The Case for Multiple Plans
A single health plan cannot optimally serve a diverse workforce. A 25-year-old healthy employee has different healthcare needs and financial priorities than a 55-year-old employee managing a chronic condition. Offering multiple plan options allows employees to choose coverage that fits their individual situation — and increases their perceived value of the benefits package.
The Adverse Selection Risk
The primary risk of offering multiple plans is adverse selection — sicker employees choosing richer plans, driving up their cost. If the rich plan is priced the same as the lean plan, sicker employees will choose the rich plan, healthier employees will choose the lean plan, and the rich plan will become increasingly expensive over time.
The Standard Multi-Plan Portfolio
IQ Insight
The most common multi-plan portfolio is a traditional PPO plus an HDHP/HSA option. This combination gives employees a meaningful choice: the PPO for those who prefer lower deductibles and predictable copays, and the HDHP for those who are willing to accept higher deductibles in exchange for lower premiums and HSA benefits. Over time, as employees understand the HDHP's financial advantages, enrollment typically shifts toward the HDHP.