5 Ways to Help Your Employees Stop Misusing Their Benefits (and Start Saving Money)

Mark Rader Benefits Communication, Financial Guidance

Eager to stay competitive in today’s job-seeker’s market, employers are offering more generous Total Rewards packages now than ever before. However, because many employees still don’t understand the value of those packages (or how to make the most of them), they end up making pricey mistakes.

Here are the most common bad benefits decisions employees make along with some road-tested messaging strategies to help your company change employee behavior as soon as possible.

Challenge #1: Choosing the Wrong Plans

Employees waste an average of $750 a year by choosing a plan that’s the wrong fit for them. Meanwhile, their employers waste anywhere from $500 to $2,100 a year on each employee who chooses the wrong plan. The average total cost of health care is on the verge of $15,000 per employee, and with health care only getting more complicated, those numbers aren’t dropping anytime soon.

Communication strategies to try:

Tip #1: Speak in human, not jargon

Benefits info that’s heavy on jargon and legalese will only confuse and bore employees. And confused, bored employees are more likely to either keep doing what they’ve always done or choose the most expensive plan just to “be safe.”

The good news is that helping your employees understand their benefits (and make smarter choices as a result) can be as simple as defining each term you use the first time you mention it. Those definitions should use clear, conversational language with a dash of humor tossed in…think of writing it the way you’d explain it in-person to a friend.

Tip # 2. Create messaging focused on various employee groups

Every one of your lovely employees is a unique human being who is also a member of a few different employee groups or types. By tailoring your “choosing a plan” messaging to fit each group’s unique pain points, you’re more likely to capture your workforce’s attention and get them to take action. This tailoring could involve adding call-outs in general content or creating standalone content for each group.

A few meaningful employee groups:

• Different demographics (Generation Z, Generation X, Baby Boomers)
• Union vs. non-union employees
• Recent hires vs. tenured employees
• Employees getting married or having a child soon

Tip #3: Give employees a really good decision support tool

Interactive online tools (like ALEX) give employees clear, personalized benefits guidance tailored to fit their individual health care needs and circumstances.  In fact, for many employees, interactive tools are even more helpful than talking to their HR team or colleagues: because the tool is private and unbiased, employees are more likely to be honest about their health care needs and less likely to be influenced by social bias, making it more likely they’ll make best choices for them. Case in point, last year, ALEX helped employees potentially save a whopping $307 million* by choosing our recommended plan over the second-best option.

*To get this number, our data team applied what they knew about how often ALEX users select the plan that ALEX highlights (75% of the time) and the average savings employees in our sample saw by taking that plan instead of the next-best “best-fit” option ($642) to the number of employees who chose any plan last year (638,000). Math: it’s pretty sweet.

Challenge #2: Poor health care spending decisions

High-deductible plans are more the rule than the exception these days, which gives employees more control of their own health care spending than ever before. However, most employees aren’t benefits aficionados, and lack the understanding they need to make wallet-friendly choices. On top of that, most companies don’t do a great job filling the knowledge gap.

Communication strategies to try:

Tip #1: Share medical price-shopping resources

Websites like Goodrx.com help employees figure out which pharmacy in their area offers the best price on their prescriptions, potentially saving them thousands of dollars a year.

Tip #2: Get serious about offering—and promoting—telemedicine

Over half of all companies say providing more virtual care solutions is their top initiative for 2019, and employees are increasingly open to the idea of virtual visits. In fact, in a recent survey, roughly three-quarters of Americans said they would consider using a virtual visit for:
• A question about a prescription
• A pre-surgery appointment
• Ongoing care for a chronic condition

When it comes to promoting your telemedicine tool, focus on what’s in it for the employees rather than the bells and whistles of the technology. Emphasize convenience (ex. “you don’t have to get off your couch when you’re sick”) and pricing (ex. “a telemedicine visit costs you a fraction of what an in-office visit does”), and put that info front and center in all the HR resources your employees turn to when they get sick.

Tip #3. Urgently promote urgent care

One of the most common—and expensive—ways employees misuse their health care is by going to the emergency room for non-life-threatening illnesses. That comes down to the fact that many of them don’t realize that they’d get much cheaper—and quicker—care at an urgent care center.

Use this article to whip up a comparison chart for your employees, making sure to include where to go for common illnesses or injuries. Be sure to give them a shortlist of all the urgent care centers in your area; that way, there’s no question where your employees should go at the critical moment.

Challenge #3: Low HSA engagement

Fact: 70% of HSA participants can’t pass a basic HSA proficiency test. And half the people who enroll in an HSA plan don’t contribute a penny to that HSA. Ouch.

Part of the challenge with boosting contributions is that some employees need more help understanding how HSAs work. The real problem, though, is ineffective employee communications.

