Open enrollment season is a time when agents and brokers are perhaps most called upon to advise and guide clients about a range of benefit package elements. From deciding which major medical insurance plan structure is right for the organization to determining needed changes to existing policies, there are a host of issues HR managers want advice about.
As a recent Aflac survey uncovered, open enrollment can be a challenging time for employees as well. Particularly in an environment of growing complexity and tight finances, employees are clamoring for the information they need to make sound judgments regarding their families’ finances and health plans.
For these reasons, one of the ways brokers and agents can make a tremendous impact for clients this year is to help make open enrollment less confusing for workers and, therefore, help them avoid costly mistakes when it comes to insurance decisions.
Alarmingly, four out of 10 workers say they wasted money each year because of mistakes they made regarding their insurance plans. Given the financial strain many American workers face in today’s economy, they simply cannot afford to make the wrong elections or decisions this open enrollment season.
Considering that many employees already admit to making wasteful mistakes in their benefits package selections, imagine the propensity for even more costly errors in an environment of changing health plans.
In fact, according to the 2011 Aflac WorkForces Report the majority of employers (57 percent) will make changes to their health care options this year, such as making a Health Savings Plan available as an alternative to traditional major medical insurance, implementing a high deductible major medical plan or reducing the number of major medical plan options.
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.
The Aflac survey findings underpin several crucial deficiencies workers face during open enrollment selections, and for which brokers and agents can offer solutions.
Best Practice: Dedicate Specific Education Efforts Around Deductible Costs
According to the Aflac study, only one-third (33 percent) of workers say 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 copayments.
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.
Best Practice: Address the frequency of election mistakes head on.
The Aflac study found that 77 percent of workers have admitted to making mistakes about their 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.
By ignoring this reality, the cycle of costly errors during benefits package selection is likely to continue. Instead, HR executives and even employees themselves need to understand that mistakes do in fact happen, and that there are ways to avoid them.
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 insurance plans like voluntary, dental or vision; or chose policies they didn’t need or the wrong level of coverage.
Although open enrollment periods come around once a year, the brevity of benefits packaged decisions requires a comprehensive, year-long education and communications program. As advisers, you play a critical role in helping HR decision-makers become more effective in their outreach and communications to workers.
Best Practice: Make Policy Changes Very Clear
Nine out of 10 workers say they typically choose the same plans (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 their workforce about insurance policy ins and outs, but also how plans work together.
Most employee populations don’t fully appreciate the importance of ancillary or voluntary insurance 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.
Best Practice: Put Out-Of-Pocket Expenses in Real Terms for Employees
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 health 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.
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 plan choices, such as “Do you know how much you spent on medical out-of-pocket costs last year?”
Best Practice: Help Workers Find Ways to Save Money Through Plan Selections
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 opportunities 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.
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 doesn’t waste it.
With health insurance growing more and more complex by the day, many industry veterans and HR decision-makers themselves are struggling to keep up. Workers face an even greater challenge —effectively choosing among the array of insurance options that are touted, yet often not understood. However, today’s agents are uniquely positioned to help employees have a better enrollment process experience and ultimately help bolster their own book of business.
Thomas R. Giddens joined Aflac in 1983 as assistant vice president in the Marketing department before serving in the field for more than 20 years. Most recently he was appointed senior vice president, director of Sales. For more information, visit aflacforbusiness.com.