Many Employees Still In The Dark About Their Benefit Choices

By Veer Gidwaney

Despite the critical importance of health insurance and retirement benefits, many employees remain misinformed about the best strategy for their needs.

It may not seem like a major concern to the insurance industry, but carriers and brokers have a vested interest in helping employees understand their choices — especially carriers who offer life insurance and retirement options in addition to health coverage. Unfortunately, because many employees don’t fully comprehend the insurance options their employers offer, some make ill-informed choices regarding their future needs.

Through improved education and outreach, brokers and carriers can help employees (especially younger ones) better understand how investment decisions affect their future.

What You Don’t Know Can Hurt You

Most health care costs occur after age 65, but younger employees tend to shy away from long-term savings in favor of other investments. Because of this, these employees believe they’re investing wisely when they actually cost themselves (and, consequently, their insurance brokers) more money in the long run.

As health care costs continue to rise faster than inflation, retirement contributions have declined, especially among the mass numbers of millennials entering the workforce. These young workers primarily focus on eliminating debt and investing. For many of them, retirement is a far-off item on tomorrow’s to-do list.

This mindset hurts both the employee and the insurance carrier because it ties up current finances in higher insurance premiums that could be put to better use in 401(k) plans, individual retirement accounts and other retirement options. Many younger employees choose health plans with exorbitant premiums in exchange for lower deductibles but fail to understand they’re removing money from the pool of potential retirement contributions. Accrued over time, these contributions can help employees. Further, contributions give young workers access to funds when the frequency and cost of health care begin to rise after retirement.

Millennials aren’t the only employees affected by this. Across the board, retirement savings are falling. So how can carriers and brokers help?

Bridging the information gap

Education must begin with addressing current misunderstandings. And when it comes to health insurance and retirement savings, misunderstandings only intensify. Clients should understand, through the advice of insurance brokers, the holistic nature of their benefits decisions.

Employers should never assume workers have the insurance and retirement equation figured out. Those unsure about the best advice to give employees should consider partnering with a brokerage; this gives the employees access to financial advisors.

Luckily, young employees want to know more about investing. Teaching someone who doesn’t want to learn can be difficult. Conversely, teaching someone who not only wants to learn but also has a personal investment in the outcome can be straightforward and rewarding.

To start the conversation, brokers and employers can offer financial wellness seminars and question-and-answer sessions for employees. These expert sessions help employees create more personal relationships with their insurance carriers and are often easier to understand than complex webpages about in-network providers, contribution percentages, etc.

How employers can help

Cooperation is key when building relationships among the employee, the employer and the broker. As always, cooperation is more organic when all parties share an open dialogue.

Remember, most employees want to save for the future and make earnest efforts to do so — many just lack the necessary information to make the most optimal and informed decisions. Don’t be surprised if several employees show up to Q&A sessions with long lists of questions.

Employers who offer high-deductible health plans to cut down on premium costs should consider adding opt-out 401(k) products that have employees contribute a certain monthly amount. If possible, employers also should look to match contributions to maximize savings. This method allows employees to distribute current costs evenly while bolstering future savings. Employees want these programs, too; according to a study from the Employee Benefits Research Institute, opt-out 401(k) plans encourage employees to save more.

While investment choices ultimately boil down to personal preferences and needs, nearly everyone shares a common goal: to protect and secure the future. By encouraging employees to consider all available options and equipping employers with the strategies and resources needed to educate them, insurance carriers and brokers can create an atmosphere of trust and engagement — helping all parties make the most of their benefits.

Veer Gidwaney is the CEO and co-founder of Maxwell Health. Veer may be contacted at [email protected].