Question

Assume that Andy Wolfson is interested in a cafeteria benefits approach. He has heard, however, that when people are permitted to select their own coverages, unit costs may rise (called “adverse selection”). In other words, in cafeteria benefits, the averaging effect of users versus nonusers across employee populations declines as people opt out of programs that they are not likely to use in favor of benefits that they are very likely to use. How might Andy deal with this problem in designing a cafeteria benefits plan?


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  • CreatedOctober 29, 2015
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