Voluntary Benefits Survive Rising Medical Rates

By

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.

Voluntary will continue to grow even in this difficult environment for reasons that are pretty clear. What can insurers and brokers do to increase voluntary benefit sales?

First and foremost, insurers and brokers must equip employers with a comprehensive benefit package if they are to attract and retain key employees. Voluntary benefits, which allow employees to customize coverage to their individual life situations, can play a key role in this initiative.

Second, since research tells us employees greatly value having access to voluntary products at the worksite and continue to show a willingness to purchase these benefits, insurers and brokers should provide employers with easy payroll deduction systems and quality voluntary products at group rates.

The most common reason workers give for why they have never purchased a voluntary benefit product is that the products were never offered. Insurers and brokers need to make these products available.

Lastly, insurers and brokers need to design products that have fewer moving parts. Studies tell us ease of purchase is an important factor in the consumer purchase decision. This means insurers and brokers should provide clean, concise enrollment information that even Homer Simpson could understand. Well, maybe not that simple, but it should not require a degree from MIT to understand the presentations.

No one knows when medical costs will plane out, but there are lots of good reasons to pay attention to the value voluntary benefits can bring to employers and employees. Insurers and brokers should seize the opportunity that voluntary benefits provide that can help address the medical benefits challenge in the total benefits portfolio.

is vice president of worksite marketing at Fortis Benefits Insurance Co., Kansas City, Mo. He can be reached at neal.lucchi@us.fortis.com


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 6, 2004. Copyright 2004 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.