In our data rich world, recommendation engines have become ubiquitous tools that consumers rely upon in almost every facet of their lives. Whether navigating the best place to get ramen noodles in a friend’s neighborhood, or what to watch on Netflix, recommendation engines make vast and complex choices more manageable — and that extends to employee benefit options as well.
Gone are the days when health plan shopping was like picking what’s behind door 1, door 2 or door 3, without much to go on. Exchanges have brought not only a greater diversity and volume of plans to choose from, they’ve brought decision-making tools that help employees figure out which plans are best suited to their situation and budgets — just like what savvy digital shoppers have come to expect in every other part of their lives.
The Private Exchange Research Council (PERC) released new analysis based on three years of benefits enrollment data, showing that recommendations provided by exchange decision engines are having an impact on health benefit buying decisions. The analysis was based on companies using private exchanges over three years, which in 2015, included 159,588 employees and 740 employers.
The data shows that not only are recommendation tools helping employees choose more appropriate health plans, they are also educating them as to the value of their benefits, ultimately resulting in increased employee engagement as well as greater satisfaction with their benefits.
Increasing employee engagement
For the modern employer, engagement is a constant struggle. There are entire books dedicated to motivating employees and keeping them on task for increased productivity, health and happiness in the workplace. Compensation and benefits are a significant piece of this puzzle, but focus tends to drift toward the former and away from the latter.
Traditionally, employees have been offered a limited choice of 2-3 health plans, giving them little reason to think or care much about their benefits beyond “gold,” “silver” or “bronze.”
Private exchanges have brought health benefits into the 21st century. Via these platforms, employees are given a far broader portfolio of options, including in some cases, less traditional benefits like legal plans, telemedicine and pet insurance.
Purchase rates for most products with a recommendation are two to four times higher than those purchased without a recommendation, or when recommended to waive the product. Vision insurance, for example, was bought in 2015 by 87% of employees with a recommendation, compared with only 35% without one. Clearly, employees are more likely to purchase a product if recommended to do so.
The fact that the recommendation engine is suggesting that employees defer more of their salary toward ancillary benefits — and that they are taking that advice — tells us that private exchanges have enormous potential to strengthen employee engagement. This data speaks to the power of the private exchange and the recommendation engine within it, and how employers can use this tool to retain and motivate workers.
Providing suggestions employees embrace
Concerning the most widely-offered and expensive benefit, the medical plan, the tendency for employees to buy what’s recommended is on an upswing.
In 2015, the number of employees that purchased the recommended medical plan was 38%, up from 32% in 2013. About one-third of the remaining employees that received a recommendation bought a more expensive plan, and another third bought one that was less expensive.
The trend toward buying the recommended medical plan could indicate employees are becoming more comfortable shopping for their own benefits on an exchange. If they are heeding the advice of the recommendation engine, they are likely becoming more confident in its suggestions for them.
Thirty-eight percent may seem like a small number to celebrate, but on the contrary, it’s an indication that the recommendation engine is working as intended. We realize that employees are making difficult decisions when choosing their medical plan, and dedicating significant portions of their salary to this benefit. The point of the exchange, and the recommendation engine within it, is to give people choice. We don’t want people to just blindly take the recommendation, but rather to shop around and understand what they’re purchasing. If the engine gets people far enough down the decision-making path, they can then make an informed choice based on their circumstances.
The fact that a roughly equal number of employees bought more and less expensive plans is another indication of the health and utility of the exchange. Employees aren’t all just taking the cheapest plan. They are being given the choice and are choosing more or less coverage, according to their needs.
Providing an anchor point
The PERC data also examined the price points of the medical plans purchased by employees who did not heed the recommendation engine’s suggestion.
We find that employees who purchased a lower tier plan did so at a considerably lower price compared to the recommended plan, while employees who chose a more expensive plan, did so only at a modestly higher price.
In light of this, it could be argued that as employees are getting to know the recommendation tool, they are increasingly using it as an anchor point from which to base their choices.
In the face of multiple plans being offered to them, the recommendation engine helps them narrow their choices down a discrete portfolio based on the information they’ve shared concerning their health, financial state, and projected expenses. From there, the employee can shop around to find the best fit. Even if employees don’t take the exact plan that was recommended, the engine at least brings them to the correct neighborhood.
Take for example a healthy, single, 23-year-old who lives with a roommate and a cat. This person may choose to buy a plan with a lower premium so she can allocate more funds towards pet insurance and ID theft protection since she doesn’t see the doctor much and isn’t worried about a lot of co-pays. A baby boomer who sees the doctor regularly to manage high blood pressure on the other hand, may choose to go with a higher premium so his out-of-pockets costs for visits and drugs are lower.
With private exchanges at their disposal, employers can engage workers at a much higher level than they have been able to reach in the past.
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