It’s easy to see and talk about the benefits of employee benefits, but what are the drawbacks? Well, while there may not be any drawbacks in the actual benefits themselves or in offering benefits, the process of offering benefits to your employees is certainly not without its challenges. There are a variety of different choices and options that will influence the kind of benefits package that is offered by your business—choices and options that, without the proper knowledge and understanding of what it is that you’re choosing and your business’s needs, could lead to your benefits package leaving more to be desired. This can be dangerous as a good benefits package can not only help you to attract more top talent, but also help to retain the talent currently working within your organization.
Now, if deciding on benefits sounds a bit scary and intimidating, don’t worry—you’re not alone. At Payday HCM, we’ve heard many current and potential clients express their stress and worry over crafting a well-rounded and robust benefits package. Aside from us being a benefits broker ourselves, we’re also a business that offers benefits to its employees. As such, we understand both the desire to work with a business on creating a comprehensive benefits package and the stress of being a business trying to ensure the benefits we offer encompass the needs of all current and future employees. A crucial part of a benefits package is choice: the choice to opt in for certain benefits; the actual choosing of what benefits to offer. Deciding between active and passive benefits enrollment is one such choice. But what do passive and active enrollment actually mean?
Well, in this article, we’ll be breaking down the differences between passive and active benefits enrollment. We’ll start by generally going over open enrollment before diving into the passive and active types of enrollment, providing a clear picture of how they both function. After that, we’ll look closer at the differences between the two enrollment types and the kinds of situations where you might opt for one over the other. By the end of this article, you’ll have the knowledge to confidently approach one of the more important decisions in the benefits process.
In this article, you will learn:
- What Is Open Enrollment?
- What Does Passive Enrollment Mean?
- What Is Active Enrollment?
- Is Active Or Passive Benefits Enrollment Better?
What Is Open Enrollment?
Before we get into the specifics of passive and active enrollment, it’s important to understand the open enrollment process and where passive and active enrollment fit into it.
When Do Employees Enroll In Benefits?
When you first start a new job, you’ll go through a number of different steps and processes to get onboarded—things like filling out a form I9, completing online trainings, and, if the employer offers benefits, enrolling in benefits. Of course, that initial onboarding process isn’t the only opportunity for employees to enroll.
Once a year, specific dates vary but often around the end of the calendar year (October 15 through December 7 for Medicare, for example), employees will have the option to enroll in benefits during what is called the open enrollment period. This period allows employees either to enroll in benefits if they were not previously enrolled or to elect to make changes to their benefits plan.
Outside of these two periods, employees generally won’t have the opportunity to either enroll in or make changes to their benefits plan. The only exception to this is in the case of a qualifying life event, when a certain qualifying event (the birth of a child, marriage or divorce, change in income) occurs, which will allow employees to make changes to their benefits plan.
Passive And Active Enrollment
So, you start a job and you go through the benefits enrollment process, selecting what benefits you want and the kinds of plans. After that, you won’t be able to enroll in benefits or make changes until an open enrollment period or if a qualifying life event occurs.
But what if I enroll and I don’t want to make changes or really even think about making changes? Or, what if, as a business owner, I want to ensure each employee is routinely checking their benefits coverage each open enrollment period.
This is where passive and active enrollment come in. Depending on whether or not you want your employees to be more active in the enrollment process or opt for a more set it and forget it style will influence whether or not you choose an active or passive enrollment style.
What Does Passive Enrollment Mean?
Now that we understand the benefits enrollment process in a general sense and where active and passive enrollment fit into that process, we can dive a bit deeper into what both of those enrollment types mean. First up, passive enrollment.
What Is Passive Enrollment?
As stated before, employees will be able to enroll in or change their benefits plans when first onboarding or during an open enrollment period (the only exception being QLEs). What about the employees who don’t want or need to make any changes to their benefits plans after initially enrolling?
Well, in the case of passive enrollment, essentially nothing. Passive enrollment allows for benefits plans and choices to simply roll over into the following year following an open enrollment period. This means that, for employees who don’t opt to make changes during an open enrollment period, all of their previous benefits choices will continue into the next year without any further action on their part.
