CBP Benefits Administration and Strategy 2 — Questions and Answers
Question 1: What is a 'private exchange' in the context of employer-sponsored benefits?
- A government-operated health insurance marketplace under the ACA
- An employer-sponsored or vendor-operated online platform where employees choose benefits from multiple carriers using defined employer contributions (Correct answer)
- A COBRA continuation market for terminated employees
- A reinsurance pool for small employers
Correct answer: An employer-sponsored or vendor-operated online platform where employees choose benefits from multiple carriers using defined employer contributions
A private exchange is a commercial (non-government) benefits marketplace that allows employees to choose from multiple plan options using a fixed employer-defined contribution, shifting some decision-making to employees.
Question 2: What is the strategic value of a 'defined contribution' approach to benefits?
- It guarantees a specific benefit level for every employee
- It gives the employer cost certainty by providing a fixed dollar amount while employees choose their own benefits (Correct answer)
- It eliminates the need for a benefits administrator
- It replaces all benefit programs with cash compensation
Correct answer: It gives the employer cost certainty by providing a fixed dollar amount while employees choose their own benefits
A defined contribution benefits strategy fixes the employer's financial exposure by setting a specific dollar amount per employee, allowing employees to allocate that amount across benefit options of their choosing.
Question 3: Which technology system serves as the single source of truth for employee benefit elections, eligibility, and enrollment data?
- Payroll system
- Benefits Administration System (BAS) or HRIS (Correct answer)
- LMS (Learning Management System)
- ERP financial system
Correct answer: Benefits Administration System (BAS) or HRIS
A Benefits Administration System (BAS) or integrated HRIS maintains the authoritative record of employee eligibility, enrollments, life events, and benefit elections across all plans.
Question 4: What is the primary risk of poor data quality in benefits administration systems?
- Employees receiving more benefits than they paid for
- Incorrect eligibility, coverage, or premium data leading to claim denials, compliance failures, and financial errors (Correct answer)
- Slower open enrollment processing times
- Higher ACA reporting fees
Correct answer: Incorrect eligibility, coverage, or premium data leading to claim denials, compliance failures, and financial errors
Poor benefits data quality can cause employees to be enrolled in the wrong plans, pay incorrect premiums, experience denied claims, and expose the employer to ERISA compliance violations.
Question 5: What is a 'dependent eligibility audit' used for in benefits management?
- Verifying that employees meet the minimum hours for benefits eligibility
- Confirming that individuals enrolled as dependents on the health plan actually qualify under plan rules (Correct answer)
- Auditing the plan's investment managers
- Reviewing the insurance carrier's claim payment accuracy
Correct answer: Confirming that individuals enrolled as dependents on the health plan actually qualify under plan rules
A dependent eligibility audit verifies that all individuals enrolled as dependents (spouses, children) meet the plan's eligibility criteria, removing ineligible dependents to reduce costs and legal exposure.
Question 6: Which of the following best describes the role of a Third-Party Administrator (TPA) in a self-funded health plan?
- Acts as the insurance carrier and bears claims risk
- Processes claims, manages provider networks, and handles plan administration on behalf of the self-funded employer (Correct answer)
- Provides actuarial projections for the annual plan renewal
- Manages the employer's 401(k) plan investments
Correct answer: Processes claims, manages provider networks, and handles plan administration on behalf of the self-funded employer
A TPA administers claims processing, utilization review, network access, and compliance functions for self-funded plans, but the employer retains the financial risk for claims.
CBP Benefits Administration and Strategy 2
What is a 'private exchange' in the context of employer-sponsored benefits?