A study by Securian Financial has found that many Americans are choosing cheaper workplace benefits in order to cover their immediate costs, but they often end up with quite a bit of financial risk in the long run. The study, titled “The Affordability Trap: Why cheaper choices cost employees more, ” warns about a trend where employees choose the lower premium plans during the open enrollment period but then have to pay higher out-of-pocket expenses.
Since inflation is getting ahead of wage growth, it is not surprising that employees want to have a high-deductible health plan (HDHP) or minimal coverage simply to decrease their monthly payroll deductions. Though these decisions offer a way out and a bigger take-home pay, they might lead to big financial problems if there is a health emergency that requires unexpected medical expenses.
“When budgets are tight and enrollment decisions feel overwhelming, employees default to the one number they can control — the premium,” said Adam Taylor, vice president for Employee Benefits Solutions at Securian Financial. “But what looks cheaper today can become far more expensive tomorrow.”
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The study also showed that almost two out of every three employees believe that cost is the most important factor in choosing their benefits, especially among older workers. Unfortunately, the focus on cost has also led to a plethora of financial consequences. In the last year, 22% of those surveyed received medical bills that were higher than expected, 20% used savings or emergency funds, 17% went into debt, and 13% delayed or skipped medical care because of the costs.
“The math employees are doing is simple: ‘What comes out of my paycheck?’” said Taylor. “The math they’re not seeing is what happens if they’re hospitalized, need surgery or face a serious diagnosis. That’s where the affordability trap snaps shut.”
The Securian Financial report urges employers to improve benefits communication by providing clearer cost scenarios, promoting supplemental coverage, and offering AI-driven decision-support tools. By making trade-offs more transparent, organizations can help employees make informed choices and reduce the risk of financial hardship.
