How to Help Employees Deal With Health Insurance Changes

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"I just want whatever I had last year."

If you’re in charge of benefits selection at a company, you’ve probably heard that before. According to Hewitt Associates, in 2010, 55 percent of employees passively defaulted to the same health insurance coverage they had the previous year. But with health costs rising and family needs changing every year, it’s often surprising that employees don’t at least look at other options to see if they’ve selected the right plan for them.

Why should you care, you might ask? Because SHRM reports that benefits are the number two deciding factor in employee satisfaction and retention. It’s important to educate employees about their benefits and help them choose the option that meets their needs.

Let’s consider this "whatever I had last year" mindset, and identify ways to help your employees actually find a plan that’s right for them THIS year.

The Status Quo Effect
To get a better understanding of why people stick with what they have, let’s take a look at organ donor participation rates (I know, weird, but stay with me).

Psychologists Daniel Goldstein and Eric Johnson found that countries that are culturally and economically very similar actually have wildly dissimilar participation in organ donation programs. For instance, Denmark has a 4 percent organ donation rate while Sweden has an 86 percent rate.

Why the difference? When people in Denmark go to DMV, they see a form with a question reading "Check the box below if you WANT to participate in the organ donor program."

In Sweden, people at the DMV read this: "Check the box below if you DON’T WANT to participate in the organ donor program."

Why are people swayed so much by the structure of the form? It’s because the decision can be a difficult one to make. They know it’s important, but they don’t know what to decide. So, they don’t decide anything and go with the default choice. This is called the status quo effect.

The same thing happens with insurance plans. People don’t know what to decide so they don’t decide anything and just go with what they had last year.

So, if you would like your employees to not just go with the status quo, you need to make the decision-making process easier:

1. Talk in Plain English – Most people don’t understand health insurance jargon because they only deal with it once a year. Use conversational English to help avoid confusion.
2. Provide Decision-Making Tools – Don’t just load the plans on the company intranet and let employees pick. Invest in an interactive tool that helps employees work through the options and make the right decision.

Loss Aversion
If the only reason people want the plan they had last year is because it’s the default choice, why do people complain when the plan they had last year is no longer an option?

Let’s review an experiment by psychologists Daniel Kahneman, Jack Knetsch and Richard Thaler. A group of people were split in half. One half of the individuals were given coffee mugs. Each person was then paired off with someone from the other group and given a sheet of paper listing a bunch of possible prices for the mug. Those with the mug secretly marked off the price they’d be willing to sell the mug for and those without the mug secretly marked off the price they’d be willing buy the mug for.

The result? People who already had the mug consistently valued it at twice the amount of people without the mug. This is called loss aversion. Losing something gives people twice the amount of negative feelings as gaining the same thing gives them positive feelings.

People have the same reaction with health insurance plans – they double their perceived value of the plan they have. If you want them to be happy with a new plan, you have to:

1. Sell Them on It – Yes, it’s called a "benefit" but you still need to tell them why it’s great and why it’ll work for them.
2. Provide Education – People can’t value what they don’t understand. Showing value is more than just telling them what they get, it’s explaining to them the needs they might not know they have.
3. Make It Personal – Tell them why it’s good for them specifically. If you’re using a decision-making tool, don’t just recommend a plan, explain why it was recommended for them.

Miller’s Law
We know that people like their default option and overvalue what they already have. But once they must decide on a plan, why is it so hard?

The reason is that there are too many factors to keep in mind when choosing an insurance plan. How much medical care do you think you’ll need? What about your family? What size deductible should you choose? How about the premium? How many medications do you need covered, etc. We could go on and on – the average human brain can’t process all of it all at once.

That’s actually true. Psychologist George Miller conducted a series of studies that found that humans can only handle five to nine pieces of information in our working memory at any given time. This is called Miller’s Law. Now look at that list again of the variables you need think about when you’re picking out a health insurance plan. Even if you only have two plans to choose from, there are still too many factors to consider at once when making the decision. So...

1. Use an Interactive Plan Recommender – This is where that decision-making tool pays off. A computer program can juggle all of the variables at once a lot better than a person and communicate specific value to each individual.
2. Ask Simple Questions – Your recommender should ask simple, multiple choice questions and then store the results so they can be factored into the plan recommendation.
3. No More Than Five – There should be no more than five possible answer choices to any one question. That way you’ll always meet the lower limit of Miller’s Law.

Times are Changing
Let’s face it – providing health insurance benefits to employees is probably only going to get more complicated. Between Federal Health Reform changes going into effect, health insurance costs for employers increasing and employees needing to be more responsible for their own health care, being a benefits administrator is a daunting task. But now you have a few pieces of information that can make your life a little easier:

• The Status Quo Effect – People go with the default choice when they find a decision too challenging. Provide plain English decision-making tools.
• Loss Aversion – People double the value of what they already have. Help them see the value of their new plan that’s specific to them.
• Miller’s Law – People can only keep five to nine pieces of information in their working memory at any time. Use computers to store information for them by asking simple questions.

Using an interactive health insurance plan recommender, you can address all three of these issues and fundamentally change the way your employees choose new plans.

And here’s the best news. When employees stop asking "why can’t I just have whatever plan I had last year," they end up finding the plan that’s right for them. It saves them money and it saves your company money.

And that’s a good investment for everyone.

Dave Urlakis is the Director of Analytics for The Jellyvision Lab, where he and his team evaluate and optimize the performance of Interactive Conversations for a bevy of Fortune 1000 clients. Before arriving at The Jellyvision Lab, Dave worked at the world-renowned Steppenwolf Theatre Company where he was an industry leader and advocate for leveraging predictive analysis and digital media for theatrical productions, presented at the National Performing Arts Convention and Theatre Communications Group National Conference and awkwardly rode elevators with John Malkovich.

Jellyvision is probably best known for its award-winning video game franchise You Don’t Know Jack. So, why did a company known for making virtual game show hosts write an eBook about helping employees navigate changes to their health insurance plan? Well, The Jellyvision Lab has taken what we’ve learned about making virtual game show hosts and used it to help our roster of awesome clients create virtual teachers, insurance agents, salespeople, you name it. We’ve created award-winning, interactive rich media solutions that have increased customer satisfaction scores, generated higher quality sales leads and actually gotten employees to enjoy the process of selecting their health insurance plan. We get results. We also get curly fries whenever they’re available at a restaurant. But that’s enough talk – if you really want to see what we do, check out the examples page on our website and then give us a call.