In our last blog we explored reasons why the lowest cost health plan may (or may not) always be the best option. We also reviewed how Picwell recommendations work to help guide employees to the best plans for their needs. But, while Picwell will recommend a specific plan, employees may still choose something other than the recommendation.
What are the factors that lead to these decisions? Let’s see.
How Employees Choose Health Plans
As we continue to look at various factors that affect benefits decisions, it’s important to apply those factors to the final decisions employees make. As you know, Picwell ranks and scores health plans based on information provided by employees. Within the Picwell tool, health plans are ranked starting with the best fit plan. The best fit plan has the highest score, and it will always have a “green” rating, meaning that it’s a great value. It makes sense that employees should always go with the top scored plan, right? Well as we’ll see, that’s not always the case - and that may actually be a good thing!
Whenever Picwell scores plans for an employee, there is a top scoring plan but it is also possible that more than one plan can be scored as a “green” plan. When this happens, it simply means that this employee has more than one great option to choose from, and no matter which health plan they ultimately choose, they will still put themselves in a great position for the year. Let’s begin by evaluating the data around plan decisions.
How many employees choose the top plan?
Looking at last year’s open enrollment period, we find that employees choose the top scoring plan 68% of the time. If we expand this to look at a few other metrics, we see that employees choose the plan with the lowest predicted cost 61% of the time and they choose the plan with the lowest premium 56% of the time.
Depending on the metric you look at, you might conclude that a large segment of employees aren’t making good choices. We like to look at things a little differently, though.
We think that it’s great to have options, and as we’ve already mentioned, sometimes employees have more than one great option to choose from. If someone chooses the second highest scoring plan but it’s still a great value, that’s a win from the employee’s perspective. Chances are, they are making that choice because there is something they like about that second ranked plan that isn’t showing up in the score. We recognize that, in addition to cost savings, there are a number of other factors that employees consider when choosing health plans.
While we constantly strive to represent as many of these factors as possible in the Picwell Score, we haven’t captured everything… yet. However, by using Color Tiers to help employees focus on the high value plans, we can put them in a better position to evaluate some of those other factors and know that they are getting a great value either way.
So what do we see if we look at enrollment by color tiers? We see some pretty good stuff!
Last year, 82% of employees enrolled in a green plan, which means that most employees are ending up in high value health plans.
This is quite a jump from what we see among employees who don’t use decision support. For example, when we have had the opportunity to evaluate health plan choices for people who do not use decision support, we’ve found that access to decision support doubled how many people were making the right plan selections.
What are the cost implications of NOT choosing a green plan?
When employees decide to go with another plan that is not marked as a green plan, they are missing out on some value. Or, to put it another way, they are spending more money on their health insurance (a lot, in some cases) than they need to, once we account for both how much medical care they will need and how much they value extra risk protection.
Just how much value are they missing out on? Here are the facts:
- Employees who choose yellow plans leave an estimated $796 on the table ($1,346 for families!)
- Employees who choose a red plan leave an estimated $1,296 on the table. That number increases to $2,667 for families!
Whether employees are choosing yellow plans or red plans, they are leaving a significant amount of money on the table. But the real concern here is who picks plans that Picwell scores as red, and why.
Who chooses red plans?
About 6% of people who use Picwell end up enrolling in a red plan. While not a large number, it’s still important to look at this in more depth.
Factors leading to a red plan decision
A lot of factors go into how employees evaluate health plans and which plans they ultimately choose. Because many of these factors are highly correlated with one another, it can be difficult to isolate which factors are significantly associated with health plan choices. Luckily, a regression analysis can help by allowing us to see the impact of different factors, holding everything else constant. When we use this approach to look at health plan selections and what factors impact choosing a red plan, there are some conclusions that we can draw.
Many household characteristics that we might think would be associated with choosing a red plan are not, in fact, significantly correlated with the quality of health plan choices. In particular, age, income, health status and financial wellness all appear to not be correlated with choosing a red plan.
However, we do see that two factors are strongly correlated with choosing a red (low) scoring plan:
- High Risk Aversion
- Family Coverage
High Risk Aversion
People with a high level of risk aversion are 2.8x more likely to enroll in a red plan compared to those with low and medium levels of risk aversion.
Oftentimes, this can be due to the perceived value of a plan. Employees who fall on the side of high risk aversion value additional risk protection the most and like to limit their exposure to unexpected costs. While this may help their peace of mind in the short term, ultimately it can hurt their wallet in the long run. If a plan falls on the red color tier, we are basically saying that it’s going to be a bad deal regardless of how much an employee desires extra risk protection.
People who are covering additional household members are 2.2x more likely to choose a red plan than people with individual coverage.
This may represent a combination of factors. Family coverage is riskier, from a financial perspective. Deductibles and out-of-pocket maximums are higher, and more people on a health plan equates to more chances of incurring a large medical bill. At the same time, employees are probably overestimating just how much their risk is increasing, and this may be leading them to “over-insure” and choose poor value plans as a result.
Benefits Decision Support Guides Employees to the Best Plans
One of the worst things employees can do is leave money on the table. As we can see, even with rock solid recommendations based on data and analytics, there are still times where employees will veer off course and choose a plan based on their own biases and perceptions of value. However, when you provide a benefits decision support solution like Picwell DX to employees, you can rest assured that more than 80% will end up enrolling in the best plan for their needs, putting themselves in the best position for the upcoming year.
Check in tomorrow as we explore how often Picwell recommends HSA-eligible plans, and how those recommendations affect enrollment and contributions.