Why Your Employees Don't Understand Their Benefits (And What That's Costing You)

Here’s a pattern I see in almost every company that comes to us after years of managing benefits reactively: The plan isn't the problem. The communication around it is.

A plan may have solid coverage, reasonable costs, and benefits that compare well to what competitors are offering. Yet employees are confused, frustrated, and making decisions that cost both them and the company more than they should.

When employees don't understand their benefits, they make expensive decisions. They use the emergency room for something urgent care handles at a fraction of the cost. They avoid preventive care because the out-of-pocket feels uncertain. They choose the plan with the lowest premium without understanding what the deductible means for their family's actual healthcare spending. They let HSA dollars sit unused because they're not sure how the account works.

None of that is the employee's fault. It’s a communication failure that started before they ever had a chance to make an informed decision.

What the Communication Gap Actually Costs

The financial impact of poor benefits education is real, and it shows up in places where most founders don't connect back to the communication problem.

When employees avoid preventive care because out-of-pocket costs feel uncertain, small health issues go unaddressed. Those unaddressed issues show up later as larger claims. Larger claims affect your renewal number. And your renewal number is one of the most significant costs your company manages every year. The line between what your employees understand about their benefits and what you pay at renewal is more direct than most people realize.

The HR cost is real too. It adds up in every billing question that lands in your HR team's inbox because an employee doesn't know how to read an explanation of benefits, every call to ask whether a provider is in network, and every confusion about why a deduction changed. When you add up those costs across a year and an entire workforce, they’re not small. 

Then there's the talent cost. A benefits package that looks competitive on paper but is never explained clearly reads differently to an employee than it does to whoever designed it. When people don't understand what they have, they don't value it. And benefits they don't value don't help you attract or keep the people you want.

Where the Gap Begins (Usually) 

Open enrollment is the moment most companies think about benefits communication, and it’s also the moment most companies get it wrong. It’s not for lack of trying. They simply communicated too little, too late. 

Sending employees a plan comparison document and a deadline is not a communication strategy. The employees who need the most help making a good decision, such as those who’ve never had employer-sponsored coverage, aren’t going to get what they need from a PDF and a portal login. 

What they need is someone to explain it in plain language at a moment when they’re ready to listen. This includes: 

• What the plan covers and what it doesn’t
• What the numbers on the comparison actually mean for their real life
• Who to call when something goes wrong
• What to do with the account they enrolled in but have never touched That explanation is the employer's responsibility, and it’s one that most benefits programs treat as optional.

How to Achieve Top-Tier Communication 

The companies that get this right have a more deliberate approach to helping their employees understand what they have.

**Firstly, it starts earlier than open enrollment. **Giving employees a clear heads-up about what’s coming better positions them to make good choices when the window opens. Just three weeks of lead time changes the quality of the decision-making significantly.

Second, it uses plain language. Benefits documentation is written for compliance, not comprehension. The communication that actually reaches employees is the version that translates the compliance language into something a person can act on. What does this mean for me? What do I need to do? Who do I call if something goes wrong?

Third, it continues after enrollment closes. The employee who enrolled in an HSA in November needs to understand how to use it in January, when the first bill arrives. The new hire who joined in March needs the same education that the rest of the team got in October. Benefits communication is not a one-time event.

Lastly, it’s supported by someone who picks up the phone. When an employee has a question or a problem, the answer to that question and the resolution of that problem is a direct measure of whether your benefits program is working. An 800 number that routes to a carrier queue is not the same as a real person who knows your plan and can help.

Do This Now Before Enrollment Arrives 

The window to fix a communication problem is before the enrollment window opens, not during it. If your open enrollment is in the fall, August is when the planning should start.

Think about what your employees actually need to know before they're asked to make a decision. Not what the plan documents say, but what a person sitting across the table from you would need to hear to make a good choice for their family. Build your communications around those questions rather than around the plan features.

If you’re not sure what those questions are, look at what landed in your HR team's inbox during the last enrollment. The questions employees asked are exactly the questions your communications failed to answer. Those are your starting points.

And if you want help thinking through what a better communication strategy looks like for your specific situation, that is a conversation I’m always happy to have.

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Brian Allen | President, evco | Managing benefits for 36,000+ lives since 2005