Employees chase lower premiums, only to face higher costs later

• Key Insight: Discover how employees' premium-focused choices create an "affordability trap" in open enrollment.
• What's at Stake: Rising out-of-pocket exposure threatens worker financial resilience and employer benefits ROI.
• Forward Look: Expect increased AI use and demand for clearer, concise benefits communication strategies.
  Source: Bullets generated by AI with editorial review

Most employees choose cheaper health plans over more comprehensive coverage during open enrollment, potentially leaving themselves exposed to higher costs down the line, according to a new workforce benefits study.

At a time when rising healthcare costs and insurance premiums continue to outpace worker wage growth, nearly two-thirds of employees say that cost is their top workplace benefits priority, according to the research by Securian Financial.

"When budgets are tight and enrollment decisions feel overwhelming, employees default to the one number they can control — the premium," said Adam Taylor, vice president for employee benefits solutions at Securian Financial. "But what looks cheaper today can become far more expensive tomorrow."

Securian Financial's fourth annual workplace benefits study identifies a growing "affordability trap" in which employees choose high-deductible health plans, skip supplemental coverage or reduce voluntary benefits to save on payroll deductions. While these decisions may boost paychecks in the near term, they can lead to thousands of dollars in unexpected out-of-pocket costs down the line, Taylor said. 

In the past 12 months, 22% of survey respondents received a surprise medical bill that was higher than expected, and 20% used savings or emergency funds to pay medical bills. Eighteen percent experienced significant financial stress due to hospital bills, while 17% went into debt for medical expenses. 

Additionally, 13% delayed or avoided medical care due to cost concerns, and 3% filed for bankruptcy or considered it due to medical debt. 

"The math employees are doing is simple: 'What comes out of my paycheck?'" said Taylor. "The math they're not seeing is what happens if they're hospitalized, need surgery or face a serious diagnosis. That's where the affordability trap snaps shut."

A race to enroll

The survey found most employees race through open enrollment, with two-thirds devoting less than an hour to the process. About 30% take under 30 minutes — leaving little time to evaluate medical plans, weigh supplemental coverage and update dependents.

Communication plays a major role in employees' confidence in their benefit choices, with 86% reporting confidence when benefits are communicated well, compared with 32% when communication is poor.

"Employees are really interested in these benefits, and they are seeking out tools and communication that can help them understand how their medical plan works in conjunction with everything else that's around them," Taylor says. "It's not that they want less communication, it's that they want short and relevant communication."

Read more: How to improve your benefits communication strategy

Communication can also help employees understand the importance of supplemental benefits such as short-term disability, critical illness insurance and reproductive health benefits. Just 30% of employees are enrolled in supplemental health benefits through their employer, and another 11% aren't sure if they are. 

To increase engagement, the report recommends that HR leaders position these benefits as "financial shock absorbers," as supplemental health benefits can offset out-of-pocket exposure from high-deductible health plans. According to HealthCare.gov, an average three-day hospital stay costs about $30,000. 

AI enters the benefit chat

Employees are increasingly turning to AI for help in making benefit decisions, asking chatbots to define terms, compare plans and get quotes for surgeries, the survey found. Usage varies by generation: 30% of millennials say they regularly use AI to make benefit decisions, followed by Gen X (22%), Gen Z (20%) and Boomers (10%). 

Read more: HR is investing in AI but hesitating to trust it fully yet

While older generations are more cautious, comfort with the technology is growing across the board, according to the study. 

"We need to recognize that employees are going to use it, and it's going to be in a model that's untrained," he says. "It's going to give them answers that are directionally accurate but may not understand all the nuances of that employer's plan. So again, I think that's where designing really clear communication can help."