Tennessee Insurance Practice Exam

What type of group insurance plan involves employees sharing the cost?

1. Noncontributory plan

2. Contributory plan

3. Employer-sponsored plan

4. Mandatory insurance plan

The correct answer is: Contributory plan

A contributory plan is one where both the employer and employees share the cost of the premium. This arrangement allows employees to have a stake in their insurance coverage, as they contribute a portion of the premium payments. These plans can foster greater employee interest and appreciation for the benefits offered, as they are directly involved in the financial aspect of their coverage. In contrast, a noncontributory plan is entirely funded by the employer, meaning employees do not pay premiums. An employer-sponsored plan generally refers to any health insurance plan provided by the employer but does not specify the cost-sharing structure. A mandatory insurance plan often refers to legally required coverage, which does not inherently involve shared costs among employees and employers. Thus, the contributory plan distinctly stands out as the correct answer to the question concerning shared costs among employees.