Human Resources leaders continue to grapple with the massive, ongoing challenge of managing employee benefits. Demonstrating their value and making sure their people can choose and use their benefits is an exhausting and arguably futile uphill battle. With health care benefits costs rising and retirement confidence hovering at low levels, it's clear that the traditional approach to benefits administration is failing employers and their people. Its shortcomings are leading to significant inefficiencies within HR teams, inadequate utilization of benefits offerings and a workforce with high expectations and low engagement – not to mention added costs for both employers and employees down the line.
In this blog post, we'll explore the proof points around what’s broken and identify what’s required to not only simplify benefits administration, but finally get workplace benefits and savings in sync.
Revealing the Three Cs of the Failing Approach to Benefits Administration
Benefit leaders share with us how important it is to support employees with their health and financial wellbeing. Curiously, though close to 30 percent of compensation costs go towards benefits, employers can’t seem to generate better success with employee engagement and program performance:
Forty-one (41) percent of American workers admitted they do not fully understand any of the employee benefits they selected during their most recent open enrollment period – and only one-fifth (22 percent in 2022) feel they understand their retirement benefits extremely well, down from one-quarter (26 percent in 2021). (Voya Financial, EBRI)
Seventy (70) percent of employers believe employees underutilize the services, benefits and programs they make available. (The Hartford)
The typical engagement in disease management programs is only 13 percent. (AHRQ)
Despite a significant investment in guidance, navigation, transparency and chronic condition programs, most organizations see engagement rates in the low single digits. These programs fail to deliver on their promises because employees don’t know they’re available or how to take advantage of them as part of a connected benefits experience.
Clearly, something isn’t working. There’s a disconnect between employers and employees, and between touchpoints in the benefits journey. These breakdowns create and perpetuate (in classic chicken-or-egg fashion) three fatal flaws that characterize traditional benefits administration:
Complexity. Employers are working tirelessly with multiple benefits providers across multiple platforms and multiple sources of data. HR teams are spread too thin across cumbersome tactical tasks, and the administrative burden is extremely prohibitive on multiple levels.
Lack of strategic focus – Over 70 percent of benefits teams’ time is spent on administrative tasks, leaving little time to focus on strategic, high value work.
Decreased resilience within HR – Burnout and exhaustion are widespread in HR, with 42 percent of teams struggling under the weight of too many projects and responsibilities.
Waning efficacy – Almost three-quarters (73 percent) of HR staff say they don’t have the tools and resources to do their job well.
Confusion. Employees are overwhelmed and struggle to understand their benefit options to begin with. That’s because traditional communication strategies, static total rewards statements and antiquated decision support tools do nothing to help them optimize benefits based on their individual needs. And when it comes to using their benefits, employees have to sort through multiple apps, phone numbers and websites, none of which are personalized to their specific situation.
Ineffective communications – SHRM cites a survey finding that employers lost an average of $62.4 million per year because of inadequate employee communications.
Underwhelming educational resources – Fewer than a third of employees view existing employer resources helpful in meeting their top priorities: Saving money (26 percent), financial wellbeing (28 percent), and mental health (28 percent).
Complacency. Complexity and confusion combine to keep everyone stuck and stand in the way of benefits programs meeting their potential. If employees don’t know what’s available to them or how to engage, they won’t. Out of frustration they’ll give up and inertia sets in, resulting in underused and unoptimized benefits plans that could do more to support employees and their families.
Rushing through enrollment – Nearly three-quarters of employees (73 percent) spend less than an hour, and 41 percent invest less than 30 minutes, reviewing their benefits at enrollment time (Colonial Life)
Spending too much – Most employees (over 80 percent) enroll in health care plans that are costing them more than they ought to be paying.
Saving too little – An estimated 33 percent of workers save less than 5% of their income for their retirement, when they should invest 15% to 20%, including any employer match, to maintain a comfortable standard of living in their later years. What’s more, as a result of higher health care costs, according to EBRI, employees have reduced their contributions to retirement savings plans, delayed going to the doctor, increased credit card debt and had difficulty paying for necessities, among other things.
Organizations and their people simply cannot afford to continue down this path. But there’s good reason to be optimistic!
How to Shift to a Connected Benefits Experience That Relieves HR Teams and Engages Employees
By taking a hard look at the gaps in the traditional approach to benefits administration, you can shift the way employees understand, choose and use benefits. It begins with offering a holistic experience that connects health, retirement and savings, so employees can quickly see the interdependencies and make the best decisions.
Streamline the key drivers of administrative complexity. For your HR team to administer benefits in a new, more effective way, administrative burdens must be minimized. Employers must consider completely outsourcing benefits administration to free up critical resources needed to support major strategic initiatives. A trusted partner can manage COBRA and ACA compliance rules and regulations, as well as provide support for employee communications, reporting, billing, and managing consumer accounts and voluntary benefits.
Enable employees to make smarter decisions during the enrollment process. You can help your workforce understand their benefit offerings and make confident decisions through personalized decision support tools and targeted benefit communications campaigns that connect the dots between not just their needs and company-sponsored benefits, but between their health care costs and retirement savings opportunities.
Drive year-round engagement that results in better outcomes and lower costs. Smarter decisions at open enrollment aren’t enough. Employers must also help employees use these benefits throughout the year leading to better outcomes for the employee and the organization. This can be achieved by giving them a personalized hub to access all their benefits and providing care navigation services to help them find quality, low-cost doctors, as opposed to just directing them to a “top” hospital where doctor quality can vary tremendously. You can also work with a vendor to analyze claims data to identify more targeted communications throughout the year to engage employees in specific programs.
Are You Ready to Deliver a Connected Benefits Experience?
While we live in a very connected world, when it comes to benefits, employers still operate in silos, approaching health, retirement and savings separately. Taking an updated approach to benefits administration will enable you to deliver a benefits experience that helps your employees achieve better health and financial outcomes, while helping to reduce organizational costs and administrative burden. With new tools and a comprehensive benefits administration partner like Benefitfocus, you can deliver the untapped potential of a modern employee benefits experience – and get your people’s health and wealth in sync.