Every year employees across the country choose the wrong group health plan from their employer because they don’t understand the coverage and what type of plan is best for their circumstances.

This ends up costing them hundreds if not thousands of dollars in unnecessary medical and premium outlays each year. But you can help them avoid leaving money on the table by educating them with helpful materials and a process that lets them find the plan that is best for their life circumstances.

The 2023 “Aflac WorkForces Report” found that while 51% of employees have a solid understanding of their total annual cost for health care coverage and care, just 39% have a full understanding of their health insurance policy. Additionally, 30% of employees say they need more information surrounding their benefits.

To help your staff choose the plan that best fits them requires an educational effort and outreach, but it should not consume all of your time. Sometimes shorter presentations, resources in print and electronic formats, followed by individual assistance in helping staff pick the right plan is the best approach.

By giving your communications strategy a boost, you can improve employee confidence in their benefits decisions and save a lot of money and headaches along the way.

Educating employees

Don’t inundate your staff with educational materials that get bogged down in jargon and that are long and complicated. Often clear and concise materials are best, especially ones that use bullet points and infographics.

Benefits experts caution that human resources personnel should not go too far into the weeds in terms of being technical. Instead, provide bite-sized chunks of information that can help them whittle down their choice to a few plans.

The materials should give different scenarios for workers to help them decide on a plan. The documents can point them towards the right type of plan depending on their life circumstances, like:

• A 27-year-old single female employee with no health problems, spouse or dependents.
• A 46-year-old married father of three young kids.
• A 58-year-old divorced woman with high blood pressure and asthma.

One thing that can really help your employees is an online calculator. Most health plans today offer these tools to help employees figure out which plans being offered best fit their needs. They plug in some simple details and the calculator will evaluate all of the plans on offer and recommend which one works best for them.

The tool compares out-of-pocket expenses, copays, coinsurance and premium costs in order to whittle down the plans. Some will even look for plans with the enrollee’s family doctor.

If the calculator doesn’t include this last feature, the employee should take it upon themselves to check before committing to a plan.

Here are the most important items that your workers should be considering:

Their family doctor(s)

Even if you are offering the same plans as last year, it’s a good idea to tell your employees to check the plan to see if their personal physician or their kids’ pediatricians are on the list of providers. Health plans make changes every year, so it’s important to check.

Getting the financial balance right

This is important as some people end up spending more up front on higher premiums in exchange for lower out-of-pocket maximums and/or deductibles. But for a young, healthy person that rarely visits the doctor, that may not be the best option and they may be unnecessarily spending too much on premiums for overly generous benefits they may not even use.

You should ask your employees to look at the deductible they had in the last year and see if they reached it. Then:

• If they did not, they should consider reducing their premiums in exchange for a higher deductible.
• But if they surpassed the deductible or came close, paying more for a plan with a lower deductible might save them money overall. If this is the case, they should also look into the plan’s cost-sharing (copays and coinsurance) rules for medical expenses that kick in beyond the deductible.

Besides that, the deductible levels, copays and coinsurance levels must also be considered. They should understand how much they can be out of pocket.

Worst-case-scenario calculation

It’s important that your employees understand the implications for them if they suffer a medical crisis.

For a full perspective, they can:

• Calculate the total premium they will pay for the entire year (their monthly premium contribution x 12), and
• Add the out-of-pocket maximum for the plan.

The total is how much they would have to pay overall if they suffered a medical crisis.

One last thing…

Finally, you should consider offering your workers a package of other voluntary benefits that will help fill any gaps in their main health coverage.

Supplemental plans you should be offering include accident, critical illness, or long-term care coverage should they have an unexpected accident or serious illness.

A new study  has found that many people in employer-sponsored health plans are enrolling in plans that are costing them more than they ought to be paying.

Many employees choose pricey plans with low deductibles, which force them to spend more up front on premiums to save just a few hundred dollars on their deductible.

As result, many employees are spending hundreds, if not thousands of dollars more on their health care/health coverage than they need to.

Study 1: The deductible angle

A study by Benjamin Handel, a U.C. Berkeley economics professor, found that the majority of employees at one company he studied were in the highest-premium, lowest-deductible plan ($250 a year) their employer offered.

This resulted in them spending about $4,500 a year on health care, compared to only $2,032 had they gone with the cheaper plan (which had a $500 annual deductible) and received exactly the same care.

Study 2: Too many choices?

Additionally, the research paper “Choose to Lose: Health Plan Choices from a Menu with Dominated Options,” published in the Quarterly Journal of Economics, found that more choices also didn’t yield more savings for individuals in employer-sponsored plans.

The study examined the health plan choices that 23,894 employees at one large U.S. employer made. They were able to choose from 48 different combinations of deductibles, pharmaceutical copayments, co-insurance and maximum out-of-pocket expenses. All of the plans offered the same network of doctors and hospitals.

As a result, workers paid an extra $528 in premiums for the year to keep their deductible at $750 instead of $1,000. In other words, they paid $528 to save $250.

For nearly every plan with a deductible of $1,000 (the highest deductible available for those seeking single coverage), the additional premiums required to reduce the deductible, with all other plan attributes fixed, exceeded the maximum possible out-of-pocket savings provided by the lower deductible.

The study also found that the lowest-paid workers were significantly more likely to choose dominated plans (the most expensive).

Both of the studies above looked at plan options with relatively low deductibles when compared with high-deductible health plans, which have become more popular with time.

In 2018, the minimum deductible for an HDHP is $1,350 for an individual and $2,700 for a family. But, under current regulations, total out-of-pocket expenses are limited to $6,650 for an individual and $13,300 for a family with a HDHP.

While these plans have gotten a bad rap lately, a study published by the National Bureau of Economic Research found they are often cheaper for employees, as well.

The authors, both from the University of Wisconsin-Madison, found in a study of 331 companies, that at firms offering both a HDHP and a low-deductible plan, selecting the HDHP typically saves more than $500 a year.

Strategies

To help offset the cost of a HDHP, you can offer your staff health savings accounts (HSAs), which offer a tax-advantaged way to save for health care costs. While there are annual contribution limits, HSAs allow your employees to roll over their balance from year to year. The funds they contribute to their HSA are pre-tax, so the savings are significant.

The Wisconsin-Madison authors surmised that many people choose the costlier health plan for two reasons:

• Inertia – It’s easier for consumers to stick with their old plan rather than crunch the numbers to see if a new plan may be more appropriate.
• Deductible aversion – When employees see a low-deductible plan they may associate it with better quality care, even though the network and coverage may be the same.

The best strategy to guide your staff to the plan that best suits them is to educate them. You should have workshops for your staff prior to open enrollment, to help them understand why the higher-deductible plan may often be the best choice for them if they want to save money on their overall premium and out-of-pocket expenses.

Ideally, you could encourage them to set aside the same amount of money in their HSA that would be enough to cover their deductible. This way, your employees would not feel burdened by health expenses they may have to pay for during the year.