September 5, 2016
The healthcare industry is in the midst of a shift toward consumerism. Driven by rising healthcare costs, employers continue to shift financial responsibility to their employees in the form of higher deductibles and out of pocket costs. This change represents a complete paradigm shift for consumers, who must now take a more active role in managing their healthcare. Consumers may not be ready for this change.
Alegeus, a technology company that offers a healthcare benefits platform, surveyed more than 4,000 U.S. consumers and found consumers have low levels of confidence in the decision-making process for choosing their benefits; the new research affirms that consumers need support navigating the process.
Below are six practice strategies employers should consider in order to help their employees take control of their healthcare finances and become savvier consumers.
Position the health plan and financial account as two halves of a whole
Tax-advantaged benefit accounts, including health savings accounts, flexible spending accounts and health reimbursement accounts, have become a staple of employee benefit packages – and a great tool to help consumers save for out-of-pocket costs that are not covered by their health plan. However, the plans are often positioned in enrollment communications as an optional add-on rather than an essential element of a consumer’s healthcare coverage.
Most health plans have some element of out-of-pocket cost; therefore, most consumers would benefit from an account, even at some minimal level of funding. Employers should consider positioning the plan and the account as a bundled benefit, whether as a traditional plan coupled with an FSA or a high deductible health plan coupled with HSA.
Offer tools and guidance to help consumers define a savings goal
Open-enrollment communications devote pages upon pages to the advantages of benefit accounts, such as how they work, who is eligible and its tax-saving potential. However, very few pages provide support for a question the majority of consumers grapple with: How much should I put into it?
When asked, only 34% of consumers feel confident that they know how much they are likely to spend out of pocket on healthcare this year; even fewer understand what they will need to save for the long term into retirement. Employers should offer guidance and tools to help employees define an appropriate savings target. This is perhaps one of the most overlooked aspects of open enrollment.
Focus on the long term, not just this plan year
Most consumers are still accustomed to thinking about healthcare costs in the context of the current plan year; this mindset is reinforced by the annual cycle of benefit enrollment. Very few consumers are thinking about healthcare savings in the long term, and only 23% of consumers claim to be saving aggressively for healthcare. Yet, according to Fidelity, an average couple will face nearly $245,000 in healthcare expenses during their retirement years. To put it mildly, most consumers are unprepared and underfunding their healthcare savings.
HSAs are a compelling long-term savings vehicle with broader tax benefits than even 401(k) accounts. Most consumers still confuse HSAs and FSAs and think they are roughly the same. When promoting HSAs to consumers, be sure to fully explain the long-term benefits and encourage them to save for the future – not just the present year.
Give examples that help consumers visualize outcomes and savings potential
Research overwhelmingly points to the fact that consumer health benefit fluency is still very low, and most employers still primarily rely on summary plan details and paper documents to communicate benefit offerings. Consumers find it challenging to interpret and personalize the plan details for their unique situation, and need help visualizing likely outcomes and savings potential.
Don’t overlook the value of human interaction
For as much as we speak of the “digital era” that we live in, and as ubiquitous as digital tools have become, consumers still value human interaction when it comes to managing their healthcare. This was true across all age groups and consumer segments. However, as consumer confidence in healthcare decision-making grows, we see the interest in human interaction wane and the interest level in digital or self-service tools increase.
The research suggests that consumers are confused; they aren’t confident in navigating these new responsibilities and they don’t yet trust the system: They want a person to answer their questions, affirm their thinking and guide them to the right decision. Employers and benefit providers should think creatively about how to best support consumers during enrollment and beyond.
Communicate year-round, not just during open enrollment
Consumer-directed healthcare represents a major paradigm shift in how consumers must manage their healthcare going forward. Despite low consumer fluency and high healthcare disengagement, most employers still communicate about health benefits just once per year, during enrollment.
Consumers need significant support and guidance in navigating this new healthcare landscape. This will require year-round communication and engagement, such as pre-enrollment education to build fluency on basic concepts, enrollment programs that help consumers compare options and make informed decisions, onboarding programs that set newly-enrolled consumers up for success, and support for ongoing usage and optimization. Enrolling in benefits is just the first step.