More and more employers next year will begin offering voluntaryemployees benefits to their workers in preparation for the “realgame changer” in 2014—the further implementation of the PatientProtection and Affordable Care Act.

|

A decade ago, voluntary products were offered mainly by largeremployers as a way to increase engagement, but now organizations ofall sizes are broadening their menu of voluntary benefits to offsetcoverage gaps, as employers further reduce their contributions tocut costs, according to MetLife’s latest annual employee benefitsstudy, released in March.

|

Indeed, sales of voluntary benefits in 2011 rose 4.5 percentfrom a year earlier, to $5.478 billion, according to research fromEastbridge Consulting Group.

|

The trend will continue next year as more employers are mandatedto provide health care plans for their workers under the PPACA. Asa result, brokers and carriers alike expect further increases inemployee deductibles and out-of-pocket responsibilities—spellinggreater opportunity for the sale of voluntary products.

|

“You’re going to see a tremendous amount of movement nextsummer, as employers start preparing for 2014 when the exchangeswill be launched,” says John Conkling, a vice president at FringeBenefits Group Inc. in Austin, Texas. “We may see some shifts inthe classification between full-time and part-time employees, whichwill create some new benefit opportunities. That has a lot of HRand benefits departments developing strategies right now, and itwill only strengthen the voluntary benefits market.”

|

The new law’s medical loss ratio will also spur more brokers topush voluntary products, says Steve Hannah, regional vice presidentof group benefit services at Mutual of Omaha. Out of every premiumdollar, $0.85 has to be used to pay claims, leaving $0.15 cents topay for carrier expenses, including broker commissions.

|

“Brokers are now deciding whether to cut staff or services, ormerge with other brokers,” Hannah says. “There’s also a mass influxof brokers, and some are now calling themselves ‘voluntary benefitexperts.’”

|

Brokers also are capitalizing on the rising popularity ofvoluntary benefits among employees, he says. According to aHartford study, employees who are offered voluntary benefitsreported higher satisfaction with their benefits than did those whowere not offered voluntary products (64 percent and 56 percent,respectively).

|

Here are seven voluntary products to watch.

|

1) Critical illness/cancer

|

Both cancer and critical illness product sales were up in 2011,according to Eastbridge. Cancer sales rose 2 percent from 2010, to$409 million, while critical illness sales jumped 20 percent, to$243 million.

|

“Critical illness/cancer policies are going to explode in 2013,”says Mathew Gahm, founder and managing director of M P Gahm& Associates Inc. in Colorado Springs. Colo.

|

“At least one in three adults will be diagnosed with a criticalillness or cancer,” Gahm says. “The max out-of-pocket is between$5,000 to $10,000-plus in many health care policies, but very fewpeople have that type of money to pay if something badhappens.”

|

Millennials are participating in critical illness at a slightlyhigher rate than boomers (27 percent to 14 percent respectively),according to the Hartford study.

|

Glenn Petersen, vice president, group voluntary and worksitebenefits at MetLife in New York City, says Gen Yers might opt forthese products because younger people tend to have a limited amountof savings to meet all the costs of a serious illness or accident.However, all age groups are likely to see a need for such polices,particularly if brokers and employers thoroughly explain theirvalue and features, Petersen says.

|

“A Gen X member might need all the extra cash they have saved tomeet children’s and household expenses,” he says. “Boomers mightwant a lump sum payment to take care of ancillary expenses and nothave to tap retirement savings.”

|

|

2) Accident

|

Accident sales accounted for 13 percent of total voluntary salesin 2011, with a 14 percent increase over 2010 accident sales, to$738 million, according to Eastbridge.

|

Accident plans will become even more prevalent in 2014 asdeductibles and out-of-pocket expenses are increased even furtherdue to the implementation of health reform, Conkling says.

|

“People are going to realize that if they go to the emergencyroom, they are going to be responsible for the first $2,000, so a$5 a week accident policy can pay for that tremendous out-of-pocketexpense,” he says. “Plus, they might have another $2,000 inhospital stay expenses as well.”

|

Moreover, brokers are going to increasingly sell these types ofvoluntary products to replace revenues, Conkling says. Depending onthe structure of the benefit, some accident policies have hospitaladministration riders on them, while other carriers may sellseparate hospital indemnity plans, he says. All of these benefitsare being sold in conjunction with major medical plans assupplemental plans.

|

3) Hospital indemnity and other gap plans

|

Look for hospital indemnity/supplemental medical products tohave great potential for sales upticks in the coming year.

|

“Medical bridge plans cover some but not all of the employees’expenses incurred under a standard medical plan thus reducingemployees out of pocket costs for high deductible plans,” says TomWagoner, president of Accelerated Benefits in Columbus, Ohio.

|

Traditional gap plans pay to fill a deductible and is integrated100 percent with the employee’s medical plan, he says. In morerecent years, medical bridge plans have replaced traditional gapplans and now contain specific schedules of benefits for a varietyof medical services, such as hospital confinement, outpatientservices, MRI and CT scans.

|

“But they don’t cover everything and there are a lot of holes inthose plans,” Wagoner says. “A lot of people selling them are notdisclosing those holes and that could be a problem. But they aregoing to be popular even with all the holes. We definitely thinkproducers are going to be moving more toward integrated plans withthe medical versus the life and disability traditional plans.”

|

4) Long-term health care insurance bundled with lifepolicies

|

Dan Johnson, vice president of sales and marketing for voluntarybenefits at Trustmark Insurance in Lake Forest, Ill., says thatbundled life and long-term care products are gaining in popularity,as many carriers stopped offering stand-alone long-term health careinsurance.

|

“Their hope was when they originally priced the products, groupsthat implemented the product would spread out participation amongmore age groups within the active employee population,” Johnsonsays. “This did not occur as often as they assumed and it affectedtheir spread of risk, rates and profitability. The continuedescalation of health care costs, along with long-term health carefacility cost escalation made these products unprofitable.”

|

Conversely, the hybrid universal life contracts that havelong-term care as an integrated benefit are becoming more popularand have changed with the needs of the customer and the market overthe years, he says.

|

“The big question from brokers and employers who have beenburned by this long-term care exit is, whether the products stillbeing sold in the market are priced properly or will they beaffected down the road with more exits to the market due to theproducts profitability,” Johnson says. “With our universal lifewith living benefits product, we’ve been able to spread the risk ofacross many insureds and age groups. We have 20-year-old employeesbuying this bundled product along with 65 year olds.”

|

Moreover, when using this hybrid product, the insured person canalways get a death benefit if the benefit restoration rider ispurchased, even if the insured also uses the long-term care benefitfor long-term care, home health care, adult daycare andassisted-living care, he says.

|

|

5) Life and disability

|

Life insurance continues to be the top selling business line,according to Eastbridge. Total life sales in 2011 were $1.347billion, up about 1.3 percent over 2010.

|

However, studies show that life insurance isn’t a mature market.According to the Life Insurance and Market Research Association, 56percent of U.S. households didn’t have an individual policy as of2010, and 30 percent lacked any coverage, not even through anemployer’s group benefits plan.

|

This represents an opportunity for brokers to educate workersabout the value of supplemental life and disability if theircoverage is inadequate, Petersen says.

|

“As they make decisions, employees can benefit immensely if isit pointed out to them that their needs can change as lifecircumstances change—for example through the birth of children,” hesays. “Purchase decisions are made on the basis of solving areal-life problem or exposure, where the employee can see the valueof a certain benefit.”

|

6) Dental and vision

|

In the past, employers might have paid for dental and visionalong with major medical plans, but as employers continue tostruggle to manage their budget, particularly as medical costsincrease, dental and vision are increasingly becoming voluntarybenefits, Conkling says.

|

“These voluntary benefits are also becoming more important toemployees, as their out-of-pocket costs continue to increase due tothe increasing popularity of consumer-driven plans,” he says.

|

According to Eastbridge, dental sales increased 22 percent in2011, to $610 million, while vision sales increased 8 percent, to$231 million.

|

7) Legal benefits

|

Donald Rowe, vice president of employee benefits worksitemarketing at Legal Club of America, says that more employers areoffering legal benefits because “most employees don’t leave theirpersonal problems in the parking lot when they come into work.”

|

“These issues interfere with their productivity,” Rowe says.“Rather than pretending employees don’t have those issues,employers give them solutions.”

|

While family law issues such as adoption, divorce, wills andpower of attorney continue to be the most popular reasons toutilize legal benefits, the recession has caused more people to usethem for home foreclosures and bankruptcies, he says.

|

Dennis Healy, vice president of sales for ARAG Legal Solutionsin Boston, predicts that in 2013, “true legal insurance” productswill become more popular than discounted legal benefits or“do-it-yourself” online templates.

|

“Employers will want to retain their best employers by offeringa menu of rich benefit offerings, particularly if they are havingto lower their participation in health care plans,” Healy says.

|

Marcia Bowers, sales and marketing director at Hyatt LegalPlans, a Cleveland, Ohio unit of MetLife, agrees that trueinsurance products are on the upswing, including “mini-legalpackages” that are tied to another benefit, such as life insuranceand disability.

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Katie Kuehner-Hebert

Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.