Employees aren’t getting it when it comes to their health benefits. According to a survey by ADP, a payroll and human resources–services provider based in New Jersey, 40 percent of employees don’t understand their health benefit plan. Less than 35 percent of those with employer-based health coverage know their medical plan’s annual deductible, and 25 percent said they spend less than 30 minutes reviewing their benefits options, according to a report by market research firm Kelton Research in California.

So it’s not surprising that several employees at Sentinel Printing, a book and commercial printing company in St. Cloud, found themselves paying unexpected out-of-pocket expenses for their prescription drugs when the company changed from an HMO to a health savings account (HSA) plan in December 2007. They didn’t realize that employees had to meet high deductibles before insurance and Sentinel Printing’s contributions kicked in. Marcia Goss, human resources manager at Sentinel, says several employees went to the pharmacy expecting to shell out for the usual copay but were instead given a bill for the entire cost of a brand-name drug. “Either they didn’t grasp it or they had other things going on in their lives,” Goss says.

Why don’t employees understand their health benefits? New consumer-driven health plans are one cause of confusion. They require the employee to spend more time weighing options, but new plan design isn’t solely to blame. HR leaders say many employees don’t understand basic health insurance terminology, prescription drug plans seem particularly tricky, and all of this is exacerbated when employees don’t use their plans very often. To get employees to increase their health-plan knowledge, HR leaders and employees will have to meet in the middle: Employees must pledge to learn more about their health plan, and HR must provide more targeted and simplified health-benefit communications.

Why don’t employees understand their health benefits? New consumer-driven health plans are one cause of confusion. They require the employee to spend more time weighing options, but new plan design isn’t solely to blame. HR leaders say many employees don’t understand basic health insurance terminology, prescription drug plans seem particularly tricky, and all of this is exacerbated when employees don’t use their plans very often.

To get employees to increase their health-plan knowledge, HR leaders and employees will have to meet in the middle: Employees must pledge to learn more about their health plan, and HR must provide more targeted and simplified health-benefit communications.

Tedious Terminology

Ranking at the top of the list of confusing issues are definitions for several common health plan terms. Not understanding the definitions of copay, deductible, out-of-pocket, coinsurance, and network—and how they apply to an employee’s specific situation—is like jumping to the second chapter of a book and wondering why it’s difficult to follow the plot, says Larry Miller, senior vice president of human resources for Starkey Hearing Technologies, a hearing aid manufacturer in Eden Prairie. Revisiting these definitions on a regular basis is one way he tries to nip misunderstandings in the bud. “I repeat this year after year,” Miller says. “I describe all the terms before I even get into what the plan is all about.” The advantage here, he says, is that refreshing everyone’s memory preps employees so that they can actually grasp the details of a plan.

Rhonda Allen, director of operations and senior vice president of human resources at Welsh Companies, a commercial real estate firm in Minnetonka, says she fields questions about basic plan elements, too. Employees are still asking her “When does a copay apply? When does this deductible thing work? Is my doctor in-network?” Most questions of this nature come from new hires and those who don’t use the plan much, she says.

Tricky Pharmacy Benefits

Drug benefits are especially difficult to understand, says Scott Aebischer, senior vice president of customer service and product innovation for HealthPartners, a health care system based in Bloomington. Employees struggle with the different copays based on a drug’s category (or “tier”), preferred providers, and formularies—lists of drugs that get preferred pricing with the plan. Sometimes, formulary changes mean an employee is surprised by a price increase for a drug he’s purchased many times before.

Drug benefits are especially difficult to understand, says Scott Aebischer, senior vice president of customer service and product innovation for HealthPartners, a health care system based in Bloomington. Employees struggle with the different copays based on a drug’s category (or “tier”), preferred providers, and formularies—lists of drugs that get preferred pricing with the plan. Sometimes, formulary changes mean an employee is surprised by a price increase for a drug he’s purchased many times before.

Goss says employees at her company have now learned the ins and outs of their pharmacy benefit, but it wasn’t easy. “Even though you explain it—and we have small group meetings and large group—if people didn’t use their benefits for three months, they still went to the pharmacy and thought they could get a prescription for $25, and they found out that a name-brand drug was going to cost them $150.” She regularly reminds employees to use the plan’s designated mail-order pharmacy, which allows them to buy three months of prescriptions for the price of two.

