The Cost of Benefits - Balancing Premium and Out of Pocket Costs

As health care costs continue to rise, the premiums being paid by employees to access those benefits may increase as well. With employers and employees alike feeling the pressure of rising premium costs, voluntary benefits continue to rise in popularity as many employers look for alternative ways to ease the out-of-pocket burden that employees may face with healthcare costs. Voluntary benefits allow employers to offer benefits that are attractive to employees with little, if any, cost to the employer. Employees benefit because they have a variety of insurance options available conveniently in one place, and often with lower premiums than individual policies they would have bought themselves. Let's take a look at how offering voluntary benefits can help balance the costs of premium and out of pocket expenses throughout the year.

What are voluntary benefits?

Voluntary benefits are coverages and products made available to employees for elective purchase. Because of their cost efficiency and portability, as well as their contribution to an employee’s work–life balance, voluntary benefits are becoming a central component of many companies’ overall benefits strategies.

These programs have four key characteristics:

• 100% employee-paid
• Offered through an employer
• Solicited and enrolled through a carrier or enrollment firm
• Paid through automatic payroll deductions

What are some common voluntary benefits?

• Accident insurance
• Critical Illness insurance
• Hospital Indemnity insurance
• Permanent life insurance
• Disability income insurance
• Accidental death and dismemberment (AD&D)
• Long–term care insurance
• Retiree medical insurance
• Prepaid legal services
• Pet health insurance
• Identity theft insurance
• Adoption assistance

Why should employers consider expanding their benefit offerings to include voluntary benefits?

Trends show employees have strong emotional appeal towards these benefits and have come to expect them. Additionally, there are typically no fees or costs for employers, and when employees are actively engaged and educated on the benefits before enrollment, these plans can complement the goals of most corporate work/life programs. Voluntary benefits can offer easy implementation, as most do not have legal and regulatory issues associated with insurance benefits, and oftentimes require little post-implementation administration or support.

What process should employers follow when expanding their non-traditional voluntary benefit packages?

Employers wishing to roll out new voluntary benefits must show their support for these products in order for them to take off with employees.

Showing support motivates workers to take notice and see the value for themselves and their families.

• Examine your current benefits package to determine which benefits are popular (or not).
• Talk to employees to determine what voluntary benefits they would prefer.
• Determine which benefits are offered by your competitors, as current and prospective employees may use this information as a benchmark for evaluating your company.
• Determine the source(s) of benefits that offer the most value for the lowest cost (this is very important to ensure success of a voluntary program because of employees’ perceived value).
• Determine enrollment logistics, including methods of enrollment. One-on-one enrollment is the most effective means of communication and provides personalized attention.
• Determine service logistics, including support, new employees, terminated employees and re-enrollments.
• Initiate an employee communications campaign to educate employees on what voluntary plans are offered and the benefits of electing them.
• Consider offering benefits multiple times per year, not just during open enrollment. This allows employees to focus on one or two voluntary packages versus being overwhelmed with many packages all at once.
• Follow up to ensure employees are satisfied and that there are no issues with any of your voluntary benefits, once implemented.

Coverage Education

It is important that employees fully understand their policy so that a misunderstanding does not lead to resentment toward the employer. For instance, if a consumer does not completely understand the nuances of property-casualty insurance and believes herself to be covered, it will come as a shock and possibly with misdirected frustration in the event of a major loss.
When offering any benefit option, employer-paid or voluntary, you should be sure your employees understand exactly how the coverage works.

Here are a few ways to make sure your employees are sufficiently educated about their benefits:

• Invite current employees to the monthly or quarterly benefits meetings provided for newly hired individuals.
• Many voluntary benefits providers are willing to send a representative to discuss their coverage with employees.
• While most benefits administrators don’t have time to meet individually with employees, consider scheduling small-group meetings with a few employees who have questions.
• Enhance your existing benefits communication program with social media. Social media provides a convenient and effective way to reach out to your employees with educational information, tips and reminders.

Measuring Voluntary Benefits Success

To ensure that voluntary benefits programs are as competitive and effective as possible, employers should measure the success of the programs every 12 to 24 months. Employers can conduct surveys to test employee awareness of, understanding of and satisfaction with the voluntary benefits programs. Companies can also benchmark their portfolios of voluntary benefits against those offered by industry peers. Finally, employers can examine participation rates among employees to determine if they are at, above or below industry norms with regard to re–enrollment and persistency.

Please contact your AssuredPartners team for assistance in determining if and what type of voluntary benefit plan designs are right for your organization.