Brokers across the board are tightening their belts these days.With leaner commissions, a sluggish economy and the uncertainty ofhealth care reform eating away at their livelihoods, brokers arehungry for a new source of revenue. Voluntarybenefits offer an appealing addition to a broker's menu ofproducts—and a new income stream that can fill their revenuegap.

Lots of medical brokers are tightening their belts these days.With leaner commissions, a sluggish economy and the uncertainty ofhealth care reform eating away at their livelihoods, brokers arehungry for a new source of revenue. Voluntary benefits offer anappealing addition to a broker's menu of products—and a new incomestream that can fill their revenue gap.

One benefits expert puts it this way: “Benefits brokers' primarybusiness has been medical and employer-funded benefits and, formany, voluntary insurance simply hasn't been their bread andbutter,” says Bonnie Brazzell, vice president at EastbridgeConsulting Group. “However, changes have taken place in the lastseveral years—benefits plans have gotten more expensive, andcompanies are increasingly cost-sharing with employees—so we seemore brokers fully incorporating voluntary benefits into theirbusiness model and proactively cross-selling these offerings.”

Now is the right time for voluntary benefits. There are manyfactors that positively impact the growth potential of voluntarybenefits and the opportunity that awaits your agency. They are:

Health care reform. Health care reform hascreated some of the most significant changes to affect the employeebenefits world, and companies are feeling pressure to change theirbenefits strategies to comply with the new legislation. And they'relooking to their brokers for help. In fact, a MetLife study shows57 percent of employers with fewer than 500 employees say they willrely on brokers more than ever because of health care reform. Sowhile the new health care legislation has probably complicatedbusiness, it's also made you more important to your clients.

Brokers see the potential promise health care reform holds forthem: Roughly half of them say the changes taking place will causethem to change the types of voluntary products they currently sell.In particular, more than half expect to sell additional accident,critical illness, short-term disability, cancer and term lifevoluntary insurance.

Rising health care costs. Reports showemployers are expected to pay nearly 9 percent more for health carecosts for their workers in 2011, the highest level in five years.And employers will more than likely ask their workers to absorb 12percent of these costs, according to a report from consulting groupHewitt Associates. Almost a year after health care reform wassigned into law, a Deloitte study found there is $363 billion morein hidden health care costs than reported in most officialgovernment accounts. These hidden costs are attributed toexpenditures that fall outside traditional areas such as doctors,drug prescriptions, hospitals and insurance coverage and representan additional 14.7 percent of health care spending not previouslycaptured in the national health expenditure accounts data.Voluntary benefits can be an integral part of a redesigned benefitsplan that helps your clients better manage their health careexpenses.

More out-of-pocket costs for employees.Employees are experiencing more out-of-pocket costs for health careas their employers have been forced to shift costs to save money onhealth care expenses. They've seen increased premiums, co-pays anddeductibles in recent years, leaving workers with more financialrisks than ever before. Employees are more interested than ever infinding a solution to fill the gaps left by changes in theirbenefits plans. They've expressed considerable interest inpurchasing supplemental coverage to help pay for some of theexpenses not currently covered by their insurance plans. A 2009Colonial Life survey showed 78 percent of full-time employed adultswho are enrolled in an insurance program provided by their employeror their spouse were at least “somewhat” interested in purchasingvoluntary benefits. 

More consumer-directed health plans. Interestin consumer-directed health plans continues to grow. These plansput employers in the driver's seat, counting on them to make moreinformed and frugal health care decisions if given a biggerfinancial stake in the process.  Redesigning anemployee benefits plan to include voluntary benefits that meet theindividual needs of workers can provide a cost-effective benefitsstrategy for your clients.

Voluntary benefits are exempt from marketreforms. The impact of coverage mandates and taxprovisions will be minimal when it comes to benefits other thanmedical. Voluntary benefits will not be offered through insuranceexchanges and will be exempt from changes to guaranteed issue andpre-existing condition requirements, as well as from the excise taxon health plans when deducted on a post-tax basis. Accident,long-term care and disability plans aren't subject to the excisetax whether paid for with pre- or after-tax dollars. So voluntaryinsurance coverage will still be a very relevant part of employeebenefits in the future.

THE BENEFITS FOR BROKERS

Brokers can enjoy many advantages with voluntary benefits,including a new revenue stream, stronger client relationships and afast entry to market.

A reliable new revenue stream. About 40 percentof employees will purchase a voluntary product when enrollmentincludes one-on-one meetings. Each employee in an account couldpotentially represent $60 or more in commissions. You can earn evenmore with bonuses and renewals.

