When it comes to open enrollment, having a robust strategy in place is key for success.
Employers need to consider not only how to educate and inform employees about available options, but also about the best way for employees to enroll in their benefits.
There are two primary approaches to open enrollment: active enrollment and passive enrollment.
What do “active” and “passive” mean when it comes to enrollment? And is one approach better than the other?
The waters are a bit muddy as the answer is truly subjective and can vary based on your individual organizational resources, needs and goals.
A 2011 SHRM report found that over 71% of employers relied on a passive enrollment strategy, though the tides are changing as employers look to control health care costs and increase engagement throughout the organization. An updated report by JP Griffin found that 50% of employers now favor an active enrollment—a 20+% shift in strategies.
We explore both options (active vs passive) below to help you make the decision that’s best for your organization.
What is ‘Active’ Enrollment?
Active Enrollment is a benefits enrollment strategy in which every employee must re-evaluate their previous benefit choices and elect from current options for the upcoming year. Employees are actively going through the full enrollment process each year rather than just signing off on the same benefits as the year before. Learn more about active benefits enrollment here.
Pros of Active Enrollment
- Active enrollment forces employees to review and re-select their benefits at least once a year. This helps to ensure that each employee’s benefit elections are appropriately tailored to their present situation.
- It gives employers a better opportunity to educate their workforce on plan changes and new benefit options. For example, if an employer is introducing something like an HDHP with an HSA, an employee is more likely to review the new plan(s) and reconsider their options.
- An active enrollment approach provides opportunities to improve the integrity of your data—including emergency contact information, beneficiaries and eligible dependents. For example, while reviewing eligible dependents, you may discover that dependents, ex-spouses or others are no longer entitled to benefits under your plan.
- A MetLife study found that employees who completed an active enrollment were three to five times more likely to elect voluntary benefits.
- An active enrollee is more likely to drop benefits they no longer need while enrolling in new benefits options that appeal more to them.
- Active enrollment also ensures that benefits which legally cannot be treated passively are not overlooked. While contributions to HSAs and 401(k)s can be adjusted throughout the plan year, the “use-it-or-lose-it” nature of both Dependent Care FSAs and Medical FSAs prevents them from being eligible for rollover elections and revisions throughout the year.
Cons of Active Enrollment
- Active enrollments require more time and effort from HR and benefits teams. This can be a challenge for small teams or organizations with limited resources.
- Employees that do not make their benefit elections during open enrollment can lose their coverage for the year.
What is ‘Passive’ Enrollment?
On the other hand, Passive Enrollment is a benefits enrollment strategy that employers use to allow employees to simply re-enroll in their current choices with little to no involvement in the open enrollment process. Employers who use this strategy simply rollover each employee’s benefit elections from the previous enrollment period.
Pros of Passive Enrollment
- Passive enrollment is simply easier on both the employer and the employee. Employees check off a “re-selecting” box, giving employers less of an administrative burden to deal with.
- It allows employees to roll over their benefits from the previous year, without having to take the time to assess their plan options and re-evaluate benefits.
- Automatically enrolling employees in previous year selections can prevent employees from losing coverage for not actively participating.
- A passive enrollment approach saves time for everyone.
Cons of Passive Enrollment
- Important employee data—like personal information, benefits information, etc.—can easily become outdated if it is not evaluated on a regular basis.
- New programs, benefits, and plan changes are often overlooked. Because of this, participation rates in high deductible plans, HSAs and voluntary products can be significantly lower.
- Employees are less likely to re-evaluate and update coverage based on their current needs and are less likely to drop coverage they might no longer need.
Active and passive enrollment both have their advantages and concerns, so which open enrollment strategy is better?
We typically recommend an active enrollment each year. Hosting an active enrollment process better educates and engages employees with their benefits and requires them to actively evaluate about their options.
When a passive enrollment strategy is used, many employees simply let their benefits roll over and don’t even consider making any changes or updates to their elections, which can result in a myriad of issues over time.
“If you’re not requiring people to go in and make a choice every year, you just can’t grab people’s attention. It’s one of those tough-love approaches where you want to make sure that people take the time to make good decisions for their own best interest.” – Meredith Ryan-Reid, MetLife (via SHRM).
Tips For Managing An Active Benefits Enrollment
- Complete a dependent audit a few weeks prior to open enrollment. This will drive savings and compliance by eliminating any ineligible dependents from your health plans.
- Have a communications plan in place that incorporates multiple channels at various points before, during and after open enrollment.
- Incorporate multiple educational initiatives and tools into your enrollment strategy: benefits guides (both print and digital), educational videos, and one-on-one consults can help address the needs of a diverse workforce.
- Ask employees to verify and update their personal information prior to enrolling—this will ensure that everything is as up-to-date as possible.
- Invest in decision support tools—either a benefits administration platform that offers basic built-in tools or an add-on service like ALEX from Jellyvision. Studies have shown that decision support not only helps employees feel more confident about their benefits decisions, but also can increase benefit account and retirement savings contributions and HDHP enrollment
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