Health Insurance Hassles Aggravate Employees, Cost Employers Billions of Dollars

It's a common affliction: People are often baffled by the time and effort it can take to manage their health benefits. Now, new research from Stanford University has put a price tag on the problem, finding the time employees spend on health insurance hassles adds up to about $21.6 billion a year. What’s more, the indirect costs may be even more dramatic, with employee turnover, absenteeism, and lost productivity actually exceeding the costs of ill health.

Tallying the Time Drain

Researchers from Stanford’s Graduate School of Business teamed up with Gallup polling experts to assess how much time people spent talking to health benefits administrators about things like settling claims, debating coverage, and getting prior approvals. The average phone call? 32.57 minutes. And more than half the time, those conversations happened at work.

The impact of these encounters wasn’t all good. Those who had talked with a benefits person the previous week were 35% more likely to be absent a day or more from work, 14% less likely to feel engaged, and 10% less likely to be satisfied with their workplace. The estimated nationwide annual cost of those extra absences was $26.4 billion—on top of an estimated $95.6 billion in lost productivity, the study found.

Until now, most research on healthcare frustration factors has centered on the paperwork burden on doctors and hospitals, says Jeffrey Pfeffer, the Thomas D. Dee II professor of organizational behavior at Stanford and the study’s lead author. "Our new twist, which I can’t believe no one looked at before," he says, "is how much employee time is wasted and the measurable effect of that time on employee stress, burnout, increased absence, and diminished job satisfaction."

These interactions with health insurance companies, he notes, are on average lengthy and end up being a significant influence on employee morale.

Easing Administrative Hassles

Administrative friction in healthcare—the “sludge,” as it’s called—is a major pain point. In fact, administrative complexity is the single biggest source of waste in healthcare, even bigger than fraud or overpricing, according to a study published in the Journal of the American Medical Association.

This complexity trickles down to everyone, which is why it perhaps comes as no surprise that a recent survey by the International Foundation of Employee Benefit Plans found only about a third of employees (34%) have a high or somewhat high level of understanding of their health benefits, while roughly half (52%) have a medium level of understanding and 15% have a somewhat low or very low level of understanding.

So, what do consumers think might help? According to recent research by the Employee Benefit Research Institute, nearly all employees feel confident in their ability to make informed choices about their benefits. But about four in 10 say they want more guidance as a result of the COVID-19 pandemic and economic crisis and most want that extra help in the form of online resources like a benefits portal or digital decision-making tool.

Indeed, almost six in 10 employees say they’d ultimately prefer a single website that lets them review and manage all their benefits, notes the latest Global Benefits Attitudes Survey from the advisory firm Willis Towers Watson. The majority of Gen Z workers said they want their benefits questions answered via online chat.

What Employers Can Do

Benefits make up about 30% of employee costs for private employers, but Pfeffer contends there’s been little study or action regarding how the so-called sludge associated with accessing those benefits robs employee time and influences attitudes. That should change, he says.

The research concludes that companies should pick benefits administrators in part on their ability to minimize the time employees have to spend dealing with them.

“Companies say they offer health insurance to attract and retain talent,” he says, “but they’re offering a benefit which is administered so that it often doesn’t feel like a benefit.”