Few can doubt that healthcare reform has changed the employee benefits landscape. Voluntary products are at the forefront. Simply put, worksite voluntary products such as term life, disability income, accident, critical illness and hospital indemnity insurance have been gaining momentum over the past several years. Employees want and need them. Non-traditional benefits/options are also being added to the modern workplace including auto & home insurance, legal services and even pet insurance. Employers can add them to their benefit packages with little or no cost, and they are a strategic fit due to increasing employee out-of-pocket expenses from high deductible health plans.
According to the recent Transamerica Employee Benefits White Paper The Benefits of Choice Series, public and private health care exchanges are impacting voluntary products. “For the benefits industry – and the voluntary market in particular – the question is not whether change will occur, but how, and in what ways, voluntary products will evolve into this new landscape”. The report indicates that private exchanges will have a positive impact to both employers and employees including an increased knowledge and awareness of voluntary benefits.
In an era of increasing costs and shifting financial responsibility, voluntary benefits can help employees build a safety net. They can be offered at little or no cost to employers and pay cash to workers to help cover unexpected out-of-pocket costs due to an illness or injury not covered, or by gaps in major medical plans.
Results from Prudential’s Eight Annual Study of Employee Benefits Today & Beyond called The ABCs of Voluntary indicate that brokers and employers alike expect both demand and participation in voluntary products to grow. Of note, “7 in 10 brokers believe that selling voluntary benefits brings better business results as well as higher employee satisfaction”. And like the Transamerica Report, the study indicates that employees will be looking for more education and information related to these changing benefits with employers turning to the carriers for help.
“7 in 10 brokers believe that selling voluntary benefits brings better business results as well as higher employee satisfaction”
For most employers, benefits education and awareness only happen during a short window during an annual or open enrollment season. However, some employers are now considering providing year-round benefits education for their employees including life event outreach. It’s not surprising that Gen X and Gen Y employees require more help to understand how their benefits work.
Aflac, best known for its supplemental & voluntary benefits offerings and the Aflac Duck marketing campaigns, provided a good national snapshot of workplace-benefit topics in its 2014 Aflac WorkForces Report including:
- 80% of employees agree that a well-communicated benefits package would make them less likely to leave their jobs
- 73% of employees think health care reform is too complicated to understand
- 86% of employees think the medical costs they’re responsible for will increase
- 10% of employees say high medical costs have affected their credit scores
- 40% of businesses in 2013 awarded employees smaller raises than in previous years
- 25% of businesses expect to award smaller raises in 2014
- 10% of companies expect to offer employees stipends in 2014 to purchase health care coverage on their own, instead of offering company-provided benefits
While some of these results may surprise you, I expect to see even bigger moves by employers in the next couple of years toward offering employees stipends to purchase voluntary benefits on their own through payroll deduction and/or on public and private exchanges.
Are You Ready?
The impact of healthcare reform is becoming clear and shows the importance of voluntary benefit options. As this growing trend continues and employees become more comfortable purchasing their own benefits, carriers should be asking themselves several questions:
- What impact will this have on my current distribution channels?
- Will a traditional individual sales model even exist in 5 - 10 years from now?
- Does my current product portfolio address the growing need?
Are you ready to adapt to successfully meet this growing trend?
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