Deck 2: The Psychology and Economics of Employee Benefits

Question 1

Violations of psychological contracts are likely to be more intense than unmet expectations because of feelings of betrayal and loss of trust. (Psychological Contract Violation)

Answer 1

True

Question 2

Employee benefits act as a tool for recruiting and retaining desired employees for companies. (How Employee Benefits Constitute Social Exchange)

Answer 2

True

Question 3

Once the social exchange is set between employer and employee,it does not change over time. (How Employee Benefits Constitute Social Exchange)

Answer 3

False

Question 4

Social exchange is one where the nature of exchange has been specified at the time of employment. (How Employee Benefits Constitute Social Exchange)

Question 5

Employee benefits need to be considered as economic exchange between employer and employee rather than social exchange relationship. (How Employee Benefits Constitute Social Exchange)

Question 6

As the size of the insured group increases,so does the difficulty for the insurance companies to predict the total medical expenses of the group. (Cost Advantage)

Question 7

Psychological contracts do not develop and change over time. (Psychological Contracts)

Question 8

Tax incentives are the only reason employers offer benefits to employees. (Why Do Employers Offer Benefits)

Question 9

Relational psychological contracts can often be understood with an example of an independent contractor or consultant hired by a firm. (Psychological Contracts)

Question 10

Long term relationship between employer and employee pertains to transactional psychological contracts. (Psychological Contracts)

Question 11

Violations of psychological contracts are basically the same as unmet expectations. (Psychological Contract Violation)

Question 12

Health insurance or other legally required benefits would form a part of employees' transactional expectation. (Psychological Contracts)

Question 13

Employee benefits practices can fulfill either transactional or relational psychological contracts. (Psychological Contracts)

Question 14

One reason for employer-provided health insurance is to avoid adverse selection. (Cost Advantage)

Question 15

Economies of scale refers to the lower amount of co-pay required of employees in a large company as opposed to those in a small company. (Cost Advantage)

Question 16

Economies of scale refers to the lower amount of co-pay required of employees in a large company as opposed to those in a small company. (Cost Advantage)

Question 17

Despite increasingly diverse workforce in the US workplace,traditional benefits practices assuming similarity among workers can still work well for today's organizations. (Workforce Changes and the Employment Relationship)

Question 18

Retirement plans is a good example of benefits that fulfill both transactional and
relational expectations. (Psychological Contracts)

Question 19

Employer's expectation of the employee is not as important as employee's expectation about the employer. (Employee Benefits as Constituting Psychological Contracts)

Question 20

Job security,recognition,and support in exchange for commitment and loyalty to the employer more pertain to relational psychological contracts. (Psychological Contracts)

Question 21

Offering benefits to employees can be cost effective for employees,but NOT for employers. (Cost Advantage)

Question 22

Most small group health insurance policies are based on experience ratings. (Cost Advantage)

Question 23

The degree to which employers will decrease their hiring,if the market compensation level increases,can affect how much of a benefit's increase cost will be passed on to the employees. (Who Pays For Benefits?)

Question 24

Experience rating is the process of gathering information about employees' risk profiles. (Cost Advantage)

Question 25

Large companies are more likely to be subject to medical underwriting because more risk involved than smaller companies or individuals. (Cost Advantage)

Question 26

The IRS offers tax benefits to companies that offer retirement plans. (Tax Incentives)

Question 27

According to insurance statistics,women have higher average medical expenses than men. (Cost Advantage)

Question 28

An insurance pool refers to all employees who fall into an insured category. (Cost Advantage)

Question 29

According to insurance statistics,medical expenses run higher for minority groups than whites. (Cost Advantage)

Question 30

Offering certain types of benefits in combination with reduced compensation is one way of recruiting desirable workers. (Recruiting Certain Types of Workers)

Question 31

When health benefit costs rise for a single employer in a market,the employer will likely be able to pass along the benefit costs to workers,even if the workers valuation of the benefit has NOT changed. (Who Pays for Benefits?)

Question 32

Even if increased health insurance costs are NOT accompanied by an increase in employees' valuation of the insurance,cash wages will probably be adjusted downward anyway. (Who Pays for Benefits?)

Question 33

Employees in a large company are less likely to be subject to medical underwriting than those in a small company. (Cost Advantage)

Question 34

If health insurance premiums rise because of advances in medical care technology,employees would probably perceive that the increase added value to their insurance. (Cost Advantage)

Question 35

One of the drawbacks of Medicare and Social Security insurance,is that neither program can avoid adverse selection. (Cost Advantage)

Question 36

Offering some benefits in a compensation package can attract qualified,but undesirable job applicants. (Recruiting Certain Types of Workers)

Question 37

Benefits administration costs are usually miniscule and not considered when measuring economies of scale. (Cost Advantage)

Question 38

Medical expenses are higher for people with new medical histories. (Cost Advantage)

Question 39

The 2009 average total medical expenditure was lowest for adults aged 18 to 44. (Cost Advantage)

Question 40

Individuals don't know more about their health than insurance companies. (Cost Advantage)

Question 41

The degree to which an increase in benefit costs is passed along to employees in the form of lower cash wages generally depends on the following factors? (Who Pays for Benefits?)

