In life, we need to expect the unexpected. One could argue that this is an apt description for voluntary benefits, which were long viewed by brokers and employers as a labor-intensive afterthought.
Individually underwritten policies like accident, critical illness, hospital indemnity, identity theft, pet protection and numerous other coverages offered through payroll deduction weren’t seen as strategic pieces of the overall benefits package. Employees didn’t want or use these products, so the story went. They were too difficult to implement, took too much time, prone to bad customer service experiences and were a distraction — all myths that have been decisively dispelled in recent years.
COVID-19 produced numerous silver linings, despite all of its obvious damage. Chief among them: working Americans finally learned they needed to better prepare for out-of-pocket exposure to unexpected serious illnesses or accidents. The clear strategic value of voluntary benefits as affordable income-protection vehicles that enhanced core benefits without much of an employer outlay soared to new heights.
We will examine in more detail in this first of a four-part series of articles how the employee populations that benefit advisers serve are benefiting from post-pandemic silver linings, the positive effects of which are expected to last for years to come.
In the case of voluntary benefits, these products and services transitioned into true group supplemental health plans working in conjunction with group medical insurance, which often are naturally sequenced within the enrollment environment. That’s because as deductibles rise, plan participants are eagerly seeking ways to fill coverage gaps, especially for unexpected medical events involving a hospital stay. In this regard, these products transcend income protection by also covering indirect expenses involving travel, lodging and child care that are unrelated to medical bills.
The benefits do not increase overall medical utilization, since they’re merely covering illnesses and accidents that were going to happen anyway. What they do is sensibly enhance a health plan member’s coverage and offer peace of mind about bridging coverage gaps.
The larger problem across the workplace and society is that the U.S. is becoming less healthy and older, with a growing number of preventable diseases traced to lifestyle choices. While doctors and hospitals are reducing death tolls, there has been a sharp increase in illnesses that people no longer die from with catastrophic consequences for both physical as well as financial health. Leading conditions include heart attack, stroke, cancer and end-stage renal failure.
It may come as no surprise that three of the most popular forms of coverage we see in the marketplace include hospital indemnity, critical illness and accident insurance. Others are cancer plans and short-term disability policies with a monthly rather than weekly benefit.
As voluntary benefits evolved, pressure built to streamline coverage, make them low touch, intuitive and more easily integrated into the overall enrollment experience. They have become easier to use now. Stringent paperwork has been replaced by online claims submission and faster turnaround times for processing payments. Medical underwriting has given way to guaranteed issue, and in many instances, pre-existing conditions limitations are even being waived.
Still, the challenge has been to ensure these coverages aren’t lost in the shuffle. Some employers that were concerned about having too many options on the table introduced these benefits off cycle in hopes of spotlighting their value with more meaningful education.
Whatever approach to communicating the value of voluntary benefits, an important point to highlight is that they’re being used in conjunction with flexible spending accounts, health savings accounts and health reimbursement arrangements to leverage benefit dollars. Employees will appreciate knowing that integrating these components makes for a more robust offering. That said, the added layer of protection from voluntary benefits also enables HSA account holders to save and accrue those funds for retirement, optimizing their triple tax advantages in the process.
Voluntary benefits also offer employers tremendous strategic value in the form of a competitive advantage. Between the Great Resignation, a tight labor market and growing emphasis on personalization versus a cookie-cutter approach to benefits and compensation, voluntary benefits serve as a recruitment and talent management tool.
Employers need to tap new and creative ways to attract and retain employees beyond just a paycheck. The competition for talent is as fierce as it has ever been. No longer is it enough to offer comprehensive medical benefits and a retirement savings plan. The need to transcend these table stakes has never been greater.
Leveraging voluntary products and services will help employers showcase that they offer a broader suite of benefits. From a cost standpoint, all it takes is a nominal fee to set up payroll deduction. While voluntary benefits have historically been offered on an employee-pay-all basis, some employers are contributing amounts or even picking up the entire cost of coverage. We are seeing an increase in employers that are bundling these benefits inside of health plans.
he cost of voluntary products also has been dropping over time. The way these policies were individually underwritten in the past made them much more expensive. While they were more generous in terms of the product provisions, utilization rates were low and member experience was poor. Over the years, as the plans became group products, carriers have been forced to either increase benefits or drop prices and many have opted to do both.
Following high inflation and rising healthcare costs, voluntary benefits are turning into an easy button for employers that are smartly investing in their employee benefits package.
Article Published By: BenefitNews.com
Article Written By:
Head Of Ancillary Benefits Solutions, BCS Financial