Employees like having benefits choices -- but just not too many, research finds
Benefits decision-making can require some advanced number-crunching, which can make it challenging.
Most employees opt for the path of least resistance when it comes to benefits selection. “People love choice, but they really don’t like making choices,” according to the “2021 MyChoice Recommendation Engine Benefits Insights Report” from Businessolver.
“As humans, we get overwhelmed and even experience psychological stress when faced with too many decisions,” the report notes. “This applies to everything from routine trips to the grocery store to employee benefits elections. According to a recent study, just over a quarter of employees would rather give up their favorite food than go through benefits enrollment, and 93 percent simply pick the same options year after year.”
Related: Why employee decision-making is only part of the health care cost problem
Almost three-quarters of employees believe their benefits are extremely or very important to their financial well-being. However, benefits decision-making can require some advanced number-crunching, which can make it challenging.
“With core health and welfare coverage alone, making the best decision means employees need to calculate potential total costs — including their contributions, out-of-pocket spending and maximum limits, plus any FSA, HSA or HRA dollars,” the report said. “This is something HR and benefits professionals likely can do in their sleep; but for many employees, the easiest choice may often be seen as the best one.”
Benefits have come into sharper focus as the health, financial and emotional toll of COVID-19 are increasingly pronounced. Research by Prudential found that employees are more likely to consider benefits as part of their overall compensation — 77% vs. 67% in the previous year — and three-quarters characterize their benefits as more important than ever.
MyChoice reported three primary findings from its research:
- Benefits literacy plummeted but then recovered to its normal low level. Over the past three years, employees have indicated that they don’t have a strong understanding of their choices. In 2020, employees who chose benefits during a mid-year annual enrollment reported more confusion than employees who enrolled in the fall.
- COVID-19 has affected employees’ risk tolerance. In general, employees don’t like risk, which informs how they think about benefits. However, the pandemic appears to have made employees more loss averse than in previous years.
- Despite financial strains from COVID-19, employees were able to save during 2020. However, some still were unable to save, and those employees are now in a worse financial position.
“HR professionals have always understood the value of benefits — from boosting recruiting and retention to safeguarding the health and welfare of an organization’s people,” the report said. “With COVID-19, the world at large has caught up, and benefits have taken a center-stage role. However, there is a tension. Employers want to provide valuable, cost-effective protection, but there is a substantial cost. In the face of an economy that contracted swiftly and significantly in 2020, employers’ goals may collide with the financial realities of a potentially long recovery.”
Understanding what employees are thinking and the challenges they face can provide a foundation for HR and benefits professionals to plan pragmatically for the short term while strategizing for the long term.
“Helping employees to better understand their benefits options so they can make better decisions, mitigating the twin pressures of risk and loss aversion, and supporting financial well-being for employees at all earning levels can help ensure that organizations have the people they need, ready, willing and able to devote their full productive selves to the task of rebuilding a successful future,” the report concluded.
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