Once bitten, twice shy: Why employees don’t re-enroll in an FSA

Why employees don't re-enroll in an FSA

If you have low enrollment rates for Flexible Spending Accounts (FSAs), you aren’t alone. While health insurance benefits are front and center during open enrollment, FSAs often feel like a well-kept secret or afterthought. Creating awareness of the benefit is a common goal during re-enrollment. However, a less commonly addressed issue is when employees who previously enrolled, choose not to re-enroll in an FSA.

There isn’t one main reason employees don’t re-enroll in an FSA. However, there are several contributing factors which can be chalked up to a bad experience.

In this post, we’ll unpack the most common reasons employees don’t re-enroll in an FSA and how you can mend the situation.

Inconvenience = unmet expectations

Benefits already come with a built-in level of stress. When employees are faced with inconvenience, it can leave a bad taste in their mouth. When an employee thinks their account is supposed to work one way and it works another way, it is confusing, stressful and time consuming. What was supposed to be a “benefit”, feels more like an inconvenience. Talk about adding insult to injury.

Let’s use Sally as an example. Sally signs up for an FSA in November during Open Enrollment. On January 2nd, she goes to Target to pick up eye drops. When she gets up to the check out counter, her benefits card is declined. She buys the eye drops with her regular credit card and leaves the store miffed and confused. Sally submits a claim and is denied—only to find out the eye drops she purchased were not eligible.

The Sallys in your workforce might experience situations like the one above on more than one occasion. After multiple encounters with a process that is confusing, stressful and time consuming, it is no surprise that some employees may be more hesitant to re-enroll in an FSA.

How to mend the situation

Be transparent up front about the quirks of the account and quiz employees with “True or False” questions. Practice running through scenarios like the Target one above to demonstrate how an FSA might work across at different merchants or for different products.

If employees are aware ahead of time of what might not work with accounts, they will be able to prepare mentally for occurrences like the one above or avoid them all together. The FSA Store is a great lookup tool to quickly find out if an expense is eligible.

Blog Support: What is substation and why is it required?

The learning curve

On top of experiencing inconvenience, some employees might also find a layer of unfamiliarity with their accounts. In short, there is a learning curve.

Take substantiation. While submitting an itemized receipt is not terribly difficult, it is not a process people encounter before enrolling in a pre-tax account.

A process like this is not only unfamiliar, but it seems unnecessary. The only thing worse than a necessary evil is an unnecessary evil. In the first section, the main issue was “Why is this happening?” With a learning curve, the new issue is “How does this work?”

In short, when employees don’t know how to complete a process in addition to not knowing why it is required, it compounds the problem.

How to mend the situation

Anticipate that “How do I…?” will be a question employees might have down the road. Take that knowledge and use it as a reason to schedule demos during Open Enrollment. The demos should address the most common “How” scenarios, such as “How do I submit a receipt?” or “How do I set up direct deposit?”

The more you can do to prevent the need to ask “How do I…?” the more likely it is employees will re-enroll. By taking this approach, you not only address the problem before it starts, but you set yourself up as a future resource if any “how” questions arise later.

Blog Support: How do I submit a claim? (for mobile and desktop), How do I submit a receipt? (for mobile and desktop)

Money miscalculations

Employees, who over estimated their FSA election and lost funds, are likely to feel bitten and a little shy to re-enroll in an FSA.  Research on loss aversion suggests that the pain we feel after loss hurts twice as much as the joy we feel after experiencing a gain of equal value.

If an employee loses hundreds of dollars, it stands to reason that they would take actions to avoid such damage in the future.

For some, this might take the form of learning more about how their account works. For others, they decide not to re-enroll in an FSA.

Although the employees who don’t re-enroll in an FSA miss out on the benefits, they also spare themselves the potential psychological pain associated with losing money.

How to mend the situation

We advise a two-fold approach that combines sympathetic recognition with problem solving. Even if there’s nothing that can be done (which is often the case), you can often begin to diffuse an emotionally charged situation with a simple “That sounds really tough.” Meet your employee where they are at in the moment.

The next step is to offer a plan for how to prevent that from happening again. Start by telling them that FSA balances are available through the BRiMobile app and they should monitor their email for balance notices. Next, remind them of strategies to use funds. In addition to regular medical needs, an FSA can also be used for uncommon (but eligible) expenses. This includes acupuncture, motion sickness wristbands and shipping and handling for medical items. Check out our full list of weirdest eligible expenses.

Finally, if you have a rollover or Extended Grace Period, promote these options during Open Enrollment. Explain their timelines and how they provide protection for employees.

Where to go from here

When you combine the three points above, it’s little surprise people don’t re-enroll in an FSA. But now, you have a trifecta of solutions you are now prepared with:

Explain to employees what to expect and why a process is happening or required.

Show them how their accounts work across different scenarios.

Protect them from the negative psychological effects of loss through early education.

It’s been said that a three-stranded chord is not easily broken. Likewise, employees who receive transparent communication and accessible resources backed by support can re-enroll with confidence, even after a bad experience.