Inflation Relief: Workplace Benefits Can Be a Big Help

Employees might be surprised at what’s available if they take the time during open enrollment to see what employers have to offer.

A female worker at her desk looks happily surprised while looking at her laptop.
(Image credit: Getty Images)

Workers looking for inflation relief could find some surprising sources of help when they check out their workplace benefits for next year.

Most Americans don’t have to look very far to see the financial impacts of inflation. Whether it’s filling up your gas tank, buying groceries or paying rent, everything is more expensive. It’s a frustrating reality that has nearly three-quarters of Americans (74%) feeling more stressed about their personal financial situation due to inflation — which is even higher (66%) than it was in March of this year, according to a recent Voya survey.

Add into the mix the fears of a looming recession, and Americans are looking to stretch every hard-earned dollar. Recalling lessons learned from the COVID-19 pandemic, many are once again turning to a trusted source for help — their employers. In fact, Voya’s survey reveals that seven in 10 employed individuals (70%) plan to spend more time reviewing their benefits selections during open enrollment this fall to help make the most of their benefit dollars.

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But with industry research showing that, in the past, the average employee spent just 18 minutes (opens in new tab) enrolling in their workplace benefits, turning good intentions into meaningful actions is going to take a little work. Here are four tips to help optimize your time and potentially your benefit dollars during this fall’s open enrollment period.

Tip #1: Keep an Open Mind When Selecting Medical Coverage

What’s the right health plan for me? It’s not uncommon for many workers to assume the more expensive medical plan provides the best coverage. In some instances, that might be true. In others, there’s a good chance you could be overspending on health coverage — which is not ideal in today’s high-inflation environment.

For example, a common health plan offered by employers is a preferred provider organization (PPO) plan. PPO premiums can be higher than other plans, but the deductibles are lower. Another increasingly popular health plan offered by employers is a high-deductible health plan (HDHP). While deductibles are often higher in these plans (as the name suggests), premiums tend to be less expensive, which typically leaves more money in your paycheck. Plus, to help offset the costs of these higher deductibles, HDHPs are often paired with a tax-advantaged health savings account (HSA), a powerful savings and spending vehicle.

While PPOs and HDHPs are both good options to consider, a Voya study (opens in new tab) shows many employees tend to overlook HDHPs for three key reasons: the naming of the plans, a general aversion to deductibles and many simply “defaulting” to the same health plan they selected the year before. The study found, though, that it was not uncommon for employees to overspend on their health coverage by selecting a PPO instead of a HDHP. In some scenarios, the average employee was overspending $500 to $2,500 through the year.

Now, obviously this won’t be the case for every employee, depending on their personal medical needs. But with soaring inflation and families looking to stretch their budgets, it highlights the importance of taking the time to do your homework. Compare each health plan’s premiums and out-of-pocket costs. Ask yourself if you have any major medical expenses planned for the upcoming year, such as an elective knee surgery or perhaps a new baby on the way. All of these considerations should factor into your ultimate decision on what medical plan you select for the upcoming year.

Tip #2: Mind the Gap — Don’t Overlook Voluntary Benefits

While most employees typically focus on core workplace benefits during enrollment — medical, dental and vision — it’s important not to let the words “voluntary benefits” or “supplemental health insurance” influence your mindset. When you consider that industry research (opens in new tab) shows that roughly four in 10 Americans would struggle to cover a $400 emergency, getting hit with an unexpected medical bill could have an impact on an already tight budget. 

