The Hidden Cost of Employee Health Plan Choices

Choice sounds great in theory. But what if one of the plans you’re offering your employees should never be chosen?

That’s not a hypothetical. It’s what’s known as a “dominated” plan option — and it’s more common than most employers realize.

When Choice Becomes a Costly Illusion

Most employers provide at least two medical plan options. On paper, that feels empowering. Employees can select what fits their needs and budgets.

But sometimes, one of those plans is objectively worse across the board. No matter how much or how little healthcare an employee uses, they’ll always spend more under that plan compared to the alternatives.

We call these dominated plans. And they quietly drain money from employees and organizations alike.

• In one employer analysis, half of employees were enrolled in the dominated option.
• Nationally, we estimate U.S. employees lose about $60 billion annually by choosing plans that never serve them well.
• The financial harm isn’t evenly distributed. Older workers, women, and lower earners are disproportionately stuck in dominated plans.

That’s not the kind of “choice” you want to provide.

Why Employees End Up in Dominated Plans

Employees don’t set out to make bad financial choices. They’re facing:

• Complex trade-offs (premiums, deductibles, out-of-pocket max, HSAs).
• Information overload (dense plan guides that don’t translate into real-world impact).
• Behavioral bias (rolling over the same plan year after year).

Without clear, personalized guidance, it’s no surprise so many people end up in objectively worse plans.

The Cost for Employers

When employees pick dominated plans:

• Payroll taxes rise. Lower HSA adoption = lost savings.
• Satisfaction falls. Confused employees feel unsupported.
• Equity suffers. Vulnerable groups carry more of the financial burden.

All while employers are left wondering why their benefits ROI looks flat.

How Budgie Fixes the Problem

Budgie’s analytics engine identifies when dominated plan options exist in your benefits design. We run employee claims history and plan designs to show — concretely — how each employee would have fared under each option.

That means:

• You see instantly if a plan should be pulled from the lineup.
• Employees see personalized, claims-backed comparisons instead of guesswork.
• HR gains confidence that every option you’re offering truly benefits employees.

Instead of draining budgets and trust, your plan design becomes a strategic advantage.

A Better Standard of Choice

Choice only matters when it’s real. Dominated plans offer the illusion of choice — but at a hidden cost to employees and employers alike.

With Budgie, you can ensure every health plan option has a purpose and every employee has a fair shot at choosing wisely.

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