In the context of cafeteria-style benefits plans, which of the following refers to the fact that the employee most likely to select a benefit is also most likely to use the benefit, which tends to drive up benefit costs?

Question

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Adverse selection occurs when the employee most likely to select a benefit is also the one most likely to use it, leading to higher costs for the employer because those who anticipate needing specific benefits are more inclined to choose them.

In the Context of Cafeteria-Style Benefits Plans, Which of the Following