Stronger relationships with group benefitclients. With voluntary benefits, you can provide a way toenhance your clients' existing benefits package at little or nocost while helping meet employees' needs. You also can bring a lotof value-added services to your accounts at no added cost. Doing sohelps position you as a full benefits provider, which means yourclients won't have to look elsewhere to get their needs met.

Quick ramp-up without additional overhead. Youdon't have to become an expert in voluntary benefits or invest inany additional overhead if you partner with an experiencedvoluntary benefits carrier. A full-service voluntary carrier, forexample, has proven enrollment systems and benefits communicationprocesses in place, ready to go the minute they're engaged.

THE BENEFITS FOR CLIENTS

Your clients can also enjoy numerous advantages by makingvoluntary products a part of their benefits plans. Theseinclude:

Better management of their benefit costs. Forexample, employers can offer lower-priced, high-deductible healthplans and provide voluntary insurance to help cover the higherdeductibles.

Lower payroll taxes. As an added bonus,offering voluntary benefits that qualify for pre-taxing can lowerpayroll taxes with each enrolled employee.

Time and money savings. Implementing acomprehensive benefits communication and enrollment program canhelp HR departments preserve precious time and budgetresources.

Employee satisfaction. Offering voluntarybenefits provides a great incentive for workers to stay with theiremployers. Employees can receive more benefits with no direct costto the employer. The employer is also helping employees protecttheir health, savings and everything they've worked so hard toachieve. A Unum study revealed employees who are offered voluntarybenefits in the workplace are more satisfied with their benefitsthan those who aren't offered them. Fifty-three percent ofemployees at companies that offer voluntary benefits are satisfiedwith their benefits packages, compared with 34 percent who say thesame at companies without this type of coverage.That kind ofsatisfaction is valuable to employers since voluntary coverageallows a company to offer more benefits and add perceived value toa plan without affecting the bottom line.

THE VOLUNTARY PRACTICE

Contrary to what you may think, brokers don't need clients withthousands of employees to take advantage of voluntary benefits. Infact, the majority of independent benefits brokers say companieswith 100 or fewer employees is their target for sales of thosebenefits.

Les Blackwell, president and CEO of Benefit & InvestmentSolutions, understands why. “It's a no-brainer for anyone offeringhealth insurance to offer voluntary benefits to make up for loss ofcommissions, especially for under-100 employers. We used to seevoluntary benefits as something we had to talk employers into, moreof an add-on but not a service that added value to our operation.That has changed. There's a lot of opportunity for brokers torethink this line of business and look at strategic partnerships todevelop voluntary programs.”

You can quickly ramp up a voluntary benefits practice and beginmaximizing your revenue by partnering with a carrier thatspecializes in voluntary benefits and has proven expertise in theindustry. Working with a company that offers a broad portfolio ofproducts and a host of value-added services gives you the abilityto offer turnkey solutions to your clients without the overhead—andallows them to focus on what they do best without needing to becomean expert in other areas. Look for a carrier that offers a highlycompetitive compensation package, but also insist on one that isfinancially stable and easy to do business with.

When looking for a voluntary carrier to partner with, considerthe many variables that can distinguish a good carrier from amediocre one. Choose a potential carrier based on its ability tooffer these important capabilities:

One-on-one benefits counseling. Surveys ofemployees who meet individually with benefits counselors duringtheir enrollments prove the effectiveness of this method. Virtuallyall of the 5,000 employees (97 percent) surveyed by Colonial Lifesay personal benefits counseling improved their understanding oftheir benefits and that this type of communication is important (98percent). This type of counseling also increases employeeparticipation. Eastbridge Consulting Group found the averagevoluntary benefit participation rate for face-to-face enrollmentsis 46 percent higher than the participation rate for aself-enrollment. That means 46 percent higher commissions forbrokers.

Local enrollers. Using an enrollment firm thatrelies on per-diem enrollers who travel from other locations canadd expense and create a lack of continuity in accounts. Brokerscan encourage long-term client relationships by using a team oflocal, established professional benefits counselors who can conductenrollments and are available for new hire and re-enrollments yearafter year. This method increases client satisfaction andpersistency, which, in turn, increases overallincome. 

Strong benefits communication and education.Companies worry about how to communicate the many benefits changes and options facingemployees today. Change, both positive and negative, creates a needfor enhanced communication and education. By providing benefitscommunication services to your clients, you'll help employeesbetter understand and value their benefits—and their employer'sinvestment in them. 

The dynamics of the benefits marketplace have changed, and smartbrokers see the opportunity to add voluntary products to their menuof solutions. There's plenty of room at the table, so pull up achair and take a seat.

Elana D'Arciprete is vice president of sales for theSoutheastern region of Colonial Life & Accident Insurance Co.She can be reached at 334-472-9200.