According to a Bankrate.com survey, three out of four Americans are living paycheck-to-paycheck, with little to no emergency savings. Meanwhile, a poll conducted by NPR, The Robert Wood Johnson Foundation and Harvard's T.H. Chan School of Public Health, shows even with year-round health insurance coverage, more than a quarter of adults face major financial problems, even bankruptcy, because of the medical bills they can’t pay off each year. Further, health care reform in the U.S. has placed more of the burden of health care costs on employees, as employers adopt high deductible health plans.
“We don’t know where the health industry is going,” says Mike Wargo, national benefits director for Allstate Benefits, a Jacksonville, Florida-based provider of supplemental insurance to companies across the country. “But we know health insurance premiums have risen and employers and employees have chosen higher premium plans.”
It’s a Catch-22 that’s squeezing employees and the economically conscious companies where they work. But it’s also presenting an opportunity for companies to recruit and retain top talent through voluntary benefits programs that don’t impact their bottom line.
A voluntary benefits program — which once may have been considered a nice-to-have option for employees and employers — has become an increasing necessity for many.
Majority of employees would purchase
Consider that Aflac’s 2015 WorkForces report showed that 88 percent of employees consider voluntary benefits to be part of a comprehensive benefits package, and 70 percent said they’d likely purchase voluntary benefits if their company offered them.
“Voluntary benefits work hand-in-hand with your major medical plans to make sure an individual is covered if they have an illness or injury,” says Allstate’s Wargo.
Wargo uses a simple example to illustrate. Think about what might happen if you trip and fall while entering your house after a long day at work. Your knee begins to throb, so you decide to go to your neighborhood urgent care center for an X-ray. The cost of that visit and X-ray could easily equal your entire deductible, leaving you with the financial responsibility to pay the whole thing.
But if you signed up for low-cost accident insurance through your company’s voluntary benefits program, that policy might cover a large portion of your bill, significantly lowering or entirely eliminating your out-of-pocket-expense.
It’s new math for today’s new health care realities. And voluntary benefits are an increasingly important part of the equation that helps not only employees, but the companies where they work.
Three primary considerations: reputation, products and simplicity
According to the Workforces Report, employees who are offered voluntary benefits are 14 percent less likely to look for new jobs within the next year while being 19 percent more likely to be satisfied with their jobs.
“Employees who are offered and enroll in voluntary insurance plans have been more satisfied, and employers have seen better employee retention,” Wargo says. “And because companies don’t pay for the benefits, it’s a win-win.”
And it’s easy to get there, too. According to Wargo, a medium-sized company with 500 or so employees can have a program in place within a couple weeks. But the first step is understanding the value a voluntary benefits program offers.
“Their questions are usually about ‘What’s in it for me and my employees? How do I administer it? What’s the cost?’ They want to know if it’s going to be affordable to their employees,” he says.
Three-point litmus test in choosing a provider
Employers should consider a three-point litmus test in choosing their provider:
Will you pay? Are you a reputable company with a good track record of providing the benefits you say you will?
What are your products? Can you help employees close their insurance gaps?
Can you pay? Do you have the back-office systems that make it easy for us and our employees?
“Companies want a good provider with a good reputation, a variety of product options and a simple administration process,” Wargo says. And that last piece can’t be overstated, he adds.
“The product itself is often a later consideration — it usually doesn’t come into it until further down the line,” he says. “That last piece — the simple administration — isn’t sexy, but it’s important to companies. They want to make sure it’s easy. They really look for simplicity in the technology and back-office operations that support the program, like automatic payroll deductions for employees’ payments.”
Progress, but we’re not there yet
According to a 2015 LIMRA study, the voluntary market grew five of the previous six years, averaging more than 5 percent annual growth.
“Increasing medical benefits costs and the need to do more with less has made voluntary benefits an attractive option for employers,” says Ron Neyer, MBA, CLU, ChFC, assistant research director, LIMRA Distribution Research.
“As the economy and the job market improve, employers are finding it more challenging to attract and retain key personnel,” he says. “LIMRA found employers choosing to offer voluntary benefits to supplement their existing benefits package without adding to their bottom line.”
Wargo agrees the market is growing, while still acknowledging there’s a long way to go.
“It’s a phenomenal market, and the industry is growing fast,” Wargo says. “But there are thousands of employers that still don’t offer this.”