Employees Can Be Smart Benefits Shoppers. Really

September 1, 1998
It can be difficult for employees to understand their health benefits options, let alone learn how to make good benefits decisions. You know the story: You try to give workers good benefits information, but they often don’t understand, and end up making poor choices -- or no choice at all. It’s a common HR problem. But by focusing on a good benefits plan and injecting a healthy dose of effective employee communication, you can ensure they’ll understand their benefits options and pick the best ones.

An actual example of a smooth, effective “data transfer” of benefits information and education is the story of Parkview Health System, a health-care services organization based in Fort Wayne, Indiana. Directed by John Dortch, the divisional director of HR, and assisted by Mike Markowich, an HR consultant with expertise in helping companies and individuals in a changing work environment, Parkview’s HR team created a communication strategy which made their 5,000 employees better benefits shoppers.

Parkview Hospital (now a part of Parkview Health System) underwent a radical change in January 1997. Our executive team acquired two other hospitals -- Whitley Memorial and Huntington Memorial -- which were located near our Fort Wayne, Indiana facility.

In the weeks following the consolidation, it became clear to our HR team that the new organization -- which wanted to continue its tradition of being an employer that supports choice -- needed to revamp employees’ benefits options. Employees requested help with retirement financial planning, a better paid time-off program, and enhanced health-care services. Our new team felt it was important to have comparable benefits among all our newly consolidated facilities and employees.

In January 1998, a year after the consolidation was complete, our firm introduced a new benefits package called “Powerful Benefits.” The package included an enhanced retirement and investment program, along with expanded health-care options and a new time off with pay plan called “Paid Time-off” (PTO).

The enhanced retirement and investment program featured the 403(b), a matching pension plan that was recommended and approved by the system’s board of directors. The new arrangement is a deferred pension plan that is similar to a 401(k) plan, allowing employees of non-profit companies to set aside money on a pre-tax basis and let the contributions grow, tax deferred, until the money is withdrawn.

The new Paid Time-off program grouped each employee’s vacation, personal and sick days with some holidays into one collective “time bank.” The PTO program would provide employees with more flexibility and control over their time off, and help our company better manage unscheduled absences. In light of the fact that only 6 percent of companies say they offer PTO programs, according to an April 1998 survey called “Managing Paid Time Off 1997” by Lincolnshire, Illinois-based Hewitt Associates, our new time-off program was leading edge.

But these benefits were a radically new concept for employees, who were used to receiving company-paid and company-chosen options. It meant employees would have an entirely new function as benefits consumers.

Employees’ new role as benefits consumers.
Employers and employees can no longer afford to allow workers to be passive benefits consumers. Benefits simply cost too much. According to a 1997 study of employee benefits by the U.S. Chamber of Commerce, benefits cost employers 41 percent of pay (up from 37.7 percent in 1985), and cost employees an average of 13 percent of pay (up from 8.5 percent in 1985).

Therefore, employees should be aggressive about their choices and take responsibility for their decisions. Our managers believed both the employer and employees would benefit from this new role. Employees benefit because they can select the best choices in health care, time off and retirement options for themselves and their families. Employers benefit by having better-informed workers who not only appreciate the high costs of benefits, but also value their employers’ responsibility for providing good benefits choices, education and more flexibility for each individual employee’s needs.

For some workers, this new involvement is refreshing and exciting. They realize that these changes allow employees to influence the design of their benefits package. Unfortunately, the majority of employees react with varying degrees of fear. Employees who embrace the new involvement are more likely to have a greater understanding of how to be smart benefits shoppers than those who aren’t as welcoming.

The key to a successful transition into the new program was acceptance of this new role from all constituents -- from the senior management team to entry-level workers. But this change was scary for employees. Most workers never had to worry about their benefits. “Life was good. Someone else was responsible,” said one employee. “Now that someone else is me!”

Designing the communication strategy.
Making this transition required that our HR team design a solid communication strategy to help employees fully understand their options and make informed decisions. We developed the communication strategy based on the following three assumptions:

  1. Employees often overlook key factors in selecting the best health-care plan. In the past, our human resources staff felt most employees selected a health-care plan based on the plan’s name and the portion of monthly costs they’d have to pay. Like shopping for a can of soup, they often just focused on what they could see on the front of the label, like the brand name and price.

    But they needed to take each plan’s features into consideration -- information that’s usually in fine print on the back of a can -- such as co-payments, deductibles, maximums, exclusions, services covered, participating physicians and hospitals, definition of emergency care and lifetime caps.

  2. Benefits information should be easy to understand. Initially, our HR managers planned to mail elaborate and customized literature to employees’ homes. They thought that employees and their spouses would be able to review the material in private and at their leisure.

    Upon further consideration, our human resources staff felt employees might not like receiving material at home, and might view the materials and postage as inappropriate expenditures, especially knowing the company’s internal mandate to keep business costs down. In addition, managers were concerned employees might not understand the information without further explanation. The HR staff questioned whether employees would take the time to review the materials or just throw them away.

  3. Employees had to believe that participation in our new retirement program made sense. Their faith was essential to program enrollment because they were required to contribute money before receiving any employer match.

    Employee feedback highlighted the need to enhance the company’s pension plan -- even retirees complained their pension checks were insufficient. Unfortunately, only 24 percent of eligible employees participated in the old 403(b) pension plan without the employer-match option.

    Follow-up surveys reported confusion and uneasiness about investment options -- especially regarding lack of trust in the stock market -- as reasons for low participation. The new concept of “you must contribute to receive extra money” supported the need for education on retirement and financial planning.