Voluntary benefits offered through your employer — such as hospital indemnity, critical illness or accident insurance, for example — provide benefits for specifically covered events, whether it’s an emergency or not.  For example, pregnancy is one of the most common reasons for hospitalization among non-elderly people. A recent Kaiser Family Foundation analysis (opens in new tab) found the average cost of having a baby is nearly $18,900 for people with large employer group insurance plans, with out-of-pocket payments averaging roughly $2,850. Hospital indemnity insurance can help you with those out-of-pocket costs when you have a covered stay in the hospital, and generally the premium cost averages $5 to $6 per week.(1)

The pandemic and a tight labor market have also caused employers to consider adding more voluntary benefits to meet employees’ evolving health needs and compete for top talent. For example, critical illness insurance — which pays a lump-sum benefit upon the diagnosis of a covered illness or condition, like a heart attack, cancer or stroke — has become increasingly popular. Industry research shows that while only a third of U.S. employers (32%) offer critical illness insurance, of those not offering it, more than two in 10 employers (22%) are planning to in the future.(2)

Therefore, given the value of voluntary benefits and the fact that more employers are adding them to their benefits lineups, it’s important to not overlook your voluntary benefits during open enrollment.

Tip #3: Ask About Nontraditional Workplace Benefits

Often, employees don’t realize how many great resources are available — and many without cost to them — directly from their employer. This is especially true when it comes to taking advantage of nontraditional benefits and services, such as emergency savings support and student loan repayment.

Industry data shows (opens in new tab) that, because of the pandemic, up to 46 million Americans depleted their emergency savings just to make it through 2020 financially. As a result, more employers are now offering emergency savings accounts. Some are funded by automatic deposits through payroll deductions, much like how employees fund their 401(k)s. The biggest difference with emergency saving accounts is that the dollars deducted from the employee’s paycheck are taxed as income, and the funds are available to an employee when they need it.

Student loan repayment is another nontraditional benefit on the radars of both employers and their employees. Voya’s data found 68% of Millennials agree or strongly agree that they are not able to pay down their debt (opens in new tab) as quickly as they want to because of inflation. To help address this concern, employers can set up direct after-tax contributions to the servicers of their employees’ student loan debt. The employer is — in effect — making loan payments on behalf of the employee, but since the money is considered income for the employee, both the employer and employee must pay taxes. This solution helps employees pay down their debt more quickly and, in turn, direct more of their income toward other saving and spending needs.

It's interesting to note that legislators have also recognized the importance of building emergency savings and helping address student loan debt, and there are several bills pending in Congress that could provide additional help in these areas later this year.

Tip #4: Tap into the Power of Digital Tools

There’s no doubt that workplace benefits can be confusing for many employees, and the reality is most employees are juggling competing priorities. This is where digital tools can help employees make informed decisions. In fact, Voya research found that 73% of employees are interested in guidance and support tools (opens in new tab) that would help them understand how much money to put aside for retirement, emergency savings and health care expenses. 

While most employees have probably used an online calculator to help predict health-related costs, today’s digital tools are increasingly sophisticated and personalized. More employers are now offering digital tools that integrate data from external sources such as personal banking and credit accounts to help a person manage their health and financial well-being all in one place. These digital tools can often provide personalized guidance on health insurance (medical, dental and vision), voluntary benefits and contribution amounts for HSAs and FSAs.

Some of these tools can even provide reminders, or “nudges,” throughout the year to help employees optimize their workplace benefits, such as explaining how to file a claim for an eligible medical expense. Ask your HR department what digital support tools are available.

With inflation at historically high levels, it’s important to leverage all the resources available to help stretch every “benefit dollar.” In addition to helping save you time, it may give you greater confidence in your benefit selections to help ensure your family is well protected — something we can all appreciate in today’s uncertain world.  

1) Voluntary Hospital Indemnity and Supplemental Medical Products SpotlightTM Report, Eastbridge Consulting Group, Inc., 2019 (average annual premium cited is for group products only)

2) MarketVision™ – The Employer Viewpoint© 2020, Eastbridge Consulting Group, Inc.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).

Rob Grubka, Fellow in the Society of Actuaries
CEO, Health Solutions, Voya Financial

Rob Grubka is chief executive officer of Health Solutions for Voya Financial. In this role, he is responsible for product development and management, distribution and the end-to-end customer experience for Voya’s stop loss, group life, disability and supplemental health insurance solutions, as well as health savings and spending accounts, offered to U.S. businesses and covering more than 7 million individuals through the workplace.