Premiums Lead Benefits Enrollment Decisions for Employees
Overall costs dominate benefits enrollment decisions for participants, and especially for older generations preparing for retirement.
The research from Securian Financial found that employees of older generations report costs as their top workplace benefits priorirty during open enrollment, with most choosing lower-premium plans with higher deductibles or staying with plans that offer bare-minimum coverage options.
Despite choosing cheaper options, Securian Financial’s research shows that participants will pay more in out-of-pocket costs. According to the survey, 22% of survey respondents received a surprise medical bill that was higher than expected, and 20% have withdrawn from savings or emergency funds to afford medical bills.
These withdrawals have instilled financial anxiety in some participants, with 18% who report experiencing “significant financial stress” due to medical bills, and 17% who have gone into debt for medical expenses. Another 13% have delayed or avoided medical care due to cost concerns, and 3% have filed for bankruptcy or have considered doing so due to medical debt.
Experts call this experience an “affordability trap,”—a phenomenon where participants choose cheaper options without considering the added expenses that come with them.
“The affordability trap isn’t about employees making bad decisions,” said Emma Thomas, director of marketing at Securian Financial, who leads the company’s annual workplace benefits research. “It’s about employees making rational decisions with incomplete information—and paying for it later. Employers can’t eliminate the trade-offs, but they can make those trade-offs visible.”
The study highlights the need to emphasize real-dollar scenarios for participants, especially in communications tactics. This includes illustrating premiums, deductibles, and out-of-pocket maximums in routine and high-cost years.
If participants were to choose a high-deductible health plan (HDHP), employers should show them supplemental insurance protections like accident, critical illness, and hospital indemnity insurance to reduce exposure risk. While 30% of employees surveyed said they were enrolled in supplemental coverage, 67% have said they find this communication helpful.
Securian Financial adds that employers could also provide benefit decision-support tools that illustrate different scenarios. In the study, 70% of employees said they use artificial intelligence (AI)-based tools when available.
Finally, plan sponsors should consider not only the type of communications they provide, but how they voice changes in the plan. For example, employers should lead with the “most consequential trade-offs” when speaking about health plans, says Securian Financial, as 20% of employees report feeling pressured to decide quickly during open enrollment periods.
Employers should also ensure participants understand benefit changes compared to the year before, and what they should consider next.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.