For more than two decades, Minnesota’s State Employee Group Insurance Program (SEGIP) has used a tiered cost-sharing model to steer employees toward primary care clinics (PCCs) with lower total costs of care. The idea is simple: by making clinics in the lowest tiers more affordable—and those in higher tiers more expensive—employees would naturally gravitate toward the most cost-effective options. But new research from RAND Corporation and the University of Minnesota suggests that the system may already be working better than expected. Cost nudges, like targeted emails or alerts about clinic tiers, had minimal impact on clinic selection, indicating that the tiered benefit design itself may be the more powerful driver of smarter health care choices.
The findings, published in May 2026, come from a randomized trial led by Tim McDonald, PhD, MPP, and Bryan E. Dowd, PhD, and build on earlier studies showing that clinics respond to tiered designs by reducing prices. According to the research, at baseline, 85% of SEGIP members were already choosing clinics in tiers 1 and 2, the lowest-cost categories. The requirement to make an affirmative decision about clinic selection each year may be enough to keep members engaged with the system, reducing the need for additional nudges to influence their choices.
This is not just an academic curiosity. The implications ripple through the broader debate about how to control health care costs without stifling access or quality. Tiered benefit designs, which rank providers based on total cost of care and quality metrics, are increasingly adopted by large employers and public health plans. But the question of whether consumers need extra prompts to make informed decisions has been open. The Minnesota study suggests that the tiered structure alone may be sufficient to guide behavior, at least for a majority of participants.
How Tiered Designs Shape Clinic Selection
The SEGIP model assigns PCCs to one of four tiers based on their annual risk-adjusted total cost of care. Members pay lower out-of-pocket costs for visits to tier 1 and 2 clinics, while tier 3 and 4 clinics come with higher cost-sharing requirements. The system assumes that employees will choose the most affordable option unless they have a specific reason to select a higher-tier clinic, such as a preferred provider or location.
According to the study, the tiered design appears to work as intended: most members default to the lowest-cost options. The research also found that clinics in higher tiers responded to the financial incentives by reducing their prices, creating a feedback loop that benefits both consumers and the overall system. However, the trial tested whether additional cost nudges—such as emails highlighting the financial benefits of choosing a tier 1 or 2 clinic—would further influence member behavior. The results were clear: these nudges had little effect on clinic selection, suggesting that the tiered structure itself is a strong enough motivator.
Why the Findings Matter
The study’s implications are significant for health care policy and employer-sponsored insurance. If tiered benefit designs are effective on their own, it could mean that the resources currently spent on consumer education and behavioral nudges might be better allocated elsewhere—such as improving the quality of lower-tier clinics or expanding access to high-value providers. For employers and insurers, this could simplify benefit design and reduce administrative burdens.
However, the research also highlights a potential downside: not all members may be equally responsive to tiered designs. While 85% of SEGIP members chose lower-tier clinics at baseline, the remaining 15% may require more targeted interventions to make cost-conscious decisions. Understanding why some members opt for higher-tier clinics—whether due to loyalty, convenience, or lack of awareness—could help refine the system further.
What’s Next for Tiered Benefit Designs
The next phase of research will likely focus on how tiered designs can be adapted to address the needs of less responsive members. For example, could personalized alerts or financial incentives for switching clinics make a difference? Or might the system benefit from greater transparency about the quality and outcomes associated with each tier?
For now, the Minnesota study offers a compelling case for the effectiveness of tiered benefit designs as a standalone tool for cost control. The findings suggest that the system may already be driving smarter choices, reducing the need for additional behavioral interventions. As more employers and insurers consider adopting similar models, the lessons from Minnesota could shape the future of health care cost management.
If you have experience with tiered benefit designs or are considering implementing one, we’d love to hear your thoughts. Share your insights in the comments below or on our social media channels.
