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June 16, 2002 at 08:00 PM
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Todays workers face an uncertain employment world. Mergers, acquisitions and business failures have translated into downsizing, layoffs and forced early retirement for thousands of Americans.
The good news is, employees can plan for–and help mitigate the effect of–lost jobs and the employer-paid benefits that often ensue. They can do this through purchase of supplemental insurance. Also called worksite, voluntary, or payroll deduction insurance, such coverage is individual insurance employees can buy at the worksite.
The key to remember is, this coverage has many advantages not associated with group coverage thats paid wholly or partially by the employer. Before looking at that, lets see why this type of insurance is important in todays workplace.
As you already know, more and more employees face the specter of lost jobs and benefits. According to a study by Challenger, Gray & Christmas (reported in Workforce magazine, April 1999), job cuts added up to 678,000 in 1998. Merger-related job cuts totaled nearly 74,000 that year–double the year earlier figure.
That trend has continued. The Bureau of Labor Statistics reports, for instance, that there were more than 21,000 mass layoffs (50 or more people from a single company) in 2001, affecting 2.5 million workers. Manufacturing has taken the hardest hit, accounting for 46% of all mass layoffs in 2001. But all types of industries have felt the pinch.
Its widely known that unexpected employment change and the accompanying loss of income can be devastating for most workers. But lost benefits can also be devastating.
Thats because, though often taken for granted by employees, employer-paid benefits are generally worth an amount equal to a third of a workers salary. In fact, according to the U.S. Chamber of Commerces 2001 Employee Benefits Survey, employers paid an average of $16,617 per worker for employee benefits in 2000.
Its true that some employer-paid benefits can continue for a period of time after employment ends. But others cannot. And, when the continued coverage of those in the former group does terminate, they too can face financial hardship.
When employees own supplemental insurance, however, they have more control over their benefits situation.
While they are employed, for example, they can select coverages from the companys supplemental insurance program that best meet their individual needs, creating a personally tailored benefits package. They often can pay for it through payroll deduction, too. Then, if their employment should terminate, they can take their supplemental coverage with them.
Supplemental insurance is a value for employers, too, especially those struggling with potential or imminent layoffs due to financial challenges. The attraction is, the supplemental benefits are paid for by employees. This means the employer can continue to provide a strong benefits package while controlling costs. Many employers find they can change plan designs to include higher deductibles, or reduce employer-paid benefits, and then substitute with supplemental products.
To make the most of this opportunity, the employer should look for a supplemental insurance provider that can offer a broad portfolio of products that can meet a wide variety of needs among the employees. Typical supplemental products include disability insurance, life insurance, accident insurance, hospital confinement insurance, and cancer and critical illness insurance.