Advantages And Disadvantages Of Passive Enrollment
The biggest advantage to passive enrollment is its ease: employees who are already enrolled in benefits don’t need to worry about making elections each year, while employees who do opt to make changes are still free to do so. This not only takes a burden away from employees, but also from HR managers and benefits administrators who have to ensure each eligible employee makes their benefits elections.
Of course, passive enrollment isn’t without its potential downsides. The lack of employee participation in continued enrollment can make things easier, but it could also mean employees aren’t making changes to their plans to better fit their needs, or a larger number of employees aren’t taking advantage of their benefits plan.
What Is Active Enrollment?
Now that we understand what passive enrollment is, we’ll dive deeper into the other form of enrollment: active enrollment.
What Does Active Enrollment Mean?
So, if passive enrollment is a benefits enrollment process that allows employee benefits selections to roll over with no employee action required, then active enrollment must require employees to re-select their benefits each year during an open enrollment period, right? Well, actually, yes.
Active enrollment is, as the name implies, a more active enrollment process. Employees will need to re-elect their benefits each year during their open enrollment period, either opting to continue with the same coverage or making changes based on their current needs. If employees fail to enroll in benefits during the enrollment period, they risk losing coverage—even if they were previously enrolled.
Advantages And Disadvantages Of Active Enrollment
Opting for an active enrollment process will ensure that each eligible employee is continually reviewing your company’s benefits offerings and making the selections that are the best fit for them at that time. Not only that, but an active enrollment process can help to boost employee understanding of your company’s benefits plan and their own insurance coverage.
On the flipside, active enrollment does require more work: not only will HR managers and benefits administrators need to ensure each employee completes their enrollment each year, they will also need to continually educate employees on how to enroll and the different changes that have occurred since the last open enrollment period. Employees also risk losing coverage if they happen to forget to re-enroll in their benefits.
Is Active Or Passive Benefits Enrollment Better?
Now, the big question remains: which enrollment type is better? But it’s not so much about which is better, so much as which is a better fit for your organization.
Choosing Passive Benefits Enrollment
Opting for passive benefits enrollment can help to reduce some of the stress that accompanies an open enrollment period, while giving your employees the choice of whether to make any changes to their benefits plan. Opting for passive enrollment can help operations run smoother during open enrollment, focusing more on the changes being made rather than ensuring everyone re-enrolls.
As stated previously, however, there are some things you will need to consider if opting for passive enrollment. If your organization has made any changes to the benefits offered, communicating these changes is crucial, as employees will voluntarily need to adjust their benefits in accordance with these changes. Although not everyone has to re-enroll, active reminders may still be necessary.
Choosing Active Benefits Enrollment
While it may create a bit more work for your employees and for your HR department, active enrollment can help to ensure each employee is continually receiving the benefits that they need. Active enrollment works best for businesses that are continually updating their benefits package.
Alongside this, though, active enrollment will require a higher level of education and work to ensure everyone is completing their enrollment. This means that choosing this type of enrollment requires a certain level of infrastructure, whether that be a decently sized HR department or a solid benefits partner.
Actively Creating A Better Enrollment Process
In general, employee benefits are not only a great thing to have as an employee, but are also a good recruiting tool. There aren’t too many downsides to employee benefits, but when it comes to enrollment and deciding on a benefits plan, things get a bit more complicated. Unfortunately, without the proper knowledge and understanding of different benefits packages and enrollment types, you may find yourself losing sight of the benefits of benefits. Luckily, with the information provided in this article, you’ll have the knowledge you need to select the right enrollment process for your business and make your benefits stress a little more passive.
When it comes to benefits, there will be a whole host of decisions you’ll need to make—whether you opt for passive or active enrollment is only one of them. There’s one decision, though, that can help to make every subsequent decision and the overall benefits process much simpler: selecting your benefits broker. But how do you decide on a benefits broker? What separates a good broker from a great one? Check out our article on the key factors that make up a great benefits broker.
Topics: