What characterizes a Contributory Plan in group insurance?

A Contributory Plan in group insurance is characterized by the fact that employees contribute to the premium payments while also allowing for a certain level of employee participation. In this type of plan, it is typically required that a significant portion of the eligible employees, often around 75%, participate in the plan to ensure its viability and affordability.

The essence of a Contributory Plan lies in the shared financial responsibility between the employer and the employees. While the employees must pay a portion of the premiums, this structure encourages greater employee engagement and commitment to the insurance plan, as they have a financial stake in maintaining coverage. Furthermore, participation rates are key metrics in assessing the success and stability of such plans.

The incorrect options reflect alternative arrangements that do not align with the characteristics of a Contributory Plan. For example, 100% employee payment with a high level of participation does not describe a Contributory Plan, as it lacks employer contribution. Similarly, a plan where employers cover all costs deviates from the contributory nature, and a focus only on high-risk individuals does not pertain to the typical structure of group insurance plans. Thus, the model of employees paying a portion of premiums while ensuring adequate participation is what defines a Contributory Plan.