We Have Choice of Plans. Is This a Good Strategy or a Bad One?

For years employers have been giving employees a menu if options to choose from while selecting benefit options. The theory was centered around giving the employee more control in their healthcare options. Much like the 401k the thought was to let the employee decide what investment choices were best for themselves.

Why should healthcare be any different?

  • Typically, these options would consists of a baseline option and give the employees the option to choose a buy up option for more premium which would lower the our-of-pocket costs to the employee.

As we will discuss in next week’s posts, choice combined with a dated employer/ employee cost sharing strategy can be a recipe for disaster.

Why you ask? We must understand how employees buy benefits.

  • They fall into one of two groups they buy up to the more expensive plan out of fear of they buy the base plan because it is all they can afford. Neither group wins and worst of all, the employers spends more money for neither group to be happy.

The question is… How do you drive the employers into the lowest premium plan while protecting them financially from the high out of pocket costs associated with it?