AD Banker Comprehensive Practice Exam

A plan in which employees select health benefits from various options based on individual needs is known as what?

1. COBRA continuation plan

2. HIPAA plan

3. Cafeteria plan

4. Staff model plan

The correct answer is: Cafeteria plan

A plan in which employees can select health benefits from various options tailored to their individual needs is known as a cafeteria plan. This type of plan provides a flexible benefits package, allowing employees to choose from a variety of available benefits, such as health insurance, dental coverage, and other perks. This flexibility enables employees to personalize their benefits according to their personal circumstances and preferences, thus optimizing their overall satisfaction and utility from the offered benefits. Cafeteria plans are designed to cater to diverse employee needs, recognizing that individuals may prioritize different aspects of healthcare and additional benefits based on factors such as age, family status, and personal health requirements. This personalization is a key advantage of cafeteria plans compared to more traditional benefits structures, which typically offer a one-size-fits-all approach. Other plans, such as COBRA continuation plans, provide a specific function related to extending health coverage after employment ends, and HIPAA plans focus on health insurance portability and privacy protections. The staff model plan refers to a specific type of managed care plan that involves health maintenance organizations (HMOs) employing doctors directly. None of these options provide the same level of customization and choice that a cafeteria plan offers.