Earlier this week, I conducted a continuing education class onvoluntary benefits — from the employer’s viewpoint — for theNebraska chapter of CEBS. A mixture of employer benefitsprofessionals, brokers, consultants and insurance company personnelattended the session. One of the employers represented a largecompany with several thousand associates.

Their benefits manager has been thinking about offeringvoluntary benefits on a “Lending Tree” approach. The idea he’sconsidering is whether to set up a portal that would offercategories of voluntary options to their associates, where there isa menu of available product providers for each product type.

This would follow the Lending Tree approach and is, in fact, theway mutual fund options often are offered in 401(k) plans. He askedwhether this would be a good idea. My reaction is that while thisis not the typical method of offering voluntary benefits, it’s aninteresting concept.

It will work well for some products. A prime example that cameto mind is products in the personal auto/home market lines. Forexample, auto carriers might have a different underwriting approachto risks in various categories. One might be the best for long-termsafe drivers; another might have more favorable rates for familieswith teenage drivers, and a third could be better for drivers witha history of speeding tickets.

Individual long-term care insurance might be another marketwhere this principle would hold true. One characteristic ofproducts such as auto or LTC insurance is they are not historically considered employeebenefits. The products that are “classic” benefits employers wantedto provide fall into the category of financial security for workersand their families.

(Employers did not want workers to have to “pass the hat” tohelp the families of deceased or disabled colleagues, so employersbegan to provide benefits in the event of death or disability.) Onthe other hand, products such as voluntary group disability incomeprotection, dental or voluntary life insurance might not fit aswell into the shoppers’ menu model, because the underwriting ofthese products is usually based on guarantee issue givenparticipation by a predetermined percentage of eligibleassociates.

From an employee viewpoint, the attraction of these products isbased on simplicity of enrollment and premium payment, plusattractive price points. The participation requirement on theseproducts both allows for a sufficient spread of risk to support theunderwriting and serves to keep per unit expenses low, thereforeallowing for favorable pricing given that expected claims arehigher when there is guarantee issue versus individual riskselection.

And in the case of voluntary disability income protection,employers may want to make sure the available plan design iscoordinated with their own sick day plan, income continuation plan,and return to work incentives such as partial disabilityprovisions. The difference comes down to the interrelationshipof enrollment and product.

Some products are best handled via “random access” enrollment,when there is some underwriting, but it is not defined in terms ofparticipation. There is pricing and selection of individualsby the insurance company. For other products, where theunderwriting is based on a group participation concept, enrollmentis typically conducted in a concerted campaign intended to supportthe needed participation.

It would be difficult to find carriers interested in marketingguarantee issue products side by side. Yes, an employer could offerunderwritten products for life and disability income protection, bysacrificing guarantee issue. The trade-off would be declination ofsome applicants, and higher premiums for others.

Some employers might be willing to accept those conditions,others might not. The idea of a menu of providers for at least somevoluntary product lines is worth additional thought. Sincethis represents a different approach to voluntary, I would like tohear from readers on the idea – so please let me know what youthink.