If group Health benefit levels are too high, what could be the end result?

• A. Underutilization of the Plan
• B. Overutilization of the Plan
• C. Normal Utilization of the Plan
• D. Adverse Selection

Answer: (B)

When benefits are very generous, people face little or no out-of-pocket cost for care, which often leads them to use more medical services than they would otherwise. This rise in usage in response to generous coverage is called moral hazard, and it results in overutilization of the plan. As utilization climbs, claim costs rise and premiums may increase, potentially threatening the plan’s sustainability. So the end result of benefits being too high is overutilization. If benefits were too low, you’d expect underutilization; if they’re balanced, utilization would be more normal. Adverse selection involves who chooses to enroll, not how much care is used given the coverage.