Megan McArdle writes:
There are entitities in the private sector like unions who do, in fact, directly confront the tradeoff between benefits and pay. Many unions run their own health plans; most of them negotiate a pay package in which the tradeoff between more pay or more benefits is extremely specific. What these entities seem to show is that even people who are very well aware of how much things cost, choose bundling and price insulation over transparency and efficiency. As far as I know, they rarely choose cost control in any way that significantly inhibits participant autonomy, or increases price exposure.
There is more here.