To improve the open enrollment experience, Hodges-Mace co-CEOs Greg Hodges and Peter Mace share how they advise clients through targeted questions.
EBA: What is the biggest mistake people making during open enrollment?
Greg Hodges and Peter Mace: The biggest mistake people make during the open enrollment season is not engaging in the process. This is also the most common mistake. Studies suggest that, on average, employees spend less than 15 minutes considering their benefit choices during open enrollment, and that as many as 90% of workers keep the exact same benefits from one year to the next. Contrast this open enrollment process, let’s say, to the process of shopping for a new TV, or a new phone, or even a new piece of furniture where we may spend hours checking out product websites, consumer reports, price comparisons, etc. Employee benefits carry a significantly higher price tag than most of those other items, so why are spending so little time with our shopping? The primary reason is that employee benefits, and especially healthcare plans, are really confusing.
As costs for both employees and employers continue to increase, however, benefit plan changes are inevitable and employees should take the time to understand the impact of these changes. While one change may seem small on the surface (for example, a new network of doctors), it may have a significant impact on you and your family. On the flip side, some changes that appear dramatic on the surface may have very little impact on you and your particular situation. If your employer introduces a high deductible plan at a reduced premium, for example, what may seem like a decrease in coverage is actually not at all if you’re someone who rarely visits the doctor. Plus, you’re now paying less for the plan.
Also see: “30 must-follow benefit pros on Twitter.”
Another common mistake during open enrollment is not taking advantage of tools and resources that help with decision-making. Many employers offer plan comparisons, cost calculators and other decision-support tools through their enrollment software, and these tools can really navigate your choices. Other employers may offer group meetings or even individual meetings where an on-site benefit adviser can provide personalized benefit counseling to each employees. Whatever your employer has done to make the enrollment process easier and more effective, take advantage. Our industry hasn’t always done a great job of making these technology and human resources accessible during enrollment, but they are out there and can be incredibly helpful.
EBA: What questions should employees ask themselves during enrollment so that they don’t overlook anything?
Hodges and Mace: The open enrollment period is a great time to plan for the year ahead and set realistic goals around health and financial well-being. Ask yourself if you can increase your contribution to the 401(k) plan by 1% or 2%. We all know that a small increase now will have a big impact on retirement savings over the long term. If your employer offers incentives around healthy behaviors, ask yourself if they are achievable for you. Some employers offer premium discounts for healthy behaviors and proactive health management, which can range from stopping the use of tobacco, to getting an annual physical, to completing a health risk assessment questionnaire, and the list goes on. It’s important to be an active participant in order to get the most out of your benefits ... not to mention that these tools and resources can help you improve your health and, potentially, in the case of early detection or disease management, actually save your life. The time to understand these tools, what you need to do and how you will do it is during the open enrollment period.
EBA: Where are employees still confused?
Hodges and Mace: We see a lot of confusion when it comes to the different accounts that allow employees to set aside pre-tax money to pay for health-related expenses like office co-pays, prescription drug costs, dental expenses and other out-of-pocket costs. There are health savings accounts, health reimbursement account, flexible spending accounts, transportation accounts, and the list goes on. They are all great vehicles to set aside dollars for future expenses and save money on taxes, but employees need to understand the rules associated with each. That information is available through the employer, but employees need to take the time to review it.
EBA: How should employees break down the plan decision process?
Hodges and Mace: We all know that choosing between different health plans can be a daunting task, so it’s important to break down the decision process into a few simple steps. It starts with determining whether your doctors or specialists are considered “in-network” or “out-of-network” for the plans you are considering. Why should you care? Because you’ll pay a lot more to see an out-of-network doctor. If someone is unwilling to consider using a new physician, this first step of looking for your doctors in the network may eliminate one or more of the medical plan choices. Alternatively, if your employer is promoting a “narrow network” — sometimes called a “skinny network” or “high performing network” at a reduced cost, this may be a great plan for you. In other words, it’s not a narrow network if your doctor is in it.
A next step in the process is to consider your healthcare activity and costs, including prescription drugs, over the past couple of years. You can go to your insurance carrier’s website to look at your claims history. If you think next year’s medical and pharmacy activity will be similar to those of past years, then you’re in a good position to be able to calculate how much you would have to pay next year under a new plan. When you compare deductibles, out-of-pocket costs and the actual insurance premiums, you can make a sound financial decision. And don’t forget to factor in any employer contributions to a health savings account or premium discounts associated with wellness activities before making those final price comparisons.
In summary, check the network to make sure there are no surprises. Then think about your healthcare claims and how much insurance you really need. From there, you can do some simple math to choose the right plan for you and your family.
EBA: What needs to be communicated to employees about life insurance and disability?
Hodges and Mace: As it relates to disability insurance, the most important thing to understand is that it’s vital to your overall financial health — regardless of age, marital status, or number of children. It’s typically inexpensive, especially at the younger ages, and protects your most valuable asset — the ability to earn an income. Insurance is bought to protect against financially challenging events, and a loss of income certainly falls into that category. Behind health insurance, disability coverage should be priority No. 1.
With respect to life insurance, employees need to first understand how much they should have. The answer to that question will vary widely depending on who you talk to, but generally ranges between 5x and 10x your annual income for someone with a family. Purchasing life insurance through the employer is typically easy, cost competitive, and doesn’t require answers to a lot of medical questions. Most employers allow you to buy a certain amount of coverage without answering any questions at all. In addition to purchasing an adequate amount of coverage, employees should confirm that the coverage is “portable,” meaning that they can continue the coverage if they ever leave the employer or are laid off. In most cases, the employer’s plans are portable at the same or similar cost to what the employee was paying during their time of employment.
EBA: What about deciding whether or not to enroll in voluntary benefits?
Hodges and Mace: According to the Kaiser Family Foundation, the average out-of-pocket maximum for an individual high-deductible health plan was over $4,000 in 2015 and for a PPO plan nearly $3,300. If you’re also covering your family members, those numbers double. During the open enrollment period, employees should consider the financial impact of a serious health condition or hospital stay. For example, would they be able to afford a one-time charge of $4,000? If so, would it have a big impact on their savings? The good news is that more employers are offering benefits like accident and critical illness insurance and supplemental health plans to help close the gap. Of course, the bad news is these voluntary benefits add to the complexity of open enrollment. Again, many employers are aware of this complexity and offer tools and resources during open enrollment to help employees create a comprehensive benefits package or “bundle” that makes sense for them and their families.
EBA: Any final tips?
Hodges and Mace: Go ahead and set aside time, even schedule an appointment for yourself, during your employer’s open enrollment period to review the benefit changes and think through how your family’s healthcare needs may change in the upcoming year. Invest time to use the resources available to you which will help you make good decisions. And lastly, be open to change. Don’t be part of the 90% of workers who keep the same benefits year after year after year unless that is truly what’s best for you and your family. With the same time and attention that we give to other consumer shopping processes, we can choose plans that more appropriate for our unique situations and, generally, save a few dollars in the process.
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