If group health benefit levels are too high, what is the expected effect?

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

Answer: (B)

When group health benefits are very generous, people face little out-of-pocket cost for covered services, so they use more medical care than necessary. This increase in utilization is called overutilization—the moral hazard effect of insurance. It raises overall costs and can push premiums higher. Adverse selection is about who chooses to enroll based on risk, not how much care people use, and underutilization or normal utilization would occur if cost-sharing were higher or balanced, not when benefits are excessively generous.