High-Deductible Health Plans

Another area that employees have to navigate is the increasing use of consumer-driven health plans. Health reimbursement accounts (HRAs) and HSAs are usually combined with high-deductible health insurance. “We’ve gone from a rich plan with a low deductible, copays, and co-insurance to a new structure, which is a consumer-driven health plan,” says Susan Allanson, human resource director at Harris Companies, a mechanical contracting company in St. Paul. Harris had a health plan that required employees to resubmit claims in order for Harris to kick in on the deductible. “In last year’s plan design, because they had to do that second step of resubmitting, I think there were some individuals who paid more out of their pocket,” Allanson says. This year, Harris tweaked the plan for nearly 200 insured employees so that the deductible automatically switches over (without resubmitting) to Harris and then to Blue Cross Blue Shield of Minnesota, after the employee fulfills his or her portion. Allanson says questions about deductibles—who pays when, and how much—is one of the pieces she still gets the most questions about.

Unfamiliar and Unused

Perhaps one of the most frustrating issues for HR pros is that employees simply don’t read plan information, or they put off learning about their health benefits until they need care. “So many of the employees don’t use the plan very often, so that’s why they don’t understand it,” Allen says. “If they use it a lot, then they tend to understand it because they know how it all works.” Allen says she fields a lot of questions about intermittent or milestone tests, such as colonoscopies. Although all the health benefit information for Welsh is available in print and on the company intranet, employees often call her to ask if colonoscopies are covered under preventive care. “People still would prefer just to ask someone instead of reading about it,” she says.

Sharpening Communication

HR leaders can address the ongoing issue of health benefits education by keeping information simple and ditching jargon. Allen sought the help of Welsh’s marketing group to streamline the printed benefits information and make it more appealing. They focused on making information easy to find, putting deductibles in chart form, reducing word counts, and defining basic terms. E-mail communication is limited to bullet points—no paragraphs—in an effort to avoid overwhelming busy workers.

Miller uses a storytelling technique: Each benefits presentation he does includes several “real-life” scenarios, such as the one about a guy who has several $1,000 claims in a year. Miller explains how each claim impacts the guy’s health plan—for example, he met his deductible in January, he fulfilled his out-of-pocket maximum in September, he had some ineligible expenses in December. The first time he tried storytelling was three years ago. “I was stunned at the number of blue-collar and white-collar employees . . . who came to me and said, ‘This is the first time I’ve understood health insurance.’” He attributes a reduced call volume to the plan administrator—a result that saves Starkey money—to storytelling. At Starkey, five generations of employees are represented, Miller says, and this approach seems to work well for people of all ages.

Reaching Decision Makers

The person making a decision about a health plan may not be the employee, Miller says, so he makes a point of inviting spouses to attend one of the open-enrollment presentations he does each year—12 sessions at a minimum. He sends reminder postcards and benefit plan packets to employees’ homes. Miller also videotapes his first few open-enrollment presentations, and the recordings are edited into a two-hour DVD, which is sent to field sales personnel, new hires, or those who want to watch it at home. The video is also accessible on Starkey’s intranet and the Internet. “We have to hit ’em high, hit ’em low, and hit ’em repeatedly,” Miller says.

Help for HR

Insurance providers can be an important resource for HR teams that are educating themselves and employees on health benefits. Medica provides seminars for HR representatives that explain online tools and programs, says John Naylor, vice president of commercial sales and general manager for the Minnetonka-based health-insurance provider.

To polish his open-enrollment presentation, Miller conducts internal focus groups before presenting to a larger group. He invites three to five employees to listen to his session and then asks: Does it motivate you to get your enrollment done by the deadline? What makes sense or not? What did you like? He says feedback from the focus groups and that of his staff make his presentations more effective. During Starkey’s last open enrollment, only three employees out of 1,875 did not turn in their health insurance election forms (resulting in no coverage for the year).

As employees grow accustomed to the new consumer-driven health benefit landscape and take on a larger role in controlling costs, they’ll need to spend more time educating themselves on their health plans. Even if they can’t rattle off the definition of co-insurance at the drop of a hat, with ongoing benefits education they should know where to look for the answer and which questions to ask.

Katie Westfall is a freelance writer and a frequent contributor to Twin Cities Business.