Businessolver Blog

Low Employee Benefits Literacy is Costing Them and You Real Dollars

Low Employee Benefits Literacy is Costing Them and You Real Dollars
Posted on Tuesday, June 18, 2019 by Bridget Mortland
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Each day, people make decisions, but all decisions aren’t created equal.

benefits-literacy

For example, buying a new car has more downstream impacts for most people than deciding what shirt to wear to work (unless you happen to be a stunt person and only some of your shirts are fire-resistant. Picking the wrong one could have very serious unintended consequences.)

Fire-resistance aside, even the most routine decisions require some level of judgement. Choosing between one or more different options requires knowledge and context. You can also throw in preference. (This detergent is better at getting out grass stains from my son’s baseball pants. Their latte tastes better. I’ve worn black three days in a row.)

But, what if you didn’t have any knowledge or context, or your knowledge was spotty? Would you be able to make a good decision?

Sometimes yes; sometimes no.

When the stakes are relatively low, knowledge or comprehension isn’t terribly important. Choose the wrong detergent and you can set things right at your next trip to the store. Best-case scenario, you’re out a couple of bucks; worst-case is set-in grass stains.

However, when it comes to benefits choices, making decisions without some solid knowledge exposes employees—and their employers—to potentially serious adverse impacts.

  1. There’s a lot of money on the line. Employees are looking at premium contributions and out-of-pocket costs that can really add up, especially when they don’t pick the options that best balance cost and coverage for their situation. And, they’re not in this alone, as employees are currently spending about $15k of their employer’s money on benefits.
  2. Employees can fail to appreciate what you’re offering. Benefits are a strong incentive for employees to stay with their current employer or accept an offer somewhere else. In this labor market, when employees make bad decisions that leave them exposed to risk, your retention may suffer along with their wallets.
  3. Employees may divert resources from short- and long-term goals. If they over-insure and spend more on benefits than necessary, employees may not be able to afford to save for goals like buying a house or retiring. On the other hand, if they don’t allocate enough resources for appropriate coverage, they may have to dip into money they’re been able to squirrel away to fund out-of-pocket costs, knocking goals out of reach. This leads to financial stress, and financially stressed employees are distracted at work. So, employees’ decisions impact your organizational productivity.

Poor benefits literacy is pervasive, and it can undermine employees’ ability to make the types of decisions that enable them to use benefits as intended—as a way to protect themselves from risk and help them meet personal and financial goals. Once they make their enrollment decisions, only a small minority of employees feel like they’re actually using their benefits optimally.

The first step in addressing benefits illiteracy is understanding the extent of the issue. By analyzing real-time employee responses to questions in our decision support tool, our MyChoicesm Recommendation Engine Benefits Insights Report offers a comprehensive look at the top issues surrounding employees’ benefits decision-making, including lack of knowledge and confusion.

Based on the report, we drilled down to who is confused by their benefits and the degree of that confusion in this handy infographic. It provides information on the demographics associated with lack of benefits knowledge and can help employers understand both the extent of the problem and where to focus educational and communication efforts.

Benefits protect employees from exposure to risk, but lack of knowledge is keeping them from making decisions that result in options best fit for them. An appropriate level of benefits literacy helps employees enjoy peace of mind without breaking the bank—either theirs or yours.  

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