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?
Answer to relevant QuestionsWhat were the trade-offs you made in deciding on your recommendations? If the state follows the recommendations, what impact will the policy have upon private sector compensation? For each specific training need you identified, what types of training methods would be appropriate to incorporate into the training? What type(s) (if any) of PFP systems do you recommend for Dee’s? Be as specific as possible and consider all jobs. What (if any) additional information would help you develop the most effective PFP system? (You may take a ...Is an incentive program appropriate? Explain your position.
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