One of the most attractive benefits to employers and their employees is short-term disability income insurance. Employers began to show interest after they determined rich sick-pay plans to be costly and provide little incentive for workers to return to work until the sick days were exhausted. As a result, a majority of employers now commonly restrict their sick-day program to a couple of weeks or less of full pay.
After an employee uses up company sick pay, STD insurance or self-funding by employees then takes over. Many employers do not want to see employees without some sort of income safety net in the case of a short-term disability such as hospitalization or prolonged recovery, and they choose to provide coverage through a group plan or offer it to employees as a voluntary benefit. STD plans usually provide 60 percent to 70 percent income replacement to disabled workers. At that level, most insured employees will want to get back to work as soon as they are able.
As mentioned above, employers decide whether to offer the STD benefit as an employer-paid plan or a voluntary one. In today's marketplace, the core medical plan expenses the employer already bears often drive this decision. The rising cost of medical plans over the past few years has prompted many employers to offer voluntary STD plans in order to reduce overall group benefits premiums.
Because of these emerging trends, I spearheaded and participated in a short-term disability insurance forum for benefit sellers. We considered ways to best position voluntary STD benefits in order to maximize their appeal to employers and their employees in today's market. Here are some of the things highlighted:
Offer a choice of elimination periods
STD plan design revolves around two basic elements: the elimination period (number of days someone needs to be disabled before benefits begin) and the benefit period (number of weeks or months of benefits for which an insured is eligible).
While the benefit period often is defined externally (by the elimination period of an employer-provided long-term disability plan), it may make sense to offer a choice of elimination periods.
Tailor the plan with specific options
There are options available that bring added appeal and can differentiate your product offering from others. One basic option is partial disability, which provides a reduced benefit when a disabled worker goes back to work on a part-time basis. This also helps an employee transition back to a full-time schedule.
Another, newer, option is coverage if and when an employee takes family medical leave, a situation not covered ordinarily by standard STD plans.
Develop case studies
"It can't happen here..." is a lyric from a Frank Zappa song and reflects the attitude of many of us when it comes to financial security needs. We tend to think that disability happens to someone else: to those who are chronically ill, to older people or to people who lead a risky lifestyle.
The use of case studies can clear up "it can't happen here" thinking among your prospects. For example, among people I have known who became eligible for STD benefits was a mother recovering after childbirth, a young woman hit by a car in a parking lot and someone who had surgery. These are common occurrences. Case studies show STD addresses ordinary life needs and that it can happen here.
The conclusion we reached is that the STD market is evolving and expanding. The trend toward voluntary STD designs creates an opportunity for producers to focus on answering this changing need. Employers who are transitioning from employer-paid plans to voluntary plans are looking for STD programs that will be attractive to employees.
Your key to success is to offer well-selected plan designs backed with case studies to help show employers and employees how you and your products best meet their needs.
From the May 2007 issue of Benefits Selling Magazine • Subscribe!
