A large majority (71 percent) of U.S. employers conduct passive rather than active benefit enrollment practices, enabling employees to renew most of their plans automatically, according to a 2011 survey by HighRoads, a provider of benefit plan communication services.
Respondents ranged in size from U.S. organizations with fewer than 5,000 employees to those with more than 100,000 employees, although most respondents had more than 5,000 employees.
“On the face of it, passive enrollment is easier for both employees and employers, since employees can just 'roll over' their current elections—except for flexible spending accounts,” said Kim Buckey, summary plan description (SPD) practice lead at HighRoads. “But that can be a risky practice,” she added. “If participants can renew their coverage without examining their elections, they may end up with coverage that doesn’t truly meet their needs or that will cost them more than they can truly afford. It also becomes more critical that enrollment materials accurately describe benefits and any changes to them—and that SPDs are updated promptly to reflect that information.”
Active enrollment requires employees to make a proactive plan choice each open enrollment period, which makes it more likely that they will review any plan changes. Employees who don’t take action are penalized—typically by a default enrollment into the option with the most basic coverage or to no coverage.
“It is critical that employees carefully review their plan open enrollment materials each year, particularly in light of health care reform and changes their employers are making to be in compliance,” said Mary Andersen, founder of ERISA Diagnostics Inc., a benefits consulting firm. “Those changes might be additional coverage possibilities, such as covering children up to age 26, or it could be new limits in coverage related to spending accounts. Either way, employees need to understand their options and take responsibility for their own benefit choices.”
Getting employees to read annual enrollment materials still is a challenge. The survey showed that 65 percent of the employers were using a variety of tactics to reach employees, including:
• Regular mail.
• Face-to-face communication.
“Good communication is absolutely key to making sure employees understand any changes to their benefit plan and evaluate whether they should switch plans during the open enrollment season,” said HighRoads' Buckey. To encourage readership, employers are stepping up their packaging of enrollment materials. The majority of respondents—62 percent—are branding their enrollment material, the survey found.
“Employers want to deliver messages relating to the value of the benefits they provide and the need for employees to make informed decisions," she noted. "Branding serves as a recognizable sign of commitment and expectation. It’s a focused message to employees that explains why their company is the preferable place of employment.”
Employees overwhelmingly are using electronic submissions to make their open enrollment choices. Some 73 percent of the respondents said employees submit enrollments electronically. Only 13 percent of respondents use paper exclusively as an enrollment method. For the most part, these are employers with fewer than 5,000 employees.
In terms of open enrollment preparation lead times on the part of employers, 59 percent of respondents start three to seven months ahead in developing open enrollment content while 41 percent begin the process eight months to a year ahead.
“Open enrollment isn’t getting easier for HR executives. It’s getting tougher and more complex every year as more and more legislation requires plan design changes and new administrative procedures,” Buckey observed.
For the most part, employers with more than 5,000 employees are taking the longest lead time—eight months to a year—to prepare for open enrollment. Some 60 percent of surveyed companies in the 100,000-and-up employee range said they took eight to 11 months to prepare. In the smaller company category—fewer than 5,000 employees—74 percent said they started to prepare three to seven months ahead.
Despite the increased complexity of health benefits plans and regulations, most respondents appear to be tackling open enrollment in-house. Some 63 percent indicated that they do not use an enrollment company or vendor to support enrollment functions.
Working on enrollment is a significant time commitment, with 97 percent of respondents reporting that open enrollment consumed at least 50 percent of their time. Not surprisingly, 41 percent of respondents indicated that time constraints are the biggest challenge in preparing for open enrollment. Cost and drafting content account for 47 percent of respondents’ challenges.
“Employers’ commitment to the open enrollment process isn’t likely to lessen, given the legislative landscape,” Buckey said. “The fact that most survey respondents—94 percent—begin the preparation process at least four months in advance attests to the considerable time and effort required for a successful communications campaign.”
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Open Enrollment Tools Evolve, HR Magazine, July 2011
Tight Salary Budgets? Benefits Can Be a Major Retention Tool, SHRM Online Benefits Discipline, July 2011
Supreme Court Ruling Shows Need to Tighten Up SPDs, SHRM Online Benefits Discipline, May 2011
Benefits Statements Can Spotlight Hidden Value, SHRM Online Benefits Discipline, April 2011
Online Benefits Education Should Target Spouses, Be Year-Round, SHRM Online Benefits Discipline, August 2010
In Wake of Health Care Reform, Open Enrollment Presents Opportunities for Employers, SHRM Online Benefits Discipline, July 2010
SHRM Online Benefits DisciplineSHRM Online Health Care Reform Resource Page