When having conversations with your clients, it is always a good idea to remind them of the value of offering a strong benefit program.
For employers, strong benefits give employers an edge when it comes to attracting and retaining employees, and reducing recruitment and training costs. Benefits can encourage employees to work harder and perform better, which has an impact on the bottom line.
For employees, strong benefits help protect physical and financial well-being. Seeing friends and co-workers lose jobs has heightened appreciation of employee benefits. By maintaining a strong benefit package now, employees will remember their employer went out of its way to help them when times got tough. According to the 2nd quarter 2009 Principal Financial Well-Being Index, benefits matter to employees:
o 47% of employees said life insurance is very important to them.
o 63% of employees said dental insurance is very important to them.
o 51% of employees said disability insurance is very important to them.
As a consultant, you can recommend solutions to your clients to help them make benefit decisions that work for both their businesses and their employees. What follows are four ways to accomplish this.
1. Cover core needs and allow additional coverage
Your clients can manage costs and help satisfy the diverse needs of their employees by providing a standard or fixed level of coverage for core products -- dental insurance, disability insurance and life insurance -- and giving employees the choice to buy additional coverage.
Employees can purchase the benefits they need and can afford, above the standard coverage at lower group rates with the convenience of payroll deduction.
2. Use voluntary benefits
Voluntary benefits are important to employers and employees. At a time when paying for benefits is difficult, voluntary benefits allow your clients to enhance their current benefit packages at little or no cost to their businesses. Employees have the convenience of purchasing insurance protection at work.
Employers are realizing these benefits and voluntary benefit programs are steadily increasing. In fact, 64% of all employers offer at least one employee-paid product in their benefits portfolio, according to the 2006 Eastbridge Voluntary Overview.
Before offering voluntary benefits, make sure your client is willing to support and endorse the program to its employees. When employers take a proactive role in communicating the value of their benefit packages, employees will see their employer cares about them by offering choice and flexibility.
3. Make benefit design changes
Every year an employer has to make difficult decisions regarding contribution levels, benefit design changes and what benefits to offer. You need to look past the spreadsheet and standard benefit designs and take a closer look at the benefits themselves.
Remove benefit provisions the majority of employees don't take advantage of or may not need. Making changes to benefit provisions and deductibles can add up to significant savings for both employers and employees, and allow your clients to shift the savings to other benefits.
4. Educate employees
With more flexibility for employees in choosing their benefits comes more responsibility for employers to educate employees about their benefit options. Employees need help understanding their gaps in protection, how the benefits your clients are offering can fill those gaps and how much benefit they can afford. Lack of knowledge and appreciation of the benefits can undermine an employer's reasons for offering them in the first place -- to attract and retain a motivated, loyal workforce.
While group meetings are a good place to start, ideally employees should receive a one-on-one benefit consultation. Most employees receive little assistance when identifying gaps in their insurance and financial coverage. One-on-one meetings allow employees to ask questions they may not feel comfortable asking in a group setting. They also allow employees to receive personal attention as well as confidentiality to discuss their own personal situation and see how the benefits can make a difference in their long-term security.
While the economy is pressuring employers to look at their business expenses, remind them of the importance of employee benefits. Offer them benefit solutions to help maximize their employee benefit packages by covering core needs, offering voluntary benefits, making benefit design changes and educating their employees.
Ways to maximize benefits and manage costs
Life insurance:
o Employers who have been providing a traditional rich benefit like two- to three-times annual salary might want to offer a base benefit like one-times annual salary and allow employees to purchase additional coverage to fit their individual needs.
Disability insurance:
o Offer short-term disability where the employer and employee equally share the premium.
o If currently offering long-term disability (LTD) and your client is still able to afford this traditionally inexpensive benefit, continue to offer it. If your client is not able to afford to pay the LTD benefit, he or she can offer it as a voluntary benefit.
o Change the maximum benefit period from the standard age of 65 to five years for up to 30% savings. According to the Council for Disability Awareness, the average long-term disability absence lasts 2.5 years.
o Lower the benefit percentage from 60% to 50% for up to a 24% savings and actually increase the income replacement ratio as long as the employee uses after-tax dollars to buy the voluntary benefit.
Dental insurance:
o Take advantage of network savings. Offering a design that encourages in-network usage is a good way to promote cost savings. Overall premiums are reduced, as well as member out-of-pocket costs, due to the decreased fees PPO providers charge. Active PPO designs generate increased in-network usage because the benefits are richer when network providers are seen for services.
o Compare the savings of using an active PPO design with a traditional PPO design:
*Waived for preventive care
** Not waived for preventive care
Other options if Active PPO doesn't meet your needs:
o Consider offering a core benefit where the employer pays the premium for preventive care (exams, cleanings and X-rays) that everyone can use and allow employees to elect to purchase additional coverage like basic and major services, and possibly orthodontia. This is a great solution for employers looking to reduce their overall contribution.
o Reduce maximums from $1,500 to $750 for an average 14% savings. According to Principal Life internal data, of those members who have $1,500 annual maximums, only 4.2% ever reach their maximum. If the maximum is reduced to $750, still only a small percentage (6.9%) of members hit it.
Chris T. Calos is vice president of group sales at Principal Financial Group. He is responsible for leading distribution and service operations for individual and group disability, group life, dental and vision.
David Levitz, CLU, ChFC, RHU, is executive vice president of GCG Financial Inc. He helps employers with the selection and implementation of employee benefit programs.
