Open enrollment this year might prove to be more confusing for workers than ever before and could result in added costly mistakes when it comes to benefit decisions. According to the 2011 Aflac WorkForces Report,1 the majority of employers (57 percent) will make changes to their health care options this year, such as offering a Health Savings Plan as an alternative to traditional major medical insurance, implementing a high deductible major medical plan or reducing the number of major medical plan options.
These changes in health care options might exacerbate existing challenges for employees when it comes to open enrollment, namely wasting money. Alarmingly, four-out-of-10 workers say they wasted money each year because of mistakes they made regarding their insurance benefits.
Given the financial strain many American workers face in today's economy, they simply cannot afford to make the wrong benefit elections or decisions this open enrollment season. Aflac recently examined the issue of open enrollment with U.S. workers and uncovered several trends that illustrate the need for better communication and efforts during open enrollment and throughout the year.
Challenge: The majority of workers make mistakes, and waste money, when choosing their benefits options during the open enrollment process.
The Aflac study found that 77 percent of workers have admitted to making mistakes about benefits coverage during their open enrollment process. This left many employees feeling negatively at the end of the year about the process, including feeling stressed, confused or regretful.
Nearly half of workers (47 percent) say they have made mistakes or have regrets, such as putting too little in their flexible spending account (FSA), or not electing available benefits coverage like voluntary, dental or vision; or chose benefits they didn't need or the wrong level of coverage.
Although open enrollment periods come around once a year, the brevity of benefits decisions requires a comprehensive, year-long education and communications program. Some of the best practices for companies include diversifying materials to encompass print, web, email, face-to-face meetings; hosting multiple in-person meetings throughout the year and including spouses in the decision-making; and utilizing social and mobile media to remind workers of upcoming open enrollment deadlines via text, Twitter, and Facebook.
Tailor your communications program to fit the needs of your company structure and industry. For example, a manufacturing plant may put up posters in break rooms or in the cafeteria, whereas retailers with multiple locations might consider direct mailers to workers' homes.
Challenge: Deductible costs confuse workers and contribute significantly to financial waste and strain.
According to the Aflac study, only one-third (33 percent) of workers say that when selecting an insurance product they always have a full understanding of the deductible costs. In fact, most (54 percent) only sometimes or rarely have a full understanding of the deductible costs.
Unfortunately, the result is that more than four out of 10 workers always or sometimes exceed their deductible costs contributing to more out-of-pocket expenses and financial strain.
As HR decision-makers prepare for the 2012 open enrollment season, it's important to simplify the language of benefits communications, including clear explanations of health care jargon. Often, employees are embarrassed to admit they don't understand concepts such as deductibles or co-payments.
Giving workers examples of realistic scenarios based on each benefits plan's options can help crystallize just how much out-of-pocket expenses they may be responsible for as a result of each enrollment choice.
Some companies offer their workers customizable worksheets to plug in their own individual information and calculate their potential medical costs for the year. Lastly, employers should use the same terminology and clear explanations in every communications vehicle, keeping benefits materials consistent.
Challenge: Most workers don't understand their insurance policies and, therefore, choose same benefits year after year.
Nine out of 10 workers say they typically choose the same benefits (e.g. medical, dental, vision) year after year, according to the Aflac study. Yet, most employees don't fully understand their policies. For example, 74 percent of workers say that when thinking about their choices for major medical insurance coverage, they only sometimes or rarely understand everything that is covered by their policy.
Furthermore, 58 percent say they are only sometimes or rarely aware of the changes in the policies each year. This uncovers a growing need for HR decision-makers to not only educate its workforce about insurance policy ins and outs, but also how benefits work together.
Most employee populations don't fully appreciate the importance of ancillary or voluntary benefit options beyond major medical, when in fact these types of policies are core components of a comprehensive financial protection plan. Given that most workers underestimate the amount of deductibles and copay costs, HR decision-makers can demonstrate to employees how pairing a supplemental insurance policy, such as critical illness or accident, can work together to offset those out-of-pocket expenses.
Particularly when it comes to voluntary insurance, employees often misunderstand key distinctions of these types of policies. For example, unlike major medical insurance, voluntary benefits pay cash benefits directly to the employee, unless otherwise assigned, to be used however he or she may choose.
Challenge: Poor benefits decisions result in personal sacrifices for many workers.
In a time when American workers are already learning how to do more with less, the need to make further sacrifices as a result of inadequate benefits coverage is like rubbing salt on a wound. Yet, that is a reality for some 65 percent of workers who have had to make sacrifices due to the high cost of unexpected out-of-pocket medical costs, such as:
- 40 percent say they have cut back on social activities (e.g. going out to dinner, movies, drinks with friends)
- 34 percent cut back on buying luxury items (e.g. designer clothes, jewelry, electronics)
- 29 percent cut back on gifts
- 28 percent not take vacation
- 21 percent work more hours
- 19 percent increase use of credit cards/line of credit
Although employees must do their part in dedicating the time and energy to these important benefits decisions, HR executives can help foster more engagement among workers. Making enrollment materials attention-grabbing or even holding mandatory enrollment meetings can help capture the busy and easily distracted employee's attention.
Don't underestimate the power of creative design in making workers stop and engage. Use catchy headlines or relevant questions to drive home the importance of benefits choices, such as "Do you know how much you spent on medical out-of-pocket costs last year?"
Challenge: Workers overlook ways to save money through benefit elections.
The Aflac study found that 63 percent of workers don't participate in a FSA. And of those who do, 43 percent say they usually or sometimes contribute too little, and 23 percent say they contribute too much. Only three of 10 workers say they contribute the right amount to their FSA.
FSAs are a valuable benefit for employees and employers, but only when they are used effectively. With low participation levels comes missed opportunity for both worker and employer to keep money in the form of payroll tax savings.
The average health FSA account balance is approximately $1,340, and a typical employee, based on industry averages, can expect to save about 30 percent in combined federal, state and local taxes. That means that the employee saves roughly $420 annually and employers could save an average of around $100 based on a 7.65 percent FICA rate.2
With financial incentives for both company and employee, HR executives have good reason to focus on educating workers about FSAs and how they work. Equally important is to guide employees in determining the right amount to put into their FSA to ensure the measure saves them money and not wastes it.
Conclusion
With health insurance growing more and more complex by the day, many industry veterans and HR decision-makers themselves are struggling to keep up. Imagine then the difficulty for workers to effectively choose among the array of insurance options that are touted, yet often not understood.
A heightened challenge this year is limited disposable income for many American workers, presenting companies and their HR benefits team with greater challenges of improving benefits communications and education strategies, and implementing a more effective enrollment process.
About The Author
Ron Agypt, a 34-year insurance industry veteran, is Aflac's senior vice president of Market Development and Broker Sales, U.S. He is responsible for setting corporate strategy, and for developing market and broker growth through a team of dedicated professionals.
Ron leads Aflac's Broker Development team, which includes 15 Market Development vice presidents and more than 115 dedicated broker specialists.Visit aflacforbrokers.com, call 1-888-861-0251 or send an email to brokerrelations@aflac.com to learn more.
1 "2011 Aflac WorkForces Report," a study conducted by Harris Interactive for Aflac, September 20102 "Best Practices in Enrollment Communications," An Executive Briefing by SHPS, September 2010; http://www.hrsummitus.com/media/whitepapers/SHPS_HRUS.pdf
