According to a recent Eastbridge study, 92 percent of benefit brokers are selling voluntary benefits. Out of the remaining 8 percent, half plan to sell voluntary in the future.[1] That said, you've seen firsthand how the insurance industry is changing right in front of us. Before the Affordable Care Act changed the way health insurance was purchased, voluntary benefits were often sold at the worksite as an employee perk or convenience and often managed separately from major medical plans and/or enrolled off-season. Doing so inadvertently reinforced the perception that voluntary benefits were an added bonus and not a fundamental part of a health benefits plan. But the reality today is that none of us can afford to position voluntary benefits as voluntary — they are fundamental benefits that fortify any health plan.
As health care costs continue to rise and employers shift more costs to employees, the value of voluntary benefits is greater than ever before. Consider, a workers' average contribution to family coverage has increased 81 percent since 2004.[2] This means that the average annual premium for family coverage with an employer-sponsored health insurance plan is now close to $17,000.[2] Health care costs will continue to rise as they always have, but the employees' financial risk does not have to grow along with it. The innate flexibility of voluntary benefits allows for personalized coverage options without directly increasing the employers' share of cost. Seventy percent of employees say they're likely to purchase voluntary insurance if the benefits were offered by their employers.[3]
Benefits are a way to manage financial risk
We get it. The details of health insurance policies are things most people would rather not think about. In fact, almost half of employees confess to spending less than 20 minutes preparing for and selecting benefits each year.[4] Many people spend more time researching a new car or planning a vacation. In fact, nine in ten typically choose the same benefits year after year.[4]
The problem with that is that a traditional employee benefit pyramid relies on perceived needs, not financial risks. For example, ancillary benefits like dental and vision are common parts of an employee benefit package. The plans offer low premiums which make them attractive, but they do much less to help protect someone from financial ruin.[5]
The maximum single event benefit for a root canal is $1,500 under most dental plans. Vision plans may offer $1,000 for Lasik surgery. Compare that to a $50,000 maximum benefit under most critical illness plans. Yet, only 30 percent of companies offer critical illness plans to their employees, while 95 percent offer dental and 83 percent offer vision.[5]
In a recent study conducted by Windsor Strategy Partners, their analysis of a specific sample case showed a 1 in 10,000 chance of receiving more than $3,000 in claims payment over 10 years from one's vision insurance carrier; a 1 in 1,000 chance of receiving more than $5,000 in claims payment over 10 years for dental; but a 1 in 10 chance of having a critical illness diagnosis over 10 years which could cost you $34,000.[5]
This is a glaring example of where perceived need outweighs financial risks but shows an opportunity for brokers to help educate clients and their employees about the correlation between benefits selection and financial risk.
The 2015 Aflac WorkForces Report found that 53 percent of workers would have to borrow from their 401(k) and/or use a credit card to cover costs associated with an unexpected serious illness or accident.[4] Employees need to understand that having the right benefits package in place is about helping secure finances and minimizing the impact to their bank account or savings when life throws a curve ball.
In today's health care market where employers and employees are sharing more costs and responsibility, financial risk must be part of the benefits conversation.
Here are some questions that we need to make sure employees ask themselves:
- What are my major medical choices? What do the plans cover? What is my contribution?
- What additional coverage does my family need?
- How much can I afford to pay for additional protection?
- How much would a major health event impact my financial plan?
- Which combination of plans best protects my health and finances?
The value proposition for voluntary benefits options has changed
Your clients are faced with difficult decisions that affect their company's bottom line, and controlling costs remains a top business objective, especially as benefit conversations have escalated from human resources to the C-suite executives. Your clients are now demanding hard business cases to support employee benefits offerings and recommending additional coverage options may seem irrational. As a trusted advisor, your clients are looking to you for solutions; therefore, positioning voluntary benefits as fundamental benefits that help fortify their plan is key.
New health care laws changed how we think about health insurance, and now it's time to reshape how voluntary benefits are positioned to help people see the total value of health and wellness plans. Brokers with the foresight to elevate voluntary benefits into the overall benefits or total rewards strategy are more likely to increase their client base, and more likely to grow their sales.
Bottom line: Voluntary benefits are fundamental in today's health care market. They are a win for all concerned — for the employer, who provides competitive benefits that help retain and attract top talent; for the employee, who can choose the supplemental health insurance options that suit his or her family's needs and budget; and for the broker, who increases business by helping to provide cost-effective solutions for both their clients and their workers.
[1] "Brokers and Voluntary Benefits – the Evolution Continues," joint survey by Benefits Selling and Eastbridge Consulting Group, June 2015.
[2] Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2014 Employer Health Benefits Survey.
[3] 2015 Aflac WorkForces Report, a study conducted by Research Now on behalf of Aflac, January 20 – February 10, 2015. Includes somewhat, very and extremely likely; of those employees who are not currently offered voluntary insurance benefits by their employers.
[4] 2015 Aflac WorkForces Report, a study conducted by Research Now on behalf of Aflac, January 20 – February 10, 2015.
[5] "Where does the risk exist" white paper, Aflac 2015
This article is for informational purposes only and is not intended to be a solicitation. Z160128 (2/16)
