The reasons for keeping or adding voluntary benefits like term life, vision, dental, long term care (LTC), disability insurance in 2010 may surprise some employers and employees. Talk about rising health plan costs and budget cuts in a sluggish economy has left many assuming that such benefits are a ploy to reducing employer paid health care costs, but that is just not the case from what we are hearing from clients and our industry. Just as important has been a desire to help employees afford growing financial protection needs, mitigate the potential for coverage gaps, and offer more choices for our diverse workforces.
According to the International Foundation of Employee Benefit Plans and Employee Benefit News survey completed in September, 68% of the 833 employee benefit professionals provided voluntary benefits plans to provide access to a greater array of benefits and support employee choice and flexibility. Voluntary benefits allow employees to add valuable coverage to their benefits package at economical group rates while employers are able to enhance employee benefits at virtually no cost.
What’s driving this philosophy may be a recession which has forced us to take a sincere look at our employee populations. For example, LTC is one of the fastest growing voluntary benefits in some markets, creating opportunities for the nation’s aging 78 million Baby Boomers to buy an affordable plan. Some voluntary programs are portable, such as life and LTD, at the low group rate, a benefit to those who may still lose a job or for Gen X and Y employees who hope to continue to move on to new employers as soon as the hiring freezes dissipates. In the same September survey, 88% of the respondents said that portability will continue to be an important characteristic. Additionally, household incomes impacted by a spousal job loss have made voluntary benefits such as low cost insurance coverage for employees and dependents attractive. One catastrophic medical event by either spouse could financially wipe out any savings of a family. Employees purchase insurance at a cost that may be only minimal to the employer’s overhead.
For employers who did cut back on benefits or the share that the company pays, instead of cutting back on the employee payment in 2010, I believe we will see more voluntary benefits as employees can often buy up in their benefit selections. Additionally, benefit such as vision insurance, which is not always part of the core benefits package, can be perceived as a better deal than allocating money to a flexible spending account because there are often network provider discounts on eyeglasses, lenses, and frames. Even if employees are participating in a flexible spending account, they may see the added value of a vision plan as a way to use their dollars more strategically.
Most employees are likely to seriously consider whatever benefits the employer offers. This reflects the employee’s confidence that if the employer is offering this benefit, it must be important. Small businesses dealing with the difficult economic times mean tough choices for owners. Instead of paying for DI, Life and Dental policies, small business owners are seeing the wisdom of offering those kind of benefits on a voluntary basis, a la carte- style, where employees can pick and choose among them and pay for the ones they want and can afford.
Not only does offering voluntary benefits cost small business virtually nothing, it helps level the playing field with larger companies. These programs usually have looser underwriting requirements and at group rates that are lower than if they went out and got coverage on their own.
Assurant Employee Benefits, one of the nation’s highly regarded service provider, reported in November an 18% increase in disability, dental and life insurance sales, with the number of companies seeking quotes on voluntary benefits rising 32%. Even with such increases, we have to mindful that the financial impact of 2008, even when viewed as mild in our region compared to national trends, may decrease new enrollments. If 25% of employees were selecting a benefit last year, it may be 20% this year.
So what can benefit professionals do in their companies to promote the value of their voluntary benefits plans? I have seen the most successful enrollments the result of some of the following techniques:
2010 will keep us all on our toes with the anticipation of changes in health care. We may find that unique voluntary benefits such as accident insurance, identify theft coverage and even pet insurance get less attention, but many of the core benefits will probably become even more valuable to help both employers and employees adjust to new ways of handling their health care.
Scott Wells, VP with Tower Benefit Consultants, a Virginia Beach firm with 22 years experience in employee benefits and health care. TBC is one of the 150 agencies of United Benefit Advisors providing employer/employee research, educational, and benefit services nationwide. Wells can be reached at 757-424-2493.