3 Biases Keeping Employees from Making Better Benefits Decisions—and How HR Teams Can Help
If your employees make bad benefits decisions no matter what information you share with them, it might not be the information that’s the problem: it might be the way you’re sharing it.
See, we humans don’t always make rational choices. Sometimes our emotions, instincts, or prejudices grab the wheel, for better or worse (and usually, it’s “for worse”).
In behavioral science circles, the term for our irrational judgment-making tendencies is cognitive bias. And when it comes to benefits decision-making, there are three biases (listed below) that frequently get employees off-track. Here are some tweaks you can make to your communication strategy to help sidestep those biases.
#1. Status quo bias
What it is: The tendency to like things to stay relatively the same, and to fear change. At Jellyvision, we call this the “I don’t wanna” bias.
Example: You just rolled out a new HDHP, but one of your employees—let’s call him Brad—doesn’t consider enrolling in it because he’s not totally sure how much he’d save. Plus, making the change sounds like a huge hassle. So, Brad just sticks with the PPO he’s had since 2005 and pays hundreds of dollars more for healthcare than he needs to.
How to help Brad overcome this bias: Brad fears switching plans because he both overestimates how hard it is to make the change and underestimates the value of trading his PPO for an HDHP.
Here’s what you can do to turn that around:
- Provide visual, side-by-side comparisons of both plans, so savings is clear at a glance;
- Make the enrollment process quicker and less confusing, then announce these upgrades to your employees;
- Hire a writer to help translate your plan descriptions from jargon-heavy legalese into plain English. This will make it easier to learn about and understand the new plan; and
- Focus less on your HDHP’s features and more on the potential savings that come with it (plus the peace of mind that comes with getting the best deal).
BONUS: If possible, give Brad personalized advice that shows him how much he, unique human with unique healthcare needs, will save by switching to the HDHP.
#2. Social norms bias
What it is: The tendency to do what your peers are doing, instead of weighing the facts.
Example: Anna’s a young employee who contributes 3 percent of her salary to her 401(k) because that’s what her work friends say they contribute. The thing is, all of them could actually afford to contribute 5 percent and take full advantage of the company match—and should seriously consider contributing more.
How to help Anna overcome this bias: Redirect Anna’s attention away from peers who aren’t making the best choices and towards peers who are. At a financial wellness event, consider asking older employees who are on track for retirement to share what they did in their younger years to get there (ideally, choose employees with a range of salaries). In your digital and print communications, share both the full range of contribution rates at your company and aggregate data about your company’s most generous 401(k) contributors. If you share national statistics, opt to share the contribution rates of employees who are on track to retire comfortably in addition to–or instead of–sharing national contribution averages (since those will be significantly lower).
Seeing clearly what the “winners” around her are doing will hopefully get Anna’s competitive juices flowing and nudge her towards better habits.
#3. Confirmation bias
What it is: A tendency to seek out, pay attention to, and remember information in a way that confirms what you already think is true.
Example: An older employee named Ron understands the 401(k) to be the retirement benefit of choice—and has contributed 5 percent of his income into his 401(k) for twenty years. During a benefits meeting, you talk about both the 401(k) and HSA options. Ron listens intently to the 401(k) section, waiting to learn about the fund options this year. But when you start talking about the HSA he only hears the part about how HSA funds can only be used for medical expenses before you reach the age of 65. This limit reminds him of the money he once put into a HRA and lost because he didn’t use it before the deadline. So, he dismisses the HSA and stops listening. This is a shame because he and his wife could actually benefit from the flexibility and additional tax advantages of HSA funds.
How to help Ron overcome this bias: One of the problems with confirmation bias is that it reduces the world to black and white: my preferred way of doing something is great, so your new way(s) must stink. To move employees like Ron past this kind of binary thinking:
- Talk about how retirement savings decisions fit into a more nuanced financial picture that involves other important aspects like choosing other benefits, paying off debt, and trying to sock away a little emergency fund. Remind them they should be weighing all these factors simultaneously as best as they can.
- Emphasize that there’s no one right way to save for retirement, then share a handful of diverse employee scenarios that drive this point home. If you’re lucky, Ron will recognize himself and his wife in one of them and perk up.
- After your initial presentation, whip up and share a list of FAQs, including plenty of questions targeting the misconceptions skeptics like Ron might have followed by clear, conversational answers.
- Best of all, prevent Ron from only seeking out information that confirms his own thinking by investing in a benefits decision support tool that can gather specific information about his broad financial and health care situation, crunch all the numbers, and provide a tailored recommendation for him. By the end of the experience, Ron may still feel a little weird about the information you’re sharing, but with your trustworthy, personalized advice in hand, it’ll be that much easier for him to set those emotions aside and make a level-headed choice
When it comes to making important healthcare and retirement decisions, your employees are at a disadvantage because biases they’re not even aware of are working against them. The better job you do of helping them overcome the psychological barriers holding them back, the more likely they’ll be to make smarter decisions, reach their full financial potential and appreciate you, their employer.
This article was originally published in Human Resources Executive magazine.