Communication strategies to try:

Tip #1: Beat the tax savings drum harder

It’s simple: When people pay for healthcare out of their HSA account instead of their bank account, they can save hundreds if not thousands of dollars in taxes. So it’s your job to make those somewhat abstract tax savings feel as tangible to your employees as a handful of cash. Using the average tax rate (19.65%) as a benchmark, list out how much employees stand to save by contributing at different levels ($1,000, $2,000, etc.). And if you feel a “fear of missing out” message might be more effective, frame those savings as something employees will lose if they don’t act.

Bottom-line messaging works: after talking to ALEX, employees said they would contribute an average of $2,620 to their HSAs—36% above the national average of $1,921.

Tip #2: Emphasize the important difference between FSAs and HSAs

You know that—unlike FSAs—HSAs have no “use it or lose it” date. The money employees put into their HSAs will stick with them until they need it, whether it’s this year, next year, or twenty years from now (even if they change jobs or retire). Your employees on the other hand…don’t necessarily know this. So be sure to proactively call out the difference everywhere you mention HSAs. Assume there’ll be confusion if you don’t.

Tip #3: Make your messaging more timely and frequent

Your employees can enroll in—and contribute to—their HSA at any time throughout the year, so don’t wait until open enrollment to bring up HSAs. Reach out consistently, whenever your employees are best primed to care: at the beginning of a new plan year; in March and April when tax savings are front of mind; or after a pay raise or promotion.

Challenge #4 – Low 401(k) contributions

Not all your employees are in a position to contribute generously to their retirement accounts because they’ve got other, bigger, financial fish to fry.

But many who can and should boost their retirement funds…just don’t. As a result, they miss out on free money and become less prepared to retire on schedule (which isn’t great for you, their employer, either).

Communication strategies to try:

Tip #1: Focus on best-in-class financial behaviors

Many employees equate meeting their employer match with a really good contribution rate. But in most cases, merely meeting that match isn’t going to be enough for them to reach their retirement goals. To counter this assumption, make clear what the top 5-10% of contributors (at your company, or nationwide) are doing before sharing national averages (which will obviously be lower). (Why mention the high achievers first? Because we humans have a tendency to be influenced more by the first of a series of options, known in the world of behavioral economics as “anchoring”.) If you aren’t intentional about what behavior you anchor your employees on, they’ll default to something less than ideal…like that employer match.

Tip #2: Share basic investing FAQ’s

Contributing to retirement funds is important, but if your employees aren’t investing those funds wisely, they’re going to fall short. Handing over the brochures your 401(k) vendor won’t help, since they’re usually packed with jargon and legalese. So it’s up to you. Be sure to use conversational, simple language to answer common investing questions and define basic investing terms (like compound interest) for your employees.

Tip #3: Describe future retirement funds as monthly income

Getting people to do things now that will benefit them in the future is…difficult. Right now is so real and vivid, and the future is not.

To give your employees a stronger feel for the way their current retirement fund decisions will impact their quality of life when they’re retired, do more than project various lump sums they’ll have access to. Instead, break down those lump sums into monthly income spread over, say, a twenty-year retirement period. Most employees know what their monthly income now is, so that number will give them a more visceral understanding of how comfortable—or not—they would be.

Challenge #5 – Low financial wellness program engagement

Convincing your employees that you, their employer, are the ultimate authority on credit card debt or creating a household budget is an uphill battle. Even if you do see decent engagement with your financial wellness resources, it’s nearly impossible to know if they’re working; to gauge success, you’d need a statistically relevant chunk of your workforce to track their financial behavior and turn over their ATM receipts. And that…isn’t going to happen.

Communication strategies to try:

Tip #1: Make finance-related benefits guidance part of your financial wellness platform

Tax-savings accounts and retirement plans are financial products that carry the same complexities and consequences of any sophisticated financial product. However, they’re generally handed over to employees with a confusing vendor pamphlet and login instructions.

Consider swapping out a financial wellness program focused on employees’ take-home pay for one centered on helping them take advantage of payroll deductions in a way that makes the most sense for them. When employees automatically save money before it reaches their paycheck, it’s (unsurprisingly) much harder for them to spend it. And as their employer, you control that spigot, so you’re in the perfect position to lead the way.

Tip #2: Provide advice that weighs all of your employees’ financial concerns

The problem with the financial advice HSA, 401(k), and Financial Wellness vendors provide is that:
1) it’s heavily biased towards their product,
2) doesn’t explain how different tax savings products relate to each other, and
3) doesn’t factor in employees’ many other financial priorities (like, say, trying to pay off college and credit card debt, save up for a down payment on a house, or sock away a rainy-day fund.)

Companies that offer holistic, vendor-agnostic advice help their employees in a more meaningful way and also give themselves a leg up when it comes to recruiting and retention in this highly competitive talent economy.