Plan design: The first step on the road to open enrollment success
This is the first article in a 10-part series on successful open enrollment.
When benefit plans are well designed, they become a powerful tool to help achieve success with a broader human capital strategy. But when they are poorly designed, with flaws in incentives, pricing or other basic features, employers find themselves with unhappy employees and unable to reach engagement goals.
Granted, no one ever said plan design was easy. Employers may have the best intentions, but employees may find some benefits as overpriced or they may ignore others the organization felt would be widely attractive. In addition, an abundance and variety of benefits can leave employees’ heads spinning.
The way to avoid this problem is to begin with a disciplined, strategic approach to benefits design. Start with a clean slate, temporarily ignoring existing benefits offerings, and asking, “What is our philosophy, and what are we trying to accomplish with our benefits program?”
When particular benefits are only offered because “we’ve always done it this way,” they tend to be out of sync with today’s employer priorities and employees’ needs.
Employers should ask: Do we want to guide employees’ benefits selections aggressively because we want to be sure they make the choices we believe are best? Do we instead want to offer employees a maximum of choices and let them address their own varied needs as they see fit? Do we want to make a big push to improve employee health, or is that not our role?
The more “paternalistic” the employer, the more the plan should limit choices and incent employees to choose an employer-desired plan over others. For example, an employer who strongly believes in life insurance might offer only a few high-quality options and share a significant portion of the cost of premiums.
Also, when an employer's philosophy around health benefits is informed by a population health perspective, that will lead to plan designs featuring aggressive holistic medical management components.
The next step in working toward a strong benefits design is to take a fresh look at the employee population to assess needs. This can be accomplished by a combination of polling employees themselves, analyzing utilization of benefits currently offered and studying relevant benchmark data.
The needs assessment will shape the overall design in terms of which benefits are offered. For example, if the process reveals that employees, on average, don’t appear to be on track with their retirement savings, retirement planning tools and education programs could be offered as part of the plan. In addition, the employer could alter its matching contributions.
The final “big picture” step in the benefits design process is determining whether the overall budget for benefits is sufficient to meet the goals of both the employee and the employer.
Additional tips for good plan design include:
- Maximize transparency with health plans. The easier it is for employees to understand what they’re paying for the better.
- Keep covered health benefits consistent between plans. This ensures the risk of adverse selection is minimized — employees needing a service covered in only one of multiple health plans won’t all enroll in that plan.
- Avoid any overlapping coverage benefits between employer-paid and voluntary plans. This ensures employees get the most bang for their buck with voluntary options.
- Incorporate benefit plan options into modeling systems that enable employees to select plans with a clear understanding of what their costs will be under various utilization scenarios.
Good benefit plan design takes thought, time and effort. Without it, however, dollars are wasted and the opportunity to support the company’s human capital strategy is squandered.
Tomorrow: How to decide on the best time, and length, for open enrollment.