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Three Voluntary Selling Points

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Will employers continue to provide health coverage to their employees? If not, what will employees do, and how will they balance increased costs alongside increased risks?

A pair of findings announced within days of each other in early June helped place in clear focus the dilemma currently seen in the benefits market as employers struggle to maintain affordable benefits for their employees.

First, consulting firm McKinsey & Company announced findings from a survey of more than 1,300 employers, suggesting that 30 percent of the respondents would “definitely” or “probably” stop offering employer-sponsored health insurance after 2014 because of “new economic and social incentives” embedded in Affordable Care Act health care reforms passed by Congress in 2010.

There was a political firestorm and debate over its methodology, and McKinsey subsequently clarified that the survey should not be used for “predictive” purposes. And to be fair, other studies have suggested the impact of the ACA will be far less seismic. For example, a recent Booz & Co.’s study takes a more detailed perspective, breaking the market down by size and suggesting that smaller employers are most likely to drop coverage. But the trend is still a real one, no matter the degree.

On the heels of that news, LIMRA posted 2011 worksite (voluntary) sales for the first quarter of 2011. While sales for worksite life products were down by 8 percent compared with the first quarter of 2010, sales for voluntary health products such as critical illness, dental and accident insurance were up 10 percent compared with the same period in 2010. Critical illness showed the most growth, with a 41 percent increase.

So, between the expected loss of major medical insurance and strong gains in voluntary plans, it is clear that employees are not only increasingly willing to accept their new role as purchaser, but are also acting with their wallets.

The cliche about making lemonade out of lemons applies here. But instead of offering generalities, here are three ways voluntary plans can be immediately positioned to help employers address benefits challenges in this changing market:

Flexibility: Traditional major medical plans provided by employers are designed to cover a group of people, and often have limited flexibility in covering individual employee needs, Voluntary, ancillary plans can provide new alternatives to supplement medical plans by offering solutions that meet the varied needs of different demographic groups within their workforces. Younger employees without children who have active lifestyles may be drawn to hospitalization or accident plans, while older employees with family needs may find that critical illness products are important to their needs. There is no reason why an employer can’t offer both in one enrollment, and products can be offered by the same carrier for an easier and more efficient enrollment.

Lower costs by packaging voluntary plans with HDHPs and HSAs: To cope with higher medical insurance costs, many employers are switching to high-deductible health care plans or Health Savings Accounts. In these cases, voluntary benefits that pay lump-sum or scheduled benefits can help employees by filling the void in coverage, helping them cover the cost of deductibles, coinsurance, and other out-of-pocket expenses. In addition, many voluntary plans will pay specified benefits for routine prevention and wellness such as doctor’s appointments and medical tests.

Avoid healthcare reform regulations: Indemnity-based plans that pay lump-sum benefits such as Critical Illness, or Accident plans that provide for a schedule of benefits, do not fall under the Affordable Care Act, so employers avoid the burden of additional paperwork and oversight if they offer such plans.

Steve Howard is vice president of marketing and strategy for American General Benefit Solutions (Benefit Solutions), a business unit of American General Life Companies. His monthly blog on ASJonline addresses issues and trends in the insurance industry. He can be reached at [email protected].