Your employees make countless decisions every day on the job. And, as part of the human condition, their psychological makeup underscores everything that they do. So, it should come as no surprise that it has an impact on how they handle making choices during open enrollment. Unfortunately, there are a handful of cognitive biases that cause employees to end up with suboptimal health plans for their circumstances. Fortunately, we’re going to identify them, discuss them, and provide suggestions for how you can help employees work through them.
Status Quo Bias
One of the biggest reasons your employees end up with the wrong health plan is that they fail to review their available options. Due to the status quo bias, they’re inclined to maintain their current coverage -- regardless of effectiveness or appropriateness -- because they view change as uncomfortable, inconvenient, or bad. Without considering their present health care requirements or any changes to the health plan options that the company offers, they keep their insurance on autopilot. This leads to them having coverage that may not meet their needs and that may be more expensive than necessary.
As a leader, you can help your team avoid falling into this trap. Hammer home the point that they need to think about their medical care needs and review the available health plans carefully during open enrollment. They should be thinking about things like: any recent diagnoses they’ve received, new providers they’ve seen, changes to medications they’re taking, or changes to their family size. Make it crystal clear that benefits selection is an active process and offer tools, like checklists, to help guide their thinking.
Salience Bias and Loss Aversion
Another main reason your employees struggle to make good choices during open enrollment is that they are naturally prone to overestimating their risk. They think that the worst-case scenario is an inevitability and then make their decisions from that place of fear. The salience bias exacerbates this tendency because it causes them to erroneously believe that an easily-visualized risk (think accident or sudden illness) is a highly-probable risk. Further, loss aversion results in employees distrusting and ignoring truly viable options (like high-deductible health plans with health savings accounts, or HSAs) because they may result in a financial blow. In all actuality, many of your employees would save money on a high-deductible health plan!
To help your employees view benefits selection more rationally, get them doing some math. Their cognitive biases may lie to them -- but the actual numbers won’t. Have them gauge their true (ballpark) worst-case scenario for the year by adding up the out-of-pocket maximum and annual premium for each available health plan. Next, have them note the difference between the highest and lowest annual deductible and see how it compares to the difference between the highest and lowest annual premium. Chances are, your employees would pay significantly more each year covering the highest premium than they would satisfying the highest deductible.
If an employee is interested in enrolling in a high-deductible health plan with an HSA, ask them to think about these two questions:
- How much can they afford to contribute to their HSA to cover their annual medical expenses?
- How much do they have available to pay for health care costs before their HSA account is built-up (i.e. emergency savings)?
Be sure to have them factor in what they’d be saving in premiums as part of their decision-making process. That amount can go a long way towards funding their HSA and paying for care.
While a high-deductible health plan isn’t the right fit for every employee, it can make sense for many more than are taking advantage. There is a real opportunity for employees to save money if they can be realistic about their level of risk and contribute diligently to their HSAs.
How Picwell Can Help
Guiding each employee through open enrollment is truly satisfying. It’s fulfilling to help others with such an important choice. But -- it’s also time consuming. And, depending on your firm size, it may be impractical. That’s why we’ve created a decision support tool. It takes the strain off of you and the benefits team while still producing the desired result of getting employees appropriately insured.
Employees simply answer a few quick questions and our sophisticated, AI-driven system does the calculations for them. They’ll instantly know what health plan is the best fit for their medical care requirements, risk tolerance, and financial standing. You can be confident that they’ll get the coverage that they need -- and probably save money to boot!