Plan design strategy

Health Plan Design Strategy

Plan design is the most direct lever employers have for managing health plan cost while maintaining competitive benefits. Every design decision — deductible levels, network strategy, pharmacy tiers, plan type — affects both employer cost and employee behavior. The best plan designs align cost-sharing with utilization patterns and workforce demographics.

Key plan design dimensions

Deductible

The deductible is the most powerful lever for shifting cost between employer and employee. Higher deductibles reduce employer premium cost but increase employee out-of-pocket exposure. HDHP designs (deductible ≥ $1,650 single for 2025) enable HSA contributions.

Out-of-pocket maximum

The OOP max caps employee financial exposure. ACA limits the OOP max for in-network services ($9,200 single / $18,400 family for 2025). Setting the OOP max well below the ACA limit is a meaningful benefit differentiator.

Copays vs. coinsurance

Copays (fixed dollar amounts) are predictable for employees. Coinsurance (percentage of cost) creates more cost-sharing variability but better aligns employee incentives with actual service costs.

Network strategy

Narrow networks reduce premium cost but limit provider choice. Tiered networks incentivize employees to use lower-cost providers. Reference-based pricing eliminates network contracts entirely and reimburses at a percentage of Medicare.

Plan type (PPO, HDHP, HMO)

PPOs offer maximum flexibility but carry the highest premium. HDHPs reduce premium cost and enable HSA contributions. HMOs require PCP referrals but can offer lower premiums in markets with strong HMO options.

Pharmacy benefit design

Formulary tiers, prior authorization, step therapy, and specialty drug management are the highest-leverage pharmacy design levers. Pharmacy often represents 25–35% of total plan cost.

Plan design principles

Align cost-sharing with utilization patterns — high-utilization services should have meaningful cost-sharing to create appropriate incentives

Pair HDHP designs with robust HSA employer contributions to maintain employee satisfaction

Use benchmark data to calibrate deductibles and OOP maxima against peer plans

Design for your workforce demographics — older workforces need lower OOP exposure; younger workforces may prefer lower premiums with higher deductibles

Test plan design changes against your claims data before implementing — model the impact on employee cost-sharing

Avoid plan designs that create adverse selection — if you offer multiple plans, ensure the HDHP is not the only option for healthy employees

Optimize your plan design

Use our free Plan Design Optimizer to model cost-sharing changes and see how they affect employer cost and employee out-of-pocket exposure.

Plan Design Optimizer