From passive players to smart benefits shoppers.
It became clear that the communication strategy had to do more than just offering employees information. Parkview managers weren’t just implementing minor changes; they were initiating a new paradigm for employees to select and manage key benefits. Therefore, employees were provided with specific information, as well as road maps that outlined how to effectively use the new benefits. Employees had to be motivated by the format, and they needed to feel comfortable with their decisions.

To simultaneously communicate the changes in benefits at Parkview and also ease employees into the new role of being aggressive and wise benefit shoppers, we designed the communication strategy with some specific goals, guidelines and steps.

First, we consulted with the health-care system’s personnel policy and compensation council to get its approval of the communication strategy assumptions. Then, we held informational meetings with managers and supervisors at all locations to explain the reason for the benefits changes and to provide an overview of the new plans.

Parkview’s HR team prepared a grid to help employees with “comparison shopping,” which compared our special access providers with network providers and non-network providers in the areas of inpatient hospital stays, emergency services, physician office visits and other vital information.

The third part of our strategy was to establish credibility and help employees understand the value of these benefits changes. This was done by tapping into both formal and informal employee communication networks. There were methods we used to both give information and receive employee feedback:

  1. Convening meetings of swing people to explain changes and obtain support. Swing people are influential, non-management personnel who command significant respect among workers. They can be a key component for a successful transition.

    Although many Parkview employees liked the changes, some saw certain features as “take-aways” -- items that took away certain benefits they used to get. Therefore, we spent considerable time to fully describe the changes that have been occurring in the benefits delivery marketplace and the health-care industry that were driving the changes in our plans and programs.

    For example, during benefits education meetings with employees about retirement planning, we highlighted that people are living longer. We showed them inflation charts so they could see the effects of inflation on their pensions over time. We also gave examples of what things cost 50 years ago. Back then, the average cost of a car was $2,000. Now, the average cost is $20,000. By 2048, if growth continues at the same rate, the car will cost $200,000. These figures blow people’s minds. We tried to highlight simply how much inflation will impact their purchasing power during their retirement years and how important it is to plan for that.

  2. Making use of reaction-response groups. One of our management team’s secrets for effective change is to use reaction-response groups. More than just informing employees of changes, Parkview’s managers believe that actively soliciting employee opinions, both positive and negative, is essential.

    Our HR department prepared and distributed a booklet to all employees that posed 50 employee questions and company responses about the PTO program. Questions were also encouraged through a telephone hotline and e-mail system, promising a response within 24 hours.

  3. Sending a newsletter every two weeks. Timely, written information helped reinforce new benefits shopping concepts for employees and validate information presented at meetings. The community relations and HR staffs wrote an internal company newsletter that answered questions from employees about the new benefits. Copies were made available in the cafeteria.

  4. Scheduling financial education seminars on all shifts over a two-week period. We felt employees needed an understanding of our new financial benefits game rules. Because past participation in the 403(b) was low (before the employer match option was introduced with the new benefits plan), Parkview managers decided to have a financial educator who wasn’t affiliated with any investment house as the presenter. In essence, the speaker had no vested interest for employees to choose any one investment. This way, Parkview managers believed employees would be more receptive to the “messenger’s advice.” Employees appreciated this arrangement.

  5. Educating employees about the cost of COBRA before qualifying events. Employees received an outline of the cost of health options which defined employee payments along with company expenses. Many employers only show employees their own contributions. The reality of the price of medical coverage hits if and when an employee applies for continuation of health coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA.). The real kicker is employees are liable to pay as much as 102 percent of the total monthly premium.

    When employees begin paying the costs for COBRA benefits, they’re usually shocked at how expensive health insurance is and question why they have to pay so much. Employers often don’t receive appropriate credit from employees for employer-paid benefits. Our management team believed employees should see the total cost of health insurance -- both the employer’s and the employees’ share -- and created a chart showing the exact costs.

  6. Sending information to employees’ homes. After conducting a thorough in-house communication and education campaign, the HR staff decided it was best to follow up with sending more information to employees’ homes. After attending benefits education meetings, employees would be able to more fully understand plan components, and subsequently find the benefits material of greater value. Therefore, the cost of mailing the information was justified.

The communications effort worked.
Over the past year and a half, we’ve already seen evidence of solid results from our communications effort. For example, employee enrollment in the revamped 403(b) plan more than doubled, having increased from 24 percent to 53 percent after the educational sessions, which also included tips on good financial habits, expectations surrounding Social Security, the cost of mutual funds and more.

Also, Parkview is now receiving 50 percent fewer requests for leaves of absence of three or more days. This decrease benefits Parkview because it marks an increase in employee attendance. With PTO, the first three days of medical leaves are deducted from workers’ PTO accounts, instead of from a traditional sick leave account.

In addition, after Parkview Health System’s president Dr. Frank Byrne completed his annual “State of Hospital Meetings” in May (a series of 16 educational sessions for employees covering the same material), he revealed that approximately 80 percent of employees had attended one of the meetings.

At the sessions, which were also conducted in the evenings for people who work night shifts, employees expressed positive feelings about the benefit changes that were made in January. They noted that with the new PTO, they like the ability to manage their own time off, and the 403(b) has given them additional opportunities for retirement saving. The future looks to bring more positive outcomes from the benefits education process for Parkview Health System and its employees.

Workforce, September 1998, Vol. 77, No. 9, pp. 64-70.