Consumers generally consider choice a good thing. And usually itis. But can having too many choices actually lead consumers to makea poor decision—or even no decision at all?

Breadth of choice is a growing challenge with benefits thesedays. With the growth of voluntary benefits and otheremployee-funded coverage, consumers have more choices than ever[Read"Some seniors overwhelmed by Medicare Advantage"]. This can leavethem feeling overwhelmed and confused. In some cases, employeesgive up, make no choice and go unprotected.

If employers and benefits providers understand some keyprinciples of decision-making and know how to best present benefitsinformation, employees have a better chance of making the mostinformed decisions and getting the coverage they need.

Setting the stage for effective decisions

Decisions about insurance and financial products are among themost difficult for consumers, according to a 2008 study by YaleUniversity. When they're faced with decisions on complex subjects,consumers may hesitate to make any decision at all if they feelthey lack the information to make a sound choice. This meansconsumers could miss opportunities for important financialprotection.

Employers and benefits providers can make it easier foremployees to choose the right benefits by becoming “choicearchitects”—a term coined by two scholars that is used to describethose who present and organize information in a way that supportswell-informed decisions.

When choice architects understand what helps and hindersconsumers in making purchasing decisions, they can communicatebenefits information in a way that is relevant and helpful.

Key principles of decision-making

As choice architects, employers and their benefits partnersshould understand some of the fundamental principles andcharacteristics of decision-making—and how to address them atenrollment time.

Here are four of the most relevant principles of benefitsdecisions and recommended actions to provide better guidance toemployees:

 Inertia, or the tendency to takeno action

Employees often maintain their benefits elections year afteryear rather than making changes to meet their current needs. Somedecisions made due to inertia—such as failing to adjust lifeinsurance coverage after children are born—can have seriousrepercussions.

Because consumers tend to take the path of least resistance,employers and benefits providers should offer default settings—apre-selected choice that can simplify benefits decision-making. Forexample, employers are encouraged to offer a short-term disabilityplan rather than a specific product. A 2009 Unum study foundemployees are more satisfied and less doubtful when options arebundled and recommended for them.

Automatic enrollments have also proven successful, increasingparticipation in some retirement funds to more than 90 percent, theYale study found. Using an automatic enrollment, instead of anopt-in approach, can be a valuable tool for improving the adoptionof benefits the employer considers essential to employees' healthor financial well-being.

Too many choices

When consumers have an overwhelming number of choices, problemsarise. Consider Medicare Part D, which was created to help seniorspay for the cost of prescription drugs. The program included avariety of plans so each person could find the right coverage.

Almost two-thirds of seniors were automatically enrolled bytheir insurance providers, but of the 17.5 million who had to makea choice, 5 million failed to enroll. Enrollment rates were lowestfor low-income individuals who needed the coverage most.

Research analyzing the program found an abundance of choices—upto 63 options in some states—caused the low participation. Manyseniors could not determine how the available options differed fromtheir current plan.

To help avoid these problems, consider the total number ofbenefits offered. Studies on buying behaviors suggest thatemployees may be able to make decisions without being overwhelmedif they are offered a maximum of four or five benefits at onetime.

Employers are also encouraged to start shallow and go deep; inother words, when grouping benefit choices—in printed or electroniccommunications—start with the benefits that involve the leastnumber of choices. If consumers feel overwhelmed by informationearly in the process, they are likely to shut down and avoid makingany decisions at all.

Making a decision based on something theyknow 

Decision-making abilities can be clouded if consumers don't havecomplete information before they make a choice. For example, a Unumpost-enrollment survey in 2006 revealed that when employeesunderstood how long-term care coverage could apply to their ownlives, they were more motivated to purchase the type of insurance.

The study shows 50 percent purchased because they readstatistics on how many people need long-term care insurance. Inother words, their decision had changed due to their newknowledge.

Because employees are often presented with several benefitsdecisions at one time, it's important to place the coverage incontext, so employees can understand how the products fit together.As choice architects, employers should include pricing informationto help employees determine what fits their budget andeasy-to-understand explanations of options for comparison.

Benefits providers often combine the use of benefit statementswith personal guidance from a benefit counselor to help employeesunderstand how different coverages can work together. Benefitstatements are designed to show employees their currentemployer-paid and voluntary benefits. Benefit counselors are typically availableto meet with employees in person or by phone to explain the newbenefits and how they complement current coverage.

Logic versus emotion

Many consumers make decisions based on emotions, not logic. As aresult, they may put off decisions about life, disability andcritical illness insurance because it forces them to thinkabout grim situations.

But research shows that once they take the time to make thesedecisions, many consumers are relieved, calm and optimistic, andthey feel wiser and more responsible after making the purchase.

To help consumers better understand their benefits, employeeeducational resources should include:

• Personal stories that relate to their own circumstances
• Explanations that can help them visualize how the benefitswork
• Financial tools to help them see how a benefit—or anoption—impacts their budget
• One-on-one meetings with benefit counselors who can answertheir questions and show them how their benefits will apply to thempersonally

Employees should also be educated about risks. Educationalresources should include statistics and real-life stories thataccurately reflect these risks. A McKinsey study shows three out offour consumers have “no idea” how much major medical proceduresactually cost. And consumers overestimate the risk of relativelylow-probability events (like fatal accidents) and underestimate therisk of more common events (such as heart attacks).

Employee education

Employees place a lot of trust in their employers when it comesto benefits. This gives employers the opportunity to engageemployees in the benefit decision-making process. Through theirpartnership with the benefits provider, employers can provide abenefits education program that encourages sound benefitsdecisions.

The 3+3 rule

For effective benefits education, employees need at least threeways to learn about their benefits as well as three weeks toprocess the information before enrollment.

Multiple communication resources—from printed pieces toWeb-based interactive tools—allow for different learning styles.Employees also need sufficient time to study the information—takingit home to consult with family, evaluating their personal situationand attending group and individual meetings.

Simple, relevant educationmaterials

Simplicity is important in making benefits information easier tounderstand and relevant to employees. Begin with an explanation ofwhat the benefits cover and how much they cost. Use tables andgraphs to appeal to visual learners, and keep it short—use bulletpoints and Q&A formats.

Expert guidance

Employees who attend group meetings or one-on-one meetings witha benefit counselor typically find them helpful because they havethe opportunity to ask questions and hear more in-depth informationabout the benefits.

Make recommendations

Employers can look to their benefits providers to makerecommendations to employees based on their age, income or lifestage and personal responsibilities. And for benefits that offerseveral options, the provider can give employees guidance on how tochoose among the options.

The coverage employees need

Making effective benefits decisions can be difficult, butemployers and providers can help.

If benefits managers understand the key principles ofdecision-making and serve as choice architects by effectivelypresenting employee benefits information, employees have a betterchance of making the most informed decisions, understanding thevalue of their benefits and getting the coverage they need.

David Leopold is the vice president of marketing strategyand communication at Unum. Leopold graduated from the University ofPennsylvania with a bachelor's and master's degree in history andearned an MBA from Harvard Business School.