Unlike buying a new bathmat, when it comes to your employees’ benefits, there is more to the decision than positive product reviews and an extra soft texture.
Choosing benefits has a much larger risk factor than buying a bathmat and thus, much larger implications. Consumers don’t typically think about risk when purchasing an everyday item, but it’s extremely important when it comes to your employees’ benefits and the impact that risk could potentially have on their life.
Our daily lives are filled with a variety of risks: relationships, employment, financial, safety, property, personal, and health just to name a few. The decisions we make regarding employee benefits during annual enrollment will touch on many risks we will face in our lives. So, let’s walk through some examples of the different potential phases of injury or illness. Share these scenarios with your employees.
Phase I – Minor Change to Health - Enrolled in Health Insurance
- Let’s say you love cycling and had a tumble. Perhaps you need outpatient surgery or you have a contagious bout of flu. You have to take some time off work to heal and get better. Thankfully, at this phase of your illness or injury your activities continue as normal. You might see a doctor or specialist, or perhaps just take advantage of this down time to lay around the house and check your emails. There is minimal impact to your normal and financial lifestyle and your income remains the same covering your family activities and paying your bills thanks to your sick leave benefits.
Phase II – Income Challenges - Out of Vacation Time / No Sick Leave
- Let’s say that injury or illness is worse than you thought, moving you into the next phase of this risk scenario. At this phase, there is an increased inconvenience factor for you and your family. Financial pressures begin to build on your partner from taking on additional efforts managing the family. Plus, on top of your normal living expenses, healthcare bills are starting to come in from hospitals and specialists. And, sorry to say, the amounts are only increasing. You have run out of sick leave and vacation days, and family income is reduced. You are starting to burn through your savings. To keep up with the expenses, you start to consider tapping into your home equity or 401k.
Phase III – Lifestyle Normality Challenged - Financial Challenges
- Your savings, loans, and equity have been exhausted and family assistance is coming to an end. Your partner’s salary is over extended, and your stress-level is through the roof. You have stopped all the ancillary services and reduced your costs to the lowest possible means of getting by. Doctors are pushing new treatments, but additional cost is prohibiting you from moving forward with them. Your partner is in the difficult position of fulfilling both caretaker and provider roles in your household, which causes you to feel the burden of guilt on your shoulders.
Phase IV – Disabled – Working No Longer an Option
- If your illness or injury causes you to become permanently or significantly disabled, the chances of bringing in additional income from working is limited or non-existent. Recovering from your family’s financial loss is completely out of sight. Due to medical expenses, you may have had to sell your home and move to renting or downsizing to smaller property. Within months you are in debt, overly stressed and your future dreams are no longer a priority.
Phase V – Death – How did you leave your family?
- This is an extremely hard time for your family and loved ones that you’ve left behind. Through the grief and memories your partner and family are trying to regain financial composure. Medical costs are replaced with funeral debt and your estate must be sorted out. Somehow, with all the sadness your family is experiencing, they are also left holding the burden of trying to regain a normal lifestyle.
Although these phases paint a horrible picture, the reality is these scenarios play out every day. A Harvard University study illustrated that medical expenses account for approximately 62 percent of personal bankruptcies in the US. Interestingly, the study also showed that 72 percent of those who filed for bankruptcy due to medical expenses had some type of health insurance, thus debunking the myth that only the uninsured face financial catastrophes due to medical-related expenses.
The lesson here is that with each phase of illness or injury, there could have been a benefits solution to assist along the way. For example, enrolling in the right health plan, purchasing critical illness coverage, hospital indemnity, long-term disability plan, maximizing HSA contributions, increasing life-insurance, enrolling in 401k and doing estate planning can assist in reducing risk across all phases. It’s important for HR professionals to help communicate these risks and benefits options to help employees make the right decisions about their benefits. The risks you take by not educating your employees can impact their lives in the long term.
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