The Good-Better-Best Framework
| Tier | Plan Type | Deductible | Employee Premium | Target Employee |
|---|---|---|---|---|
| Good | HDHP + HSA | $2,000 (with $1,000 employer HSA) | Lowest | Healthy; financially savvy; HSA-focused |
| Better | Mid-tier PPO | $1,000 | Medium | Average utilizer; wants predictability |
| Best | Rich PPO | $500 | Highest | High utilizer; chronic conditions; family coverage |
Pricing the Portfolio
The contribution strategy for a good-better-best portfolio must price each tier to reflect its actuarial value. If the "best" plan costs the same as the "good" plan, adverse selection will concentrate sick employees in the "best" plan. The contribution differential between tiers should reflect the actuarial value difference — typically $50–$150/month between tiers.
The Middle Option Effect
IQ Insight
Behavioral economics research consistently shows that when people are given three options, they disproportionately choose the middle option. In a good-better-best plan portfolio, most employees will choose the "better" plan — regardless of their actual healthcare needs. This is the "compromise effect" — people avoid extremes. Design your "better" plan to be the option you want most employees to choose.