Voluntary Benefits Survive Rising Medical Rates
Persistent medical insurance rate increases have dominated and will continue to dominate benefit discussions for the foreseeable future. Employers benefit dollars are getting stretched tighter than a pair of jeans after the holidays.
Brokers know that employers are starting to wonder how rising medical costs are affecting their employees desire for voluntary benefits. There is a school of thought that medical costs will push employees to spurn voluntary benefits. This hypothesis has come up repeatedly in discussions with brokers, who probably are picking up on the frustration of their clients trying to figure out how to navigate the changing tides.
Fortunately, the available evidence points in the opposite direction: Sales figures have not shown medical cost increases forcing employees to move away from voluntary products. The most significant indicator of this trend, were it to occur, would be a drop in employee participation rates. Anecdotally, participation seems to be holding steady.
Industry data backs up this experience. In 2002, LIMRA International, Windsor, Conn., interviewed 38 companies and found that 34 were getting participation rates as good as or better than what they averaged in the prior 3 years.
Eastbridge Consulting Group Inc., Avon, Conn., recently completed a study on medical increases and buying behavior that indicates few employers or employees believe medical cost increases will significantly affect voluntary benefits purchasing decisions. Within relevant pricing ranges, employers and employees are indicating a continued intent to purchase.
For producers, offering voluntary products helps ease the pain that employees feel when medical plan contributions increase, or co-pays and deductibles go up. Offering voluntary benefits is also a way for producers to help employers give employees more choices and cope with individual life situations without taking on additional costs.
The owner or senior management needs to support these products and encourage employees to participate in order for there to be any interest. Brokers should encourage employers to select their total benefits package with an eye toward reducing employee stress and building morale and productivity.