A)The cash value employees place on the benefits
B)The degree to which employers will increase or decrease their hiring when the market compensation level decreases or increases
C)Whether the benefit cost increases for all employers in a market or for a particular employer
D)All of the above

Question 42

What is medical underwriting? (Cost Advantage)

A)A process where employers have to verify the medical history of their employees
B)A process where the employer has to pay the difference for insuring high-risk employees
C)A process where employees provide their past medical history to insurers
D)A process where one insurance company combines with another to insure a company

Question 43

What are the three main reasons that employers offer discretionary benefits? (Why Do Employees Offer Benefits?)

A)Employers have a cost advantage, the benefits help in recruiting and retaining workers and the company gets tax incentives to offer them
B)It's required to by law, the company gets tax incentives to offer them, employers have a cost advantage
C)The company gets tax incentives to offer them, the benefits help in recruiting and retaining workers, it's required to by law
D)The benefits help in recruiting and retaining workers, employers have a cost advantage, it's required to by law

Question 44

Which of the following employee benefits is more relevant for relational psychological contracts? (Psychological Contracts)

A)Legally required benefits
B)Health insurance
C)Life insurance
D)Accommodation and enhancement benefits

Question 45

Discuss what psychological contracts mean in employee benefit practices and how psychological contract develop. (Psychological Contracts)

Question 46

Prime-age workers are in what age group? (Who Pays for Benefits?)

A)25 - 60
B)40 - 65
C)30 - 54
D)35 - 65

Question 47

Which of the following is not a reason why insurance rates decrease as group size increases? (Cost Advantage)

A)The administrative cost is reduced
B)There is lesser risk in providing insurance
C)It is easier to predict cost of insurance
D)High-risk policy holders are driven away

Question 48

What are the two basic causes for psychological contract violations? (Psychological Contract Violation)

A)Distributive and procedural justice
B)Reneging and incongruence
C)Changing composition of the workforce and the economic challenges
D)Legal and industrial environments

Question 49

Why does health insurance become less expensive when the size of the insurance group increases? (Cost Advantage)

A)Administrative costs are lower, more employees are contributing co-payments, the threat of high-risk individuals driving out low-risk ones is less
B)Insurance is less risky to provide, the threat of high-risk individuals driving out low-risk ones is less, administrative costs are lower
C)More employees are contributing co-payments, insurance is less risky to provide, administrative costs are lower
D)Insurance is less risky to provide, more employees are contributing co-payments, the threat of high-risk individuals driving out low-risk ones is less

Question 50

In insurance terms,what does adverse selection refer to? (Cost Advantage)

A)When employees choose an insurance plan they don't like, but are stuck with it for a year
B)When insurance companies use medical underwriting to choose who to insure
C)When employees are forced to choose between what they think are two inferior insurance programs
D)The tendency of an insurance pool to disproportionately attract "bad risk" employees and discourage "good risk" employees

Question 51

If workers are willing to leave the labor market when compensation falls and employers have relatively inflexible staffing needs,employees will tend to pay for benefit cost increases. (Who Pays for Benefits?)

Question 52

Being able to spread the administrative costs to larger groups of employees,to reduce the health insurance cost per employee,is referred to as what? (Cost Advantage)

A)Insurance pooling
B)Economies of scale
C)Economies of scope
D)Administrative underwriting

Question 53

Which of the following is not closely associated with the nature of transactional psychological contracts? (Psychological Contracts)

A)Economic and extrinsic focus
B)Close-ended, specific
C)Narrow scope
D)Long term relationship

Question 54

What is an insurance pool? (Cost Advantage)

A)Insurance companies that join together to underwrite a self-funded insurance policy
B)Employers who join together to insurance all their employees under one policy
C)People who join together to by a group insurance policy
D)Insurance companies that join together to issue one large-group insurance policy

Question 55

Which of the following can be avoided by using experience ratings? (Cost Advantage)

A)Adverse selection
B)Medical underwriting
C)Economies of sales
D)Insurance pooling

Question 56

Briefly discuss how workforce demographic changes can influence the employment relationship. (Workforce Changes and the Employment Relationship)

Question 57

Which of the following employee benefit might fulfill both transactional and relational expectations of employees? (Psychological Contracts)

A)Health insurance
B)Retirement
C)Legally required benefits
D)Accommodation and enhancement benefits

Question 58

In most cases employees do not give up anything to get benefits because they are "free-add-ons" in a compensation package. (Who Pays for Benefits?)

Question 59

In 2009,which age group had the highest average total medical expenditures? (Cost Advantage)

A)Adults aged 65 an older
B)Adults aged 45-64
C)Adults aged 18-44
D)Children aged 5-17

Question 60

The greater value employees place on a benefit,the larger reduction in cash wages they will accept if the benefit is introduced into a compensation package. (Who Pays for Benefits?)

Question 61

Discuss the issue of who pays for employee benefits. (Who Pays for Benefits?)

Question 62

Briefly discuss how employee benefits aid in recruiting certain types of workers. (Recruiting Certain Types of Workers)

Question 63

Examine the reason why health insurance costs might rise. (Who Pays for Benefits?)