Less may be more when it comes to benefits enrollment
The old saying, “less is more,” was originally about aesthetics — a means to advocate for minimalism in art, architecture and design. But scientifically speaking, it has a very different meaning from a consumer perspective; fewer choices can often means more sales.
It’s almost counter intuitive. Having choices is a good thing, right? We want more choices. So how can having fewer choices be a good thing? Because of something called choice overload. It describes what happens when people are confronted with too many decisions.
Offering too many choices can hurt sales, sign-ups, participation or client engagement of any kind. It stands to reason that every step to minimize the number of choices for customers or employees will have a positive impact on sales, participation and satisfaction. As for those choices that simply can’t be eliminated because they’re too important? At the very least, they can be made far easier.
There’s a famous experiment that took place in a supermarket. The researchers set up a tasting booth for jam. They offered free samples and a coupon of $1 off for any subsequent purchases. At certain points during the day, they offered customers six different flavors of jam to choose from. At other points, they offered customers 24 different flavors of jam to choose from.
Thirty percent of the customers who visited the booth when there were six flavors of jam ended up purchasing jam. Those are decent results – must have been really good jam. The customers who stopped by for 24 flavors of jam? Only 3% ended up purchasing.
Similar results came when the experiment was applied to chocolates and speed dating — offering too many choices led to fewer decisions. And research from the world of 401(k) investing shows the same thing.
As for the people who ultimately did make a decision? Having too many options decreased their satisfaction, as they struggled with the appeal of the choices not made. So having to consider too many choices didn’t work out well for them either.
Behavioral economics techniques can be so valuable for benefits administrators. If the goal is to maximize employee engagement with the benefits that are best for them, here are a few techniques that may help.
The default option. Are you opt-in? Or are you opt-out?
If behavioral economics techniques were a baseball team, the default option would be the MVP, which usually comes down to a question of opt-in or opt-out.
In an opt-in, I have to take an action, like checking a box, to participate. If I do nothing, I’m out. In an opt-out, I have to take an action, like checking a box, not to participate. If I do nothing, I’m in. As simple as that may sound, the impacts are astonishing.
People may be familiar with the success stories of 401(k) participation, transitioning from opt-in to opt-out. In one study, it was the difference between a 34% and 90% participation rate. In another, 20% and 76%. That’s a pretty significant difference for something that is literally free to incorporate.
That’s not to say that an opt-out approach is appropriate for all situations. In general, three criteria are necessary:
· It has to be explicitly worthwhile or beneficial for participants, like retirement savings or organ donation.
· It has to be exceedingly clear that if people take no action, they will be participants.
· It has to be incredibly easy for people to opt out.
If we can meet those criteria, switching from opt-in to opt-out is worth serious consideration.
Why this matters
People only have so much mental energy and focus available to them each day, and they have to be careful where they spend them. If we can minimize the amount of mental energy and focus we request from them, we maximize our chances of success.
A good place to start would be to stop asking people to learn about the benefits that are not relevant to them. Very few 20-somethings are interested in learning about eldercare benefits. Very few sixty-somethings are interested in learning about fertility benefits. Employees without children don’t need to learn about childcare.
Yet, in many cases these services are promoted to all employees, regardless of relevance.
A behavioral principle known as salience, discusses the power of offering people only those things that are relevant to them as a means of eliminating unnecessary “noise” and making it easier to devote attention to that which matters. This explains why personalization can be such an effective approach.
If benefits administrators can learn more about their employees, they can begin to personalize the benefits packages they offer. This learning may come about from readily available data, such as life stage, or employees can create profiles that will help the admins serve them better. Doing so will reduce unnecessary mental energy required to evaluate benefits packages.
Mind the knowledge gap
It is extremely difficult for non-administrators to have expertise in benefits. While an administrator may look at a host of healthcare packages and be able to articulate the differences, the same is not true for employees.
This gives benefit managers an opportunity to make things easier for employees. For example, administrators could say: “This plan is good for people who go to the doctor infrequently. This plan is good for people who go to the doctor frequently. This plan is good for people who take lots of prescriptions.”
If we can anticipate that employees will not be able to differentiate between the choices we provide them, we can provide the knowledge necessary for them to make good decisions. This is also an opportunity for personalization — if employers can learn more about the employees, it may be possible to offer personalized recommendations, creating even less work for workers.
There are many ways in which a benefits administrator can be creative in maximizing employee engagement with benefits. So long as that creativity takes into account that people have limited time, mental energy, expertise and focus, there’s a great chance that these efforts can make a meaningful difference.