Employee benefit options once resembled a fast-food restaurant with only a few basic items on the menu. Today, however, many employers offer an all-you-can-eat buffet of voluntary benefits from which to choose — and that's good news for brokers.
Health insurance is still the main course, but an ever-expanding range of voluntary benefits gives employers more flexibility, employees more options, and brokers more profit potential.
Look for this momentum to continue and likely accelerate in 2018. Several key trends point to what employees want and how brokers can help their clients deliver.
Identifying a threat
Identity theft cost American consumers $16 billion in 2016, according to the Insurance Information Institute. Moreover, high-profile reports of hacking at major financial institutions are making headlines with increasing frequency.
No wonder identity theft protection is one of the fastest-growing voluntary benefits on the market. More than 70 percent of employers will offer this coverage by the end of 2018, according to research by Willis Towers Watson. This would be twice the percentage of employers who offered coverage as recently as 2015.
Identity theft protection is especially appealing to businesses, because employees whose identity is stolen lose countless hours of productivity while trying to recover.
Reaching critical mass
Critical care insurance is not far behind. Forty-four percent of employers now offer it as a voluntary benefit, and an estimated 72 percent of employers will do so by the end of 2018.
Here's how it works: Critical illness insurance provides an unrestricted lump-sum benefit upon diagnosis of a covered condition such as cancer, heart attack, stroke, kidney failure or major organ transplant. Most carriers require applicants to be younger than 60 when they apply. Policies usually remain in force for the client's lifetime, but policy benefits may be cut in half after age 65 or 70. Payments can be used to pay both out-of-pocket medical costs and nonmedical costs associated with treatment, such as childcare or transportation.
Barking up the right tree
About 1.5 million North American pets are now covered by insurance, according to the North American Pet Health Insurance Association. Look for that number to grow significantly in the coming year. In fact, technology specialist Aquarium Software expects the number of companies offering voluntary pet insurance to nearly double in 2018. Smart employers realize that employees can lose as much productivity caring for a sick pet as for a loved one.
“As an employee benefit, it's growing by leaps and bounds,” says Bill Skubovius, vice president of North American markets for Petplan Health Insurance in Newtown Square, Pennsylvania. “Today, it's a really important product. One in three Fortune 500 companies — including Disney, Walgreens and Google — offers pet insurance. Many companies share in the cost of premiums.”
The loan arranger
Anyone looking for the next big thing in voluntary benefits should consider student loan repayment plans. Americans owe a collective $1.3 trillion in student debt, with a disproportionate amount of it owed by recent graduates entering the job market. In a recent survey, more than 3 in 4 respondents said their choice to take a job would be considerably affected or decided based on an employer's willingness to offer a student loan repayment program.
Only 3 percent of employers currently offer this benefit, according to the Society for Human Resource Management. However, Willis Towers Watson expects that number to explode to 26 percent by the end of 2018.
Seven in 10 Americans will run into a legal issue next year, according to the American Bar Association. This creates financial strain on even well-paid employees, and the associated stress hurts productivity.
Seventy-five percent of businesses that offer voluntary legal services plans do so to help employees achieve peace of mind when dealing with a legal situation, according to a survey sponsored by MetLife. Other motivating factors include improving employee satisfaction (69 percent); increased retention and loyalty (44 percent); and staying ahead of the competition (32 percent).
Well, well, well
Employee wellness easily makes the list of voluntary benefits trends every year and likely will do so long into the future. The reason is simple: Research shows that a well-designed and executed program is a win-win for businesses and employees.
"Every indication we have supports the conclusion that employee well-being programs can have a positive financial impact on a company, when implemented in a comprehensive way, using best practices," says Hans Hage, vice president of product development for StayWell in St. Paul, Minnesota. "Most studies report break-even returns or better after two or more years of program implementation, and several studies suggest a $3 return for every $1 invested in the program after three-and-a-half years."
Employees are much more likely to reach their fitness objectives if they are working toward a specific goal, such as losing 10 pounds before Christmas or running a race next spring. Technology makes tracking progress both easier and more fun — especially when it can be purchased through payroll deduction or subsidized by the employer.
"In our experience, you need to give employees tools that they already want to use, like a Fitbit, to increase engagement in wellness programs," says Amy McDonough, senior vice president of strategy & operations for Fitbit Health Solutions in San Francisco. "Financial incentives are also a great way to boost engagement rates when done well and aligned with program goals."
Back to school (online)
A well-educated workforce is one of an employer's most valuable assets. And thanks to the rise in online learning, continuing education has never been more accessible or affordable.
Nearly 1 in 4 workers would be likely or very likely to pursue online education if it were offered as a voluntary benefit, according to a survey by Harris Interactive. This benefit is helpful to employees at all levels of a business. Among the options mentioned by survey participates are college courses, professional certification, and SAT or ACT preparation for themselves or family members.
Employers are well aware of the high cost of sick days and lost productivity from illness or chronic health problems. They may be less aware of the effects of employee financial problems.
Financial stress costs businesses $5,000 per employee in lost productivity each year, according to research from the Federal Reserve. No wonder financial wellness programs continue to become more prevalent.
At least three-fourths of large and mid-sized companies now offer some level of financial training, according to an Aon Hewitt study. Many businesses that already have such programs in place are expanding into additional relevant topics such as budgeting, debt reduction, health care and home purchases.
Have it your way
One-size-fits-all may be a good idea for baseball caps, but definitely not for voluntary benefits programs. A generation ago, employee choices were the equivalent of vanilla, chocolate or strawberry. Today, it's more like 31 flavors, with new ones added regularly. Customization will only pick up steam in 2018.
An employee's age still is a significant factor in what types of benefits he or she needs and desires. However, employers continue to add options that also consider differences in lifestyle, financial habits and other factors. The result is that each employee can tailor a benefits program that is well-suited to his or her needs without having to pay for benefits that are not relevant.
Do it yourself
Group and personal meetings about voluntary benefit options, followed by paper enrollment and data input, is a tedious process. It also is costly and subject to mistakes during data entry.
Technology, fueled by the way millennials like to receive information, continues to streamline the process. Next year will see even more use of mobile, video, social media, benefit portals and interactive tools for benefits education and communication. Employees can digest information at their own pace, revisit areas that need clarification and share options with family members. The result? Greater customization; easier and timelier access to benefits; and a more streamlined, efficient and controllable process.
Not so long ago, employees selected core benefits such as health and life insurance and tacked on a few voluntary benefits. Today, however, the trend is clearly moving toward an integrated package of core and voluntary benefits.
Brokers and employers can help by highlighting logical connections between core employer-paid benefits and employee-paid voluntary benefits. For example, an organization that pays for a short-term-disability policy may offer voluntary, employee-paid disability benefits. It is important for the employer and broker to clearly communicate the synergy between these benefits.
Remember, 2018 is an election year, so there likely will be another round of promises, warnings and threats about the future of the insurance industry. Regardless of the outcome, creating win-win scenarios for businesses and their employees should make it another banner year for voluntary benefits.
"There is now less of a focus on the financial impact represented by traditional ROI models and more of a focus on workforce engagement, productivity and overall business performance," says Jessica Grossmeier, Ph.D., vice president of research for HERO (Health Enhancement Research Organization) in Waconia, Minnesota. "In fact, a 2016 research study from HERO found that there is a correlation between companies that invest in comprehensive approaches to employee well-being and those that report strong corporate stock performance. The conversation has thus shifted from a focus on ROI alone to a broader value proposition that includes both the tangible and intangible benefits of improved worker health and well-being."