As a benefits advisor, you might find yourself selling insurance plans that have changed little since 1960 to employers where most workers were born after the Beatles broke up.

One solution: offer more voluntary, employee-paid benefits products.

Over the past few years, employers have been asked to absorb higher and higher benefits costs, and employees have had to deal with restricted coverage, higher co-payment amounts and higher deductibles.

Depending on an employer’s demographics, geographic location, payroll and level of benefits provided, benefits can account for up to 30% of an employee’s total compensation. One of the main reasons for this is a pervasive expectation in our culture that employee health insurance programs should be designed to fit everyone, with little regard for the individual needs of each employee.

That means that the cost of benefits has been driven by employees with the highest needs.

Members of Generation X, or adults born between 1965 and (roughly) 1981, often have modest needs.

Supplementing traditional coverage with voluntary plans helps the employer provide a basic plan at low cost while letting the employees choose from a variety of add-ons that can round out the coverages they need to fit their own individual circumstances.

When employers are facing large cost increases for “core” benefits, voluntary programs can help them sweeten the package without increasing their own expenses.

Employees appreciate the flexibility of choice.

Many younger employees consider flexibility to be a mark of quality.

The one-size-fits-all cultural trap is a product of an earlier era, when customization was labor-intensive and expensive. Gen-Xers grew up with the technological revolution that made customization affordable, so they find it entirely natural to have choices and options in their benefits package. They have grown up expecting to have options and choices in all areas of their lives.

What voluntary programs do most employers consider? Life, disability programs, critical illness, health indemnity/mini-medical, accident, legal services, long term care, vision, cancer, dental and executive carveouts are just a few.

Voluntary programs are most successful when strongly supported by senior management. Many employees will base their decisions about whether to enroll on the HR managers’ endorsement of the plan. Younger employees, in particular, will appreciate the fact that the HR managers have already done some due diligence.

When owners and senior managers allow time for employees to participate in meetings about the options available, and then allow one-on-one time with enrollment specialists, participation rates grow dramatically. Unless management provides that support, few employees will take time to hear what benefits are available. In that case, participation rates probably will be below 15%.

Before helping employers add voluntary plans, brokers should review existing, employer-paid plans carefully. Otherwise, employees could end up paying extra for benefits they already are getting from their employers.

Brokers also should make sure that any voluntary product offered is a good value and fits the employer’s business objectives.

Finally, brokers should start by introducing just a few voluntary products. Introducing too many voluntary products at once can be confusing.

Steve Woodward is vice president of the employee benefits division at Ogilvy-Hill Insurance, Santa Barbara, Calif. His e-mail address is swoodward@ohins.com.


Reproduced from National Underwriter Edition, April 19, 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.