coverage, reinforcing the collaborative nature of premium payments. Fully funded and self-funded plans refer more to how the plan is financed rather than the participation of employees in premium payments. In a fully funded plan, the employer pays the entire premium, and in a self-funded plan, the employer assumes the risk and pays claims directly instead of purchasing insurance. Therefore, these distinctions underscore why the coverage under the definition provided pertains specifically to contributory plans.