Has choosing a healthcare plan become too complicated? According to research conducted by Medical Xpress, when given the option between two employer-sponsored healthcare plans, nearly 25% of employees chose the option that was less financially beneficial to them – despite the fact that both plans offered the same non-cost benefits.
Medical Xpress wanted to determine just how difficult it was for employees to make the most beneficial decision when presented with just two options. Both options were the exact same in every way except for cost, with one of the two healthcare plans having higher premiums and lower out-of-pocket expenses (i.e. deductibles, co-payments). According to the research, the plan with lower premiums and higher out-of-pocket expenses was more financially beneficial to 97% of the 2,300 employees in the study.
Despite this fact, 23% of the employees chose the plan with higher premiums – a mistake that would cost them more than $2,000 a year on average.
Why It Matters
For nearly 180 million Americans, employer-sponsored healthcare is a necessity to help with the expenses of medical care. In 2020, the average insured worker is spending over $5,500 in premiums and more than 8% of their total spending goes to healthcare expenses.
Typically, employees are given an option of at least two healthcare plans. The decision of which healthcare plan will be most beneficial to the employee is determined by two factors: 1.) The expected amount of care they will need for the upcoming year, and 2.) The amount of risk they are willing to take on. In most cases, if an employee expects they will need less care, it makes sense for them to choose the option with a lower monthly premium and higher out-of-pocket costs. Nonetheless, evidence shows that when employees have too many options, they routinely make poor health insurance decisions.
That said, based on the study conducted by Medical Xpress, while choice overload might play a role in poor decision making, it is not the primary reason employees are having such a difficult time making the best benefits decisions.
Healthcare practitioners and policymakers have been trying to help employees make better benefits decisions for quite some time now, yet with little progress. For example, using algorithms to provide individuals with a “smart default” plan that fits their needs best. Despite these efforts, the issue still exists. The truth is, helping employees make better benefits decisions is a difficult challenge.
While it will not eliminate all health benefit decision-making errors, simplifying the choices would help. Additionally, providing more search and analysis tools to employees would also make it easier for employees to make a better informed decision.
What You Can Do to Help Your Employees
There are many ways you can help your employees make better benefits decisions. Here are a few of the things you can do for your employees to help reduce this issue within your organization:
Plan Design – To encourage your employees to become responsible healthcare consumers and take control over their healthcare costs, you should work with your benefits broker to develop effective plan designs that give employees more control and more choice in their benefits selection.
Employee Engagement – Employees need to be aware of their role as consumers and engage with their healthcare decisions. Your employee engagement efforts should centered around crafting a healthcare approach that addresses employee concerns and needs. Once you have created a healthcare environment that is conducive to employee engagement, you should work directly with your employees to get them to take control of their healthcare decisions.
Employee Education – You should provide your employees with the resources they need to truly understand their options and best provide for their health while reducing healthcare expenses for themselves and you as an employer. In addition to utilizing external resources to give your employees access to education, you should maintain consistent communication with your employees about their healthcare options, the tools available to them, and any changes to their benefits. The right employee benefits broker will take a hands-on approach to employee benefits education, working directly with your team to help them select the best plan for their needs.
Empowering Employees – Once you have given your employees the insurance options that maximize their role as consumers and the engagement and education that makes them informed consumers, it’s time to provide them with the tools they need to become empowered consumers. There are more options than ever to manage healthcare and reduce expenses such as telehealth, pharmacy savings cards, and various benefits enrollment platforms. If you need help in deciding which of these tools are best for your business, your broker can advise on how to harness the power of modern benefits technology.