The only way your employees will get the most out of their benefits, and for you to ensure your organization is getting a good return on its investment, is if they fully understand them. But in the Open Enrollment Survey done by Aflac in 2012, only 16 percent of employees reported feeling confident they hadn’t made any mistakes during open enrollment, and almost a quarter felt they hadn’t picked the right coverage for their needs.
Employees can get the wrong ideas about their benefits, and miscommunication, apathy or ignorance can perpetuate those misconceptions. The cost of ignorance is high: Employees may not have the coverage they need, and you may be paying for coverage they’re not using.
This guide will help you understand four common misconceptions employees have about benefits offerings and what human resources leaders can do to educate them.
How Much They Cost
Experts say one of the biggest areas of confusion employees have about their benefits is how much they cost, and the fact that the funds taken from their paychecks to pay for benefits don’t reflect the full cost of the coverage or perk they receive.
“The most common misconception is that the amount taken from their paycheck is the total premium cost,” says Houston-based benefits consultant Brad Stephenson, who notes that this can cause problems if their employment status changes. “Many employees are hit with sticker shock when they go out on COBRA and have to pay the full amount required to keep their coverage.”
Employees may also be surprised by their level of responsibility for health care costs, simply because it’s difficult to compare costs before they get treatment, Stephenson says. “Another hot button is the misconception over costs for actual care and treatment, which vary based on place of service, type of physician, drug costs and pharmacy. Health care is one of the only items purchased where cost comparisons are rare or nonexistent.”
Transparency about benefits costs — especially those for health insurance — can help. Some companies include a page with each paycheck that shows a breakdown of how much the employer and the employee pay for health insurance.
How They Work
The Affordable Care Act has changed the healthcare landscape, and employers and employees are still trying to figure out what works. When you add in voluntary benefits and other supplemental coverage, it can become even more confusing for employees as they try to figure out what’s covered, what’s not and what their share of the cost will be.
Sometimes, even seemingly basic elements of health insurance can confuse employees. “Some employees do not understand why premiums increase each year,” says John Jakovenko, director of human resources at McCurdy & Candler. “The impact of the claims from the previous year affect the increase in premiums the following year.”
When your company’s health insurance premiums rise, you need to find ways to communicate why they’re increasing to clarify things for employees. “For every dollar the employer pays in health insurance, the insurance company only wants to pay no more than roughly 70 cents,” Jakovenko says. “Employers with large claims (cancers, premature babies, cardiac issues) often go beyond this threshold. The healthcare companies want to recoup this outlay and do so through increased premiums the following year.”
Giving employees as much warning as possible about how much premiums might rise can help ease the sting. Also, be sure to highlight what employees are getting for their money — break down the costs the company is covering, and how that compares with what employees are responsible for paying.
In addition, employees aren’t always clear on what’s covered and what’s not. “The biggest employee misconception is that their insurance card is magic and will cover every medical need,” says Reid Rasmussen, CEO of Freshbenies. Ensure that the plain-language literature employees get during open enrollment makes it clear exactly what’s covered and what employees will be responsible for.
New employees may also be surprised about how your benefits differ from their previous employers’. “Employees think that medical pricing is the same from one location to the next,” Rasmussen says, adding that medical prices for the same procedure can vary widely among providers, even in the same network.
How to Manage the Options
As the cost of benefits goes up, many employers are considering offering supplemental insurance and voluntary benefits as a way to provide more options to their employees. But sometimes the wide variety of choices can be overwhelming.
“In recent years, the world of employer-based benefits has become significantly more complicated than it was years ago,” says Kevin Veith, director of human resources at Hedrick Gardner Kincheloe & Garofalo. “Employers are continually trying to get the most bang for their buck with benefits as a way to make sure their employees are taken care of. In many cases the best solution is not one plan for all circumstances, but some combination of multiple plans, including a primary health plan, an HRA, HSA, FSA or other similar reimbursement plan, supplemental insurance, disability, and specific injury plans.”
The problem, Veith says, is that when people are covered by different plans, it’s hard for them to fully understand their benefits, when to use each one and how to get the most out of the combination. “For most people, understanding the expense does not even enter their mind.”
A benefits survey and analysis can help ensure your employees have the benefits and coverage levels they need. Working with vendors to inform employees about their coverage and when it should be used is also important — both during open enrollment and throughout the year.
How Important They Can Be
Many employees simply don’t think about what benefits such as life insurance or disability insurance can do for them in case of a crisis. For example:
According to a study by the Consumer Federation of America and Unum, most workers underestimate the extent to which they may lose work because of illness and injury. Illnesses, not injuries, are the main reason for lost work — and they can happen to anyone in any sort of work environment.
A study by New York Life found that members of Generation X — those born between 1961 and 1981 — have a gap of almost 25 percent between what they need to reach their financial goals (such as paying off a mortgage or securing a retirement) and the life insurance coverage level they purchase.
Research by The Hartford found that more than half of millennials — those born between 1982 and 2000 — overestimate the cost of disability insurance, and that less than 10 percent know how much it actually costs.
If your company offers disability, life or other ancillary or voluntary benefits that help protect employees’ income, employees need to understand these benefits fully before they can decide whether to buy into the programs. Ensure your employees understand these benefits by providing information about them — and what’s at stake if they aren’t covered.
Benefits figure highly in recruiting and retention, and employees who are happy with their benefits are more willing to stay at an organization. Misconceptions about benefits can cost your company in several ways, including recruiting, hiring and training employees to replace those who left because they weren’t happy with their benefits, as well as higher costs because you’re paying for benefits employees aren’t using.
Clear benefits communication and education are essential when it comes to eliminating any employee misconceptions about the coverage your company offers them. When employees understand what’s available and what it’s worth, they’ll get the most out of their benefits, and your company will get the most out of what it offers.