You’re surrounded by talented people. Maybe they’re developing software or manufacturing innovative new products. They lead projects, manage budgets, and make complex decisions every day. And yet, research shows that even the smartest people struggle to select the right health benefits for themselves and their families.
Why is this so hard?
- Choice paralysis: To attract and retain top people, companies often present benefits packages that have lots of choices and flexible options. While in theory this would allow each person to customize a plan to his or her exact needs, people tend to get overwhelmed by the number of choices available and find it impossible to research each option thoroughly.
- Confusing jargon: PPO or HMO? Copays or coinsurance? HSA or FSA? And what’s a CDHP anyway?
- Translating benefits to costs: A 2013 study asked respondents in a broad range of ages, income, and education levels to calculate the costs they would be responsible for if they spent four days in an in-network hospital for a procedure that cost $100,000 and had not incurred previous health care costs that year. Only 11 percent could answer this question correctly.
- Understanding the implications: When only a small percentage of people really grasp the complexity of plan cost levers such as deductibles, co-pays, and maximum out-of-pocket (MOOP/OOPM) costs, most choose what appears to be the most straightforward option—either a “Goldilocks” plan that seems like a reasonable compromise between high-cost and low-cost options, or perhaps the plan that takes the lowest amount out of their paycheck. These plans may not be the best choice in terms of cost or coverage, but your people may not know how to pick the plan that’s right for them.
More information, more satisfaction?
Do you need to give your people more detailed information so they can make better choices? Not really. In a 2015 Harris Poll, more than half of insured people expressed that they found dealing with health benefits to be a hassle. In fact, given a choice, many people would rather do nearly anything than research their health benefits—a 2015 Aflac study revealed that 26 percent of people surveyed would rather clean a toilet!
Employees often don’t feel comfortable or empowered in making their own health benefit decisions. Metlife’s 13th Annual U.S. Employee Benefit Trends Study showed that a majority of employees report that they did not review their selections several times before making them final. It’s not surprising, then, that 41 percent of employees at both medium and large-sized companies—and over half of employees at small companies—say they were not confident in their last round of benefit decisions.
26% of people would rather clean a toilet than research their health benefits
Anyone can choose the wrong plan
In addition to lacking the knowledge to make a confident decision, an intelligent workforce may be more likely to assume it’s someone else’s job to sort through the various options and make the right choices. This may result in higher-income employees just choosing the “top” plan, regardless of cost or type of coverage. These employees may be able to more easily absorb the consequences of investing less effort in the plan selection process, but the plethora of choices and the resulting complexity can disproportionately affect lower-income individuals as they balance cost and coverage options.
A 2015 study suggests that financially vulnerable populations overwhelmingly choose what are known as dominated options, where price differences between available plans are not well-correlated to coverage. For example, identical plans with slightly different deductibles (i.e. $750 vs. $1000) might have a cost variance of $500 over the plan year and someone looking to save money might choose the lower deductible plan, despite the fact that it will cost them more in the long term.
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Planning for the future
After all, it’s hard to predict what might happen with your people’s health over the next year. They don’t know if their next game of pickup basketball will result in an ACL tear, if their chronic exhaustion is actually a thyroid disorder, or if their kid’s going to jump off the slide and break her arm. They might choose a plan with high co-pays because they rarely go to the doctor, then find themselves paying $50 three times a week for unforeseen physical therapy.
No wonder people would rather clean their bathrooms.
So what can you do?
Stay tuned. We’ve got a series of presentations and tools to help you design smarter health plans, which is the first step in empowering your people to make better health benefits decisions.