A great deal is happening in the voluntary benefits market, as more brokers and carriers enter the space, and employers realize supporting overall wellness—physical, emotional and financial—increases presenteeism and productivity.
Eastbridge Consulting Group Inc. in Avon, Connecticut, projects that voluntary sales for 2015 will increase between 3 percent and 6 percent from 2014, and will continue to rise 3 percent to 5 percent over the next several years. It's possible that growth might be even higher, as more carriers get into voluntary benefits and brokers sell higher amounts, says Bonnie Brazzell, vice president at Eastbridge.
1. Controlling costs and employee retention
“Brokers understand voluntary benefits better than in the past and are seeing more opportunities as their employer clients move from employer-funded to employee-funded voluntary benefits to try to control overall costs,” Brazzell says. “Brokers also see more opportunities as more employers move toward high deductible plans, and can see how particular voluntary products fit into the overall benefit package.” According to Metlife's 13th annual Employee Benefit Trends Study, employers’ top employee benefits objectives are retention (41.1 percent) and controlling health and welfare benefit costs (37.3 percent).
“Voluntary benefits can help them achieve both these goals, adding choice and customization to a benefits program while sharing the cost of these benefits with employees,” says Meredith Ryan-Reid, senior vice president, MetLife group, voluntary and worksite benefits in New York City.
The MetLife survey also found nearly 40 percent of employees say a wide selection of benefits would make them feel more loyal to their employer, and 55.5 percent are willing to bear more of the cost in order to have a choice that meets their needs.
2. Attractive to carriers
More carriers are getting into the space, “because it's the place to be for growing revenues and profits,” says Dan Johnson, vice president of sales and marketing for voluntary benefits at Trustmark Insurance in Lake Forest, Illinois. But it can also be “a tough space” to work in because of the administrative requirements, he adds.
“New carriers quickly learn that this is not an extension of the employer-paid buy-ups—much more defined administrative requirements are needed,” Johnson says. “Some carriers have jumped in and then jumped right back out in a very short period of time, leaving brokers and their clients with big messes on their hands.”
Many carriers are also realizing that they don't have the experience in certain product lines that brokers want and clients need, so they are willing to partner with other carriers in a private label or white label basis, he says.
Brokers originally went with one carrier for all their employer-paid and voluntary benefits products, but they are moving toward providing more best-in-class solutions—for not only products, but communications and engagement solutions to help educate clients and their workforce about wellness, high-deductible health plans, PPACA reporting, value of benefits, 401(k) plans and other topics.
While half of voluntary benefit sales occur through takeovers of existing accounts, there is plenty of opportunity to access first time buyers, especially in the mid-sized and smaller employer markets, says Steve Hesler, assistant vice president of product and market development at Colonial Life in Columbia, South Carolina.
Larger employers expect products that are customizable and employer-paid with many self-service capabilities, while small to mid-sized employers need standardized products, worksite sales capabilities, enrollment assistance and more focus on the individual, Hesler says.
“Along with industry-wide investments in customer experience and operational efficiency, we will continue to see carriers make large investments in capabilities that allow them to expand their target markets to reach new customers who have different needs,” he says.
Many carriers have been able to build robust administrative benefit systems which provide complete self-enrollment technology and carrier connections, but others focusing on enrolling face-to-face have been slow to develop these systems, says Tom Wagoner, president of Accelerated Benefits in Columbus, Ohio.
“Their livelihoods could be endangered if employers adopt a self-enrollment platform,” he says, “because the need for benefits counselors embedded into their culture is limited to virtually nothing.
Employers might also choose a third-party benefit administration platform from a payroll company, he says. But the challenge for worksite insurance companies is trying to adapt to 250 different insurance payroll platforms. “It's not like there is a universal plug and play,” he says. Some benefit administration systems also charge a fee to the insurance company to participate, whether or not a person buys their products, so carriers might have to pick and choose which platforms they want to be on.
Marty Traynor, vice president of voluntary benefits at Mutual of Omaha in Omaha, Nebraska, says that brokers are now helping employers use multiple channels—including mobile devices—to educate employees year-round, and not just during open enrollment period.
3. Gap plans and MED
Critical illness and accidents plan sales are experiencing the most growth, Brazzell says. Critical illness sales increased almost 20 percent from 2013 to 2014, and accident sales rose 9.5 percent. Hospital indemnity plan sales grew 10 percent and vision grew 9 percent as employers shifted the benefit from employer-funded to employee-funded.
Trustmark recently changed its critical illness product based on consumer research and advances in medical science enabling people to be diagnosed more quickly and recover faster from mini-strokes and strokes. As such, Trustmark now allows for partial payouts for early detection of heart, cancer and strokes, along with paying for preventative visits and after clinical diagnosis. Every year on January 1, the total policy payout will be replenished automatically, with no change in premiums from the age of issue. If the policyholder wants additional coverage, they would pay an additional premium, calculated for their current or attained age.
Interest in Unum's critical illness and accident policies also continues to be very high, but the carrier's hospital indemnity product is gaining more interest because it covers most hospital stays, including maternity care, says Kathy O’Brien, vice president of voluntary benefits for Unum's national client group in Chattanooga.
“Critical illness policies pay a lump sum benefit for covered conditions upon diagnosis and the policyholder can use the money for whatever expenses they have and not just medical expenses,” O’Brien says. “A hospital indemnity policy reimburses the policyholder with benefits paid directly to the insured to help cover the cost of hospital stays and certain related procedures and treatment.”
4. New ideas
Aflac is enabling its employer clients to look at product bundles and personalize them for their workforce, says Stephanie Shields, vice president of strategy planning and product development for group plans.
“The needs of millennials are very different from those of boomers, and our goal is to offer a benefits mix that helps provide financial protection to our customers, regardless of life stage,” Shields says. “We’re also keeping our products simple—eliminating waiting periods, pre-existing condition limitations and offering generous guaranteed issue amounts. This enables us to plug and play easily with third-party platforms.”
Aflac also offers a “billsaver program,” where individuals who have a medical bill that is $400 or more and not covered by insurance can now have an expert resource negotiate on their behalf.
Aflac is also seeing more employers funding what have traditionally been viewed as voluntary benefits, such as critical illness or accident plans, she says.
Keith Pellerin, Aflac's interim chief marketing officer for individual products, said that many consumers still don't realize just how much exposure they have to high out-of-pocket costs for many of the plans on the health care exchanges.
“From a number of surveys, we’ve seen that over 50 percent of households would struggle to come up with $1,000 in cash in the event of an unexpected accident or illness,” Pellerin says.
Aflac now has a commitment to pay claims submitted Monday through Friday prior to 3 p.m. EST, with all necessary documentation in one business day.
Some consumers are buying gap plans as an alternative to major medical insurance, though certain states require applicants to have a “minimal essential coverage,” or MEC plan, Pellerin says.
Jon Duczak, a vice president at Fringe Benefit Group in Austin, Texas, says employers with large populations of workers who are not eligible for full-time benefit offerings are increasingly offering MEC plans as a voluntary benefit to their employees. The MEC product satisfies PPACA's individual mandate.
Many employers are anxiously awaiting Congress's decision on the Cadillac tax repeal, before determining if they might have to stop offering HSAs and FSAs to avoid reaching the $10,200 employee contribution limit to trigger the tax, Wagoner say.
“The Cadillac tax kicks in January 2018, but most union contracts run three years, and if a union or union employer is negotiating a contract that starts January 2016, there might be a year where the terms could create a huge financial liability for the employer or employee if there is a pass-through clause,” he says.
While hospital indemnity products have typically complimented HSAs, sales of such gap plans may start to compete if the Cadillac tax stays in force, Hesler says.
5. Lifestyle plans
Donald Rowe, vice president of employee benefits at Legal Club of America in Sunrise, Florida, is noticing “a very big push” in lifestyle plans, including identity theft protection, legal service plans, financial education and employee purchase programs.
“These products are growing in popularity as employers realize they help increase employee engagement and presenteeism, and as employees become more aware of the need for such products,” he says. “In particular, there is now a tremendous appetite for identity theft protection, a function of the modern times we live in with all of the data breaches.”
Employers are also increasingly offering legal service plans and voluntary benefits that enhance the financial wellness of their workforce, says Ingrid Tolentino, CEO, Hyatt Legal Plans in Cleveland.
“Things like employees making sure they have a will that takes care of their family if something happens or someone to turn to if they become a caregiver,” Tolentino says. “Products that help maintain emotional and financial well-being result in less stress and less time off work for the employee.”
In 2008, policyholders used Hyatt's legal plan mainly for bankruptcies and foreclosures directly related to the bad economy, she says. Since then, bankruptcies and foreclosures have ticked down, and the plans are now mostly being used for wills, real estate matters and the resolution of traffic tickets.
In 2016, there will likely be more emphasis on financial education and employee assistance programs, which can help address the drivers of stress and make employees more productive, Traynor says.
“Education in financial wellness is going to help employees better understand the risks they face, and that they should be using voluntary products to protect themselves against those risks,” he says. “There are some creative ID theft products, like being able to track what kids are doing on the Internet and protect them from getting their identity stolen.”
6. Life, disability, dental and vision
Life and disability sales are still the dominant sellers in terms of total premium dollars, but YOY sales increases in those lines are usually much slower or even flat, Eastbridge's Brazzell says. For instance, short-term disability was down about 2 percent, but remains the No. 3 bestselling product. Term life and universal life/whole life saw a slight decrease of -0.2%.
Hesler says he expects the industry to see continued strong sales from disability and term life coverage because they are “very well understood in the marketplace.”
“Cash value products such as universal life and whole life will remain challenged in this low interest rate environment, even if the feds begin increasing interest rates, since this will occur gradually,” Hesler says.
The coming year should bode well for voluntary benefit sales, as more employers continue to shift costs to employees or help pay for such benefits to offset decreased contributions to major medical plans. Sales will also rise as more employers offer “lifestyle” plans, including legal service plans and identity theft protection, to increase their employees’ financial wellness and ultimately, presenteeism.