Active or Passive Enrollment, That is the Question

One of the most important decisions a benefits manager will make each year is whether to hold an active vs. passive enrollment.

Let’s review both. In an active enrollment, employees must select their benefits by a certain date or risk losing certain coverages. During a passive enrollment, employees who take no action receive the benefits they had the previous year.

Traditionally, the trend has been toward passive due to the administrative burden involved in active enrollments. A 2011 study found that 71% of U.S. employers opted for passive enrollment. Many of you might be thinking, if it’s not broke, don’t fix it, right? However, there are downsides. Passive enrollment may lead to employees opting for the wrong benefits year over year, which can cause strain on budgets and stress for employees who aren’t properly covered. Plus, since there are no real action items in passive enrollment, employees are more likely to be disengaged and may not know or appreciate the benefits employers are offering.

Active enrollment isn’t without its drawbacks either. If during annual enrollment employees aren’t informed about their benefits and they fail to make their selections before the end date, they will be left without coverage for a full year, until the next annual enrollment period. This can cause major headaches for HR and benefits managers. Not to mention, an employee without coverage is not a happy one. Major direct communication with employees is key to active enrollment success. And, without a technology partner that can help streamline communications to relieve some administrative burden, active enrollment could become a huge lift for smaller HR departments.

As benefits technology gets better and the user experience improves, employers may be more likely to explore an active enrollment strategy for higher engagement.

Both have pros and cons. Since it’s about that time for benefits managers to make this decision, here’s a pro/con list to help you make your decision.

Active enrollment pros

1. Higher employee engagement
2. Better ROI on benefits offerings
3. Higher benefits visibility
4. Gives employees an opportunity to think about and select their benefits
5. Can help promote higher benefits literacy

Active enrollment cons

1. More administrative work
2. If not properly implemented, employees may not have all the right information to make informed decisions about their benefits
3. Employees could miss enrollment deadlines and be without coverage
4. More time consuming
5. Without a technology partner, could take more resources to implement

Passive enrollment pros

1. Less time to implement
2. Takes less communication to employees
3. Employees don’t run the risk of being without coverage
4. Less administrative work
5. No plan changes, no worries

Passive enrollment cons

1. Employees are defaulted to coverage that may not be a good fit for them
2. Employees are less aware of benefits offerings and might not be aware of new options
3. Low engagement from employees
4. Potential higher benefits cost if employees are overinsured from default coverage
5. Lower benefits literacy