The last few years have brought unprecedented financial pressures to employers. As that pressure increased, so did the speculation that ancillary benefits would fall by the wayside. It seemed like an easy way for employers, especially those who own small- and medium-sized businesses, to keep benefit costs in line with dwindling cash flow.
But that didn't happen.
In fact, we're seeing quite the opposite. Many realize they have other options besides eliminating benefits. Some employers are adding voluntary to expand their benefit programs. Others are restructuring and using voluntary benefits to help keep their employee benefit investment relatively flat.
How are employers using voluntary in their benefit packages?
For a long time, voluntary benefits were seen as add-on, nice-to-have benefits. Obviously that's no longer the case. Employers want to expand their benefit offerings and are using voluntary benefits to do so. And, employees are more concerned about and actively taking responsibility for protecting their financial security. Voluntary benefits are now satisfying a core portion of a companies' benefit package.
Here are a few examples:
Adding voluntary to complement existing employer-paid benefits. An employer can add voluntary term life to the employer-paid life, long-term and short-term disability insurance they already have in place. This addition will allow the employer to expand their benefit package without extra cost and give employees an opportunity to buy additional life coverage for themselves and their dependents.
Restructuring an employer-paid benefit to include an employee buy-up option. An employer who has been paying for life, dental and vision insurance could change their dental overage to a core/buy-up design rather than paying for all of the dental coverage. The employer now pays for a base level dental benefit and employees have the option to buy up to a richer benefit.
By restructuring, the employer can still offer a comprehensive dental benefit while managing rising benefit costs. The addition of a buy-up option allows the employee to choose the benefit level right for them.
Replacing one of their employer-paid benefits with voluntary. An employer who has been paying for dental, life, short-term disability and long-term disability insurance for their employees can change the employer-paid short-term disability to voluntary.
This replacement will help the employer keep their budget relatively flat, while assuring employees have access to coverage to protect their income in the short term.
Why aren't these companies rushing to eliminate benefits?
Employers recognize the importance of a strong employee benefit package. Taking away benefits and exposing employees to risk isn't something many employers want to do. In good economic times and in bad, benefits remain a cornerstone of the employment relationship.
Plus, employers recognize employees need access to benefits to protect themselves and their family. By offering a choice of benefits, employees can take responsibility for purchasing the benefits they need most, with the workplace as an access point.
What does this trend mean for you and your business?
First off, it means your clients need you now more than ever. Employers need your help to make sure they offer the right benefits. We've heard many employers say they thought they had voluntary covered. But upon careful review, some of their voluntary benefits weren't doing as much as the employer thought they did to help protect their employees and their families.
Second, it means a lot of opportunity to diversify your revenue stream and build stronger client relationships. Specifically, many businesses with 50 to 200 lives are adding new voluntary benefits.
Most importantly, this shift means expanding your expertise when it comes to voluntary benefits. In order to be successful, it is important to:
o Understand how voluntary can play a role in an employee benefit program and the importance of offering meaningful coverage -- knowing the differences between core insurance and supplemental benefits, i.e. disability insurance vs. cancer or accident coverage.
o Be well-versed in voluntary contracts and provisions and learn how small changes can make voluntary benefits even more affordable for employees. They can't buy coverage they can't afford.
o Know what types of education, enrollment, administration services and technology are needed for good participation and case level success.
o Have a clear understanding of the ongoing support needs of voluntary business. Additional attention is needed to keep participation high and employees satisfied.
What is the future of voluntary benefits?
It is clear that employers who understand voluntary benefits can enhance their benefit package, manage costs and help protect employees -- the data backs that up with the increase in voluntary business.
Given the increase in the amount of coverage employees are buying, it's also clear employees are beginning to focus more sharply on the role voluntary benefits play in helping protect themselves, their families and their assets. In fact, 76% of employees who have bought voluntary benefits said it is important to have the opportunity to buy the benefits at work, according to the 1st Quarter 2010 Principal Well-Being Index.
Voluntary is going to become a bigger part of your business as more employers use them in their benefit programs.
Five things to know about voluntary benefits
1. Voluntary benefits are here to stay: Voluntary benefits aren't just a short-term cost-containment measure in response to the current economic downturn. They will be a fixture of employee benefit packages going forward as employees take more responsibility for their benefits.
2. Voluntary benefits must be valuable: Make sure the voluntary and employer-paid benefits work together and the benefits offered are meaningful, wanted and needed.
3. Voluntary benefits need to include choices: Employees have different needs. Offering a choice of benefit levels allows the employee to select the benefit that best needs their needs and they can afford.
4. Voluntary benefits need to be effectively communicated: Employees need to know the who, what, when, where, why and how of benefits. Taking time to create a voluntary education plan tailored to your client's needs helps ensure employees are satisfied.
5. Voluntary education should be needs-based: Employees are much more likely to purchase benefits if they understand the financial impact on them and their paycheck. Avoid high pressure sales tactics that result in employees terminating coverage later on.
Also, Art Brooks discusses "Providing voluntary benefits as a value-add"
Amy Friedrich is vice president of the specialty benefits division at the Principal Financial Group.
Tom Jocz is managing partner of Diversified Insurance Services. He has 20 years experience in helping business customers with all facets of their employee benefit management programs.
