Netflix-Like Recommendations May Be in Store for Workplace Benefits
Editor’s Note: In this series, The Way We Work, Entrepreneur Associate Editor Lydia Belanger examines how people foster productivity, focus, collaboration, creativity and culture in the workplace.
It’s time for your company’s annual benefits meeting. Chances are, you and your colleagues all have access to the same medical, dental, maybe vision, life insurance and retirement savings options -- just the basics.
The fact that every employee gets the same rigid benefits might be something you take for granted. But not everyone has the same life circumstances. Someone in their 20s may be trying to get their student loans paid off, whereas someone in their mid-30s may prioritize child care. That’s why some companies offer employees help covering these costs as a benefit.
Of course, not everyone in their 20s has loans, and not everyone in their 30s has kids. But this generalized example illustrates the reasoning behind one model that many companies are experimenting with: personalized benefits. It’s the opposite of the traditional group benefits most companies provide. With personalized benefits, employees get to cherry-pick which they enroll in based on their personal needs and preferences.
More than 5,000 businesses use the personalized benefits model today. Meanwhile, only 2.7 million of America’s 5.7 million small businesses (those with less than 50 employees) offer any sort of benefits because of the cost, complexity and rigidity, according to PeopleKeep, a company that provides software to facilitate personalized benefits.
However, according to a recent MetLife survey, 60 percent of employees are willing to bear more of the costs of benefits in exchange for the ability to customize and choose among them.
Entrepreneur spoke with three personalized benefits experts about what companies considering them should keep in mind.
How do personalized benefits work?
For most people, looking at their pay stubs is the only way to see how much comes out of their checks toward their benefits. With personalized benefits, each employee gets an equal allotment of pre-tax dollars to allocate toward whatever sorts of benefits they choose. And that means they can choose non-traditional benefits, from pet insurance to student loan repayment to wellness classes.
Some companies that offer those benefits curate them for employees, while others offer no limitations and guide employees through the consumer market.
“The only thing you can’t do is go to the ATM and withdraw this money,” says Jeff Oldham, SVP of global and institutional markets at benefits enrollment software company Benefitfocus, when describing the latter approach.
But you can’t just give people the money and leave them on their own for decision-making, says David Feinberg, VP of operations and risk at HR platform Justworks. Employees need help learning about their options and figuring out what may be best for them.
“You can’t be everything to everyone, but it is important that you’re satisfying the greatest number of your employees,” Feinberg says.
What makes personalized benefits attractive to companies?
Especially when the unemployment rate is low, as it is now (3.9 percent), companies have to compete for talent in new ways. Personalized benefits may entice new hires while boosting retention, when people see that a company has options that can apply more directly to their needs.
Companies can even tailor benefits to correspond with the general needs of a certain demographic. For example, Benefitfocus helped design a plan tailored to retailer American Eagle’s predominantly millennial workforce.
Feinberg and Oldham both emphasize that when employees’ needs are met, they’re less likely to be distracted by any sort of struggle in their personal lives. When an employees’ personal stress preoccupies them during the workday, it’s bound to harm their productivity.
Doesn’t everyone just put a big chunk of their allocation toward health insurance?
Commonly, yes, but not everyone, explains PeopleKeep CEO Rick Lindquist, who is also the author of The End of Employer Provided Health Insurance.
“Health is by far most popular use case for this,” he says, “But if you just want to use this money for medical expenses? That’s up to you.” Some people might have health insurance coverage through a parent, spouse or Medicare. Others may just not believe they need it, or may not believe in it, period, choosing instead to pursue strictly alternative medicinal therapies.
Lindquist also explains his view that the individual market for health insurance needs more healthy people that can afford to buy in (read: with money allocated to health insurance as a personalized benefit). Because it can be cost prohibitive to purchase health insurance in the individual market, it attracts a disproportionate share of unhealthy individuals. People who are less healthy, don’t have group benefits through an employer or can’t pay for treatment out of pocket or with an HSA are more likely to buy insurance through the individual market, given the current system.
“It is a good thing for the individual market, because healthy people work,” Lindquist says of personalized benefits.
How can companies figure out what their employees need?
Don’t make assumptions about what benefits your employees need as a collective or individually, Oldham advises. That goes for hybrid and unlimited models. If you’re offering a selection, take the opportunity to form an ongoing dialogue with employees. (So, that once-a-year benefits meeting is out the window.)
“I would ask your folks what they’re looking for,” he says. “Survey them and ask, ‘What are we not offering that may be of interest to you?’”
Oldham makes the point that if, for instance, employees aren’t coming forward saying that microloans are a type of benefit they might want, that may be because they don’t want their employer to know they’re suffering from financial hardship.
But what happens if employees themselves aren’t sure what benefits are in their best interests? On the flip side, unlimited benefits can be overwhelming. That’s, of course, where platforms such as PeopleKeep and Benefitfocus come in.
Oldham calls it the “social responsibility” of tech partners to consider everything that’s going on in someone’s life, take into account any changes that could occur and advise accordingly, making sure that the employee knows what they’re effectively paying for.
“We cannot make assumptions that Americans understand health care or that Americans understand benefits,” Oldham says. “The statistics clearly show otherwise.”
How will technology help people make decisions about benefits in the future?
So many online services today automatically analyze user data to predict preferences and personalize (e.g. Spotify’s playlists, Netflix’s recommendations, etc.). The HR version of this sort of tech-assistant decision-making is potentially the future of personalized benefits.
“It will ultimately end up to where we will have a catalog of benefits that an employee will never see, and then, based upon questions that we ask them, based upon the demographic data, we’ll be able to offer up suggestions,” Oldham says.
Companies such as Benefitfocus are already thinking carefully about how to ethically and responsibly help employees prioritize benefits based on data. Oldham presents the following hypothetical scenario a benefits facilitator might weigh:
“In our world, with your permission, we would know if you’re an asthmatic, with medical claims data. So, should we be offering you benefits or programs to ensure that you are remaining compliant with your medication? Or should we be texting you when we can see that tomorrow you’re going to have heavy pollen in your area, ‘Hey, don’t forget your inhaler?’”