Whats Behind The Allure And Growth Of Voluntary Benefits

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With health care costs rising at a rate of 15% each year, many employers have been forced to reevaluate all the benefits they offer to their employees. To keep benefit costs in check, many are deciding to reduce or even eliminate employer-paid benefits such as dental, term life and disability insurance.

This has resulted in a rise in sales of worksite-sold insurance products. Also called voluntary insurance, these products are policies that employees choose (volunteer) to buy at the worksite, typically paying 100% of the premium through payroll deduction.

Employers are turning to these products for several reasons: To fill the gap created by the cutbacks; to provide more choice; and to improve employee satisfaction.

One product line in particular has benefited significantly from this trend. That is voluntary dental coverage. A 2003 worksite marketing survey from LIMRA International, Windsor, Conn., found more employers were interested in voluntary dental than in any other voluntary benefit.

The report, “Worksite Marketing of Voluntary Benefits: The Employers Perspective,” also found that 59% of firms with 10 or more employees offer at least one voluntary insurance benefit to employees, and 25% more are considering adding voluntary benefits in the next two years.

What is fueling this growth? First, despite having to shoulder the cost for this coverage, employees say they appreciate the convenience of purchasing voluntary products at the worksite.

In addition, employees indicate they feel comfortable buying a product through a program their employer supports. They like the fact that the employer has conducted the necessary due diligence in selecting a carrier that will meet their varying needs.

Finally, employees enjoy the simplicity of applying for products that are: 1) guaranteed issue or require only simplified underwriting; 2) are competitively priced; and 3) are portable beyond their current employment.

The question then becomes, how best to take advantage of these trends?

To promote the plan and help employees understand why they and their families need these products, employers, with the assistance of carriers, should provide newsletters, employee enrollment kits, payroll stuffers and e-mail announcements. Such communications are critical in maximizing participation in the plans.

More importantly, agents, brokers and carriers should conduct group and one-on-one enrollment meetings to introduce the benefits and answer any questions. Agents and brokers should also keep in mind the three “Ps” that are shown in the chart on this page, and they should be sure to align themselves with carriers that offer a range of plans with flexible benefit levels.

Take worksite dental insurance, for example. To be successful in this market, agents and brokers should make sure that the voluntary dental plans offered include the industrys most innovative features such as dental preferred provider organizations having enhancements and discounted services.

In addition, agents and brokers should develop a thorough understanding of how dental benefits in the program are paid. For example, some plans provide a schedule that pays a fixed amount for dental procedures. While this option may be less expensive for the participant, the benefit amount for most services is typically much lower.

Other plans pay benefits based on a “usual, customary and reasonable” structure, where benefit amounts are based on the average fees of dentists in a certain geographic area.

Other important considerations in dental plans are the waiting periods and the definition of preventative, basic and major benefits. What one carrier considers a basic service may be considered a major service by another carrier.

The above are just a few of the reasons why agents and brokers play a key role in helping employers make informed decisions about the increasingly popular voluntary benefit plans.

The products offer an effective way to create or enhance a comprehensive employee benefits package. They also enable employers to attract and retain the best employees, which, in turn, helps build business and increase the bottom line.

For agents and brokers, the sales potential of these products can be endless.

CLU, ChFC, RHU, is vice president, worksite marketing at Mutual of Omaha in Omaha, Neb. His e-mail addres is marc.lower@mutualofomaha.com.


Reproduced from National Underwriter Edition, March